Posts Tagged ‘Medicare’

Medicare Changes in the Ryan Budget

May 5, 2011

On April 15, 2011 Republicans in the U.S. House of Representatives passed the Ryan Budget (all Democrats voted no) and sent it to the Senate.  Then they went back to their home districts and faced some criticism from their constituents, especially on the plan to privatize Medicare.  Rep. Paul Ryan and his colleagues explained disingenuously that people over the age of 55 would not be affected by the proposed changes.

While it is true that the voucher-like healthcare system would not start until 2022, the following changes would affect people over 55 immediately on passage:

The proposal would repeal the ACA provision that expanded subsidies for the “coverage gap” in Medicare Part D (a range of spending in which many enrollees have to pay all of their drug costs, sometimes called the doughnut hole).

The proposal would repeal the Community Living Assistance Services and Supports (CLASS) program for long-term care insurance, as well as a number of mandatory grant programs including funds for so-called high-risk pools, reinsurance for early retirees, and prevention and public health activities.[i]

Republicans also say that after taking effect, the proposed legislation would create a healthcare insurance system for seniors like the current healthcare insurance system for federal employees.  This is not true, either.  Federal employees pay a fixed portion of their healthcare insurance costs, but that would not be true for the new Republican Medicare substitute.

Under the House Republican proposal, starting in 2022 new Medicare beneficiaries would receive coverage through private insurance plans, and Medicare would subsidize the cost.   The federal payment for a typical 65-year-old would be set at $8,000 a year in 2022, about the same as what Medicare is expected to spend under current law.

The eligible age for federal benefits would increase two months per year until the eligible age would reach 67 in the year 2034.  Presumably, Ryan expects people between the ages of 65 and 67 to get healthcare insurance from their employers or in the private market.  The CBO did not analyze the extent to which additional people would apply for disability insurance benefits or Medicaid because of the increased eligibility age for privatized Medicare.

Beneficiary costs under the Ryan plan would be higher than under traditional Medicare.  Administrative costs are higher for private healthcare insurance than for Medicare, but that is only the beginning.  The premium support payment would be adjusted for age, health status, income of the beneficiary, as well as general inflation, measured by the Consumer Price Index.  But healthcare costs and insurance premiums have, for years, been rising faster than consumer prices in general.[ii]  So, under the Republican plan, Medicare would pay a shrinking share of beneficiaries’ total health costs, and seniors would pay a growing share. For a typical 67-year-old, that share would be 68% in 2030 versus 25% under current law, the Congressional Budget Office said.  

There is nothing in the Republican plan to reduce the rate of growth of healthcare costs per enrolled beneficiary (“bend the curve”).  Indeed, the House legislation would repeal the parts of the Affordable Care Act that initiate several proposals to try to reduce that rate of growth.  The net result is that the Ryan Plan increases beneficiary costs more than it reduces government costs.  Part of the reduction in overall healthcare costs to the federal government is particularly insidious.  Since the beneficiary share of the total healthcare insurance costs would be higher under the Ryan budget, participation rates for eligible elderly persons would be lower than under traditional Medicare.

The Ryan plan includes rules that would govern the Medicare exchange—including requiring insurers to issue insurance to all people eligible for Medicare who apply, requiring that each insurer charges the same premium for all enrollees of the same age, and using a risk-adjustment mechanism. However, the Ryan plan would allow insurance companies to increase premiums with beneficiary age.  Ryan says that the support payments would be greater for the poor, but it is not clear that the increase in federal healthcare support payments would be enough to prevent participants from dropping out of the federal plan as they got older.

Healthcare experts agree that the primary problem with healthcare is health care inflation. The secondary problem is the long-term Medicare deficit.  For decades, the United States has relied on a private healthcare insurance for people under 65, and fee-for-service government healthcare insurance for people over 65.   Neither system has helped to rein in healthcare inflation.  Republicans want to scrap Medicare and revert to a private healthcare insurance system for everyone. However, the free market for healthcare insurance has failed to rein in healthcare inflation for people under 65, just as Medicare has failed to control healthcare costs for the elderly.   Despite the lack of supporting evidence, the Ryan plan would repeal all federal pilot programs designed to reduce the rate of growth of healthcare costs, relying on blind faith in free markets to control costs.  It is foolish to suppose that a solution that has failed repeatedly to control healthcare costs will succeed in the future if we solve the secondary problem of the long-term Medicare deficit.

The Ryan Plan would end traditional Medicare to solve the secondary problem of the long-term Medicare deficit, and substitute a system that would increase the burden on the elderly to pay their own healthcare costs and increase the number of uninsured elderly.  James Kwak, who calls the Ryan Plan “ just one bad idea dressed up with the false precision of lots of numbers” has suggested a better and simpler way:  “Index the Medicare payroll tax to actual health care costs. This should automatically solve the Medicare deficit because as Medicare’s costs go up, its funding will go up at the same rate.*

“This may sound like just raising taxes whenever the government wants to spend more. But the key is that the more taxes you pay, the more you get back. To see this, assume for now that Medicare is a pure price taker: it has no impact on health care costs but just has to pay what the market charges. Then, if health care costs go up by 5 percent, your taxes go up by 5 percent, but the expected value of your future Medicare benefits also goes up by 5 percent. You get all the insurance benefits of traditional Medicare, but now that insurance is worth 5 percent more, so you should be willing to pay 5 percent more.**

“Raising taxes can have macroeconomic effects, but anything that solves the Medicare deficit problem will have macroeconomic effects: any solution involves either higher revenues or lower spending. Furthermore, increasing payroll taxes in line with health care costs is no different in substance than increasing premiums for employer-sponsored plans in line with health care costs, which has been going on every year for decades.”[iii]

With that solution in mind, we can reject the Ryan Plan and let healthcare experts discuss various ways to bring healthcare cost inflation under control.


Congress Passes Medicare Bill (H.R. 6331)

July 18, 2008

Congress saves Medicare; quickly overrides Bush Veto

On July 15, Congress quickly voted to override President Bush’s veto of H.R. 6331, the Medicare bill that postpones a big cut in reimbursements to doctors and replaces it with a slight increase.  After an easy victory in the House of Representatives, the bill passed the Senate 70-26, with 21 Republicans joining 47 Democrats and 2 Independents.  http://www.opencongress.org/bill/110-h6331/show

The override brought to a conclusion a dramatic fight between the Bush Administration and Democrats in Congress over fundamental policy issues affecting Medicare.  The bill had been blocked for almost a month by a Republican filibuster. [See the July 15 article in https://westonpolicy.wordpress.com posted before Congress had voted to override the veto.]   Returning to Washington during his treatment for brain cancer, Senator Kennedy cast the 60th vote to stop the filibuster. http://www.cqpolitics.com/wmspage.cfm?docID=news-000002913551&parm1=5&cpage=1 Only Senator McCain failed to vote on this vital bill. http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=110&session=2&vote=00169  

The insurance industry immediately launched a web-based letter writing campaign to ask President Bush to veto H.R. 6331 because it would reduce payments to providers of Medicare Advantage plans. http://capwiz.com/naifa/issues/alert/?alertid=11593781  The President responded to insurance industry pressure by vetoing the bill. 

The real fight was about how to pay for the Medicare doctors’ fees and about Republican plans to privatize Medicare.  In 1997, a Republican Congress introduced Medicare + Choice (M+C) allowing Medicare-eligible seniors to enroll in private insurance plans that would compete with traditional Medicare in providing health insurance to seniors.  Six years later the M+C plans had attracted few participants.  Frustrated by the failure of M+C plans to grow as they had expected, in 2003 Republicans decided to “prime the pump” by subsidizing the privatization of Medicare.  Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003,which expanded the role of private health plans in Medicare through prescription drug plans and, over the objections of many Democrats, a revised Medicare+Choice (M+C), renamed Medicare Advantagehttp://content.healthaffairs.org/cgi/content/full/hlthaff.w4.586/DC1

Many studies have determined that the Medicare Advantage plans receive about $1000 per year per beneficiary more than traditional Medicare.  This year (2008), Democrats led by Senator Baucus (D, MT) wrote into H.R. 6331 language that will reduce these subsidies to the private insurance plans and shift the money to traditional Medicare.  Democrats wanted to fix the Medicare funding problem within the Paygo (Pay-as-you-go) rules by reducing the subsidies to the insurance companies, while the Republicans wanted to postpone the mandatory cuts in doctor’s fees by increasing the deficit (borrow more money from the Chinese).  Under the Democrats, fiscal discipline won.

H.R. 6331 does not eliminate the subsidies to the Medicare Advantage plans.  Rob Cunningham of Health Affairs Journal said on July 10: “Easily lost in all the political drama is the modesty of the compromise that won over so many Republicans in both chambers. The controversial benchmark system for setting bid targets for MA plans remains untouched, despite repeated recommendations from the Medicare Payment Advisory Commission to equalize payments for MA and traditional Medicare. The bill phases out a payment adjustment to MA plans for indirect medical education (IME) by a maximum of one-half of one percentage point a year, worth a total of $12.5 billion from 2008 to 2013. But as the Congressional Budget Office points out, the current IME adjustment represents a double payment to MA plans, because Medicare’s fee-for-service hospital rates, on which MA benchmarks are partially based, already include an IME add-on.”  http://healthaffairs.org/blog/

The Republicans have been especially keen on Medicare Advantage Private Fee-for-Service (PFFS) plans.  Several studies have shown that both Medicare Advantage managed care plans and Medicare Advantage PFFS plans fail to provide any better care than traditional Medicare.  MA PFFS plans in particular are 17% more expensive than traditional Fee for Service Medicare.

On July 14, the American College of Physicians issued a long letter imploring President Bush to sign H.R. 6331, giving a long list of anticipated adverse consequences of not doing so.  http://www.eurekalert.org/pub_releases/2008-07/acop-aip071408.php 

After the Congress voted to override the President’s veto, the ACP congratulated Congress for its quick action to prevent the cuts in the physicians’ Medicare fee schedule.

In his veto message, the President said that H.R. 6331 would reduce options for Medicare beneficiaries, “particularly those in hard-to-serve rural areas. In particular, H.R. 6331 would make fundamental changes to the MA PFFS program. The Congressional Budget Office has estimated that H.R. 6331 would decrease MA enrollment by about 2.3 million individuals in 2013 relative to its current baseline, with the largest effects resulting from these PFFS restrictions.

“While the [Medicare Modernization Act of 2003] MMA increased the availability of private plan options across the country, it is important to remember that a significant number of beneficiaries who have chosen these options earn lower incomes. The latest data show that 49 percent of beneficiaries enrolled in MA plans report income of $20,000 or less. These beneficiaries have made a decision to maximize their Medicare and supplemental benefits through the MA program, in part because of their economic situation. Cuts to MA plan payments required by this legislation would reduce benefits to millions of seniors, including lower-income seniors, who have chosen to join these plans.”  http://www.politico.com/blogs/thecrypt/0708/Bush_vetoes_Medicare_bill.html

The Administration did have one valid criticism, when President Bush’s statement said “H.R. 6331 would delay important reforms like the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies competitive bidding program, under which lower payment rates went into effect on July 1, 2008.”

Nevertheless, do not be misled by the reference to low-income beneficiaries participating in Medicare Advantage plans.  The Republicans have a long-term plan to solve the projected insolvency of the Medicare system by privatizing Medicare, and they view the Medicare Advantage Plans as a stepping stone to that goal.  The Democrats acknowledge that Medicare expenses are growing at a rate that will lead to a problem in ten years.  However, Democrats view the Medicare Advantage program as a failed experiment in Medicare privatization.  Introducing insurance companies as middle men in the senior health insurance system adds cost rather increasing either efficiency or quality.  

Another way must be found to control the growing cost of health care in this country.  Democrats are not offering a separate long-term Medicare solution, but many view this problem as part of the overall problem of introducing a universal health care system for everyone in the United States.  As envisioned by Democrats, Universal Health Care will include subsidies for low income participants.  This will not be a single payer system like traditional Medicare, but some parts of the system such as a national health database and information system could be used by doctors to treat patients of all ages.

The passage of H.R. 6331 appears to be the beginning of the end for the health plan industry’s most profitable and fastest-growing private Medicare product – private fee-for-service.  PFFS is a special program because health plans are not required to create managed care networks of doctors, hospitals, and other providers. Instead, the health plan can force providers to treat its members and also force them to accept the Medicare fee schedule in payment. PFFS plans get 17% more than Medicare does for like seniors and don’t have to establish networks of providers, and they can simply pay at the already established Medicare payment schedule.  Health plans commonly pass some of these extra payments on to members in the form of extra benefits, which makes these plans very attractive – almost 10 million seniors are now in them. 

The health plan industry has lobbied hard to keep these MA PFFS subsidies.  The Democrats have said five years of subsidies is long enough.  The PFFS plans are too costly. H.R. 6331 not only starts to phase out the subsidies, it requires that any PFFS player establish networks by January 1, 2011 – converting PFFS members to mainstream Medicare Advantage. “With PFFS gone in 2011, the Congressional Budget Office (CBO) estimated that $14 billion in savings could be transferred to physician payments.” http://healthaffairs.org/blog/

H.R. 6331 only postpones the supposedly automatic cuts in physicians Medicare payments for 18 months.  There is no dispute that the Medicare physicians’ payments schedule needs a complete overall.  That is a subject for the next Congress, which hopefully will have more Democrats.

Bush Vetoes Medicare Bill (H.R. 6331)

July 15, 2008

Today, July 15, President Bush vetoed H.R. 6331, the Medicare bill that would stave off a big cut in reimbursements to doctors and replace it with a slight increase.

If you think drafting and passing legislation is dull and boring, picture this:  On Wednesday, July 9, the U.S. Senate floor was crowded with 97 Senators, a majority ready to vote to save Medicare, but prevented from doing so because of a Republican filibuster.  Democrats had crafted legislation to suspend for 18 months an automatic 10.6% cut in Medicare payments to doctors this year, and another scheduled 5.4% cut next year.  The House of Representatives had passed the bill as H.R. 6331, but Republicans in the Senate were engaged in a filibuster to prevent the bill coming to a vote on the Senate floor.  Doctors were threatening to stop taking new Medicare patients if their fees were cut, claiming that such a payment schedule would not even cover a typical internist’s overhead.  Some internists even threatened to stop serving existing Medicare patients. http://www.medicalnewstoday.com/articles/114493.php  The Center for Medicare Services had used its administrative powers to suspend the automatic cuts to July 15.  Senator Harry Reid called for a cloture vote to stop the filibuster, but he needed 60 votes. 

Half-way through the cloture vote, it appeared that the vote was headed for defeat by the same margin as the previous cloture vote on June 27, because only 9 Republicans were voting for cloture, and there were only 49 Democrats on the floor.  Then a roar went up in the chamber.  Senator Edward Kennedy (D, MA) and Senator Barack Obama walked in through the main door.  Obama’s arm was draped around the shoulder of Senator Kennedy, who had been absent from Washington for several months undergoing treatment for brain cancer.  After Senator Kennedy cast the 60th vote to stop the filibuster, 9 more Republicans crossed party lines to vote for the cloture motion, so HR 6331 was passed by 69-30.  http://www.cqpolitics.com/wmspage.cfm?docID=news-000002913551&parm1=5&cpage=1 Only Senator McCain failed to vote on this vital bill. http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=110&session=2&vote=00169, http://www.opencongress.org/bill/110-h6331/show

Unfortunately, the happy ending is not yet in sight.  The insurance industry immediately launched a web-based letter writing campaign to ask President Bush to veto H.R. 6331 because it would reduce payments to providers of Medicare Advantage plans. http://capwiz.com/naifa/issues/alert/?alertid=11593781  The President has responded to insurance industry pressure by vetoing the bill.  Although the bill passed the House by an overwhelming margin, and by a supposedly “veto-proof” margin in the Senate, the prospects for H.R. 6331 are now uncertain.  The 69 yeah votes in the Senate last week included 18 Republicans, 9 of whom switched their votes only when the bill was sure of passage.  The President only has to persuade 3 of those Senators to change their minds again to sustain his veto.

The real fight is about how to pay for the Medicare doctors’ fees and about Republican plans to privatize Medicare.  A Republican Congress created an alternative to traditional Medicare, allowing Medicare-eligible seniors to enroll in private insurance plans called “Medicare Advantage” plans.  Many studies have determined that the Medicare Advantage plans receive about $1000 per year per beneficiary more than traditional Medicare.  Democrats want to reduce these subsidies to the private insurance plans and shift the money to traditional Medicare.  Democrats want to fix the Medicare funding problem within the Paygo (Pay-as-you-go) rules by reducing the subsidies to the insurance companies, while the Republicans want to postpone the mandatory cuts in doctor’s fees by increasing the deficit (borrow more money from the Chinese). 

H.R. 6331 does not eliminate the subsidies to the Medicare Advantage plans.  Rob Cunningham of Health Affairs Journal said on July 10: “Easily lost in all the political drama is the modesty of the compromise that won over so many Republicans in both chambers. The controversial benchmark system for setting bid targets for MA plans remains untouched, despite repeated recommendations from the Medicare Payment Advisory Commission to equalize payments for MA and traditional Medicare. The bill phases out a payment adjustment to MA plans for indirect medical education (IME) by a maximum of one-half of one percentage point a year, worth a total of $12.5 billion from 2008 to 2013. But as the Congressional Budget Office points out, the current IME adjustment represents a double payment to MA plans, because Medicare’s fee-for-service hospital rates, on which MA benchmarks are partially based, already include an IME add-on.”  http://healthaffairs.org/blog/

The Republicans have been especially keen on Medicare Advantage Private Fee-for-Service (PFFS) plans.  Several studies have shown that both Medicare Advantage managed care plans and Medicare Advantage PFFS plans fail to provide any better care than traditional Medicare.  MA PFFS plans in particular are 17% more expensive than traditional Fee for Service Medicare.

Yesterday, the American College of Physicians issued a long letter imploring President Bush to sign H.R. 6331, giving a long list of anticipated adverse consequences of not doing so.  http://www.eurekalert.org/pub_releases/2008-07/acop-aip071408.php 

Unmindful of the pleas from America’s doctors, President Bush has vetoed the bill.  In remanding the bill to the House of Representatives, the President said that H.R. 6331 would reduce options for Medicare beneficiaries, “particularly those in hard-to-serve rural areas. In particular, H.R. 6331 would make fundamental changes to the MA PFFS program. The Congressional Budget Office has estimated that H.R. 6331 would decrease MA enrollment by about 2.3 million individuals in 2013 relative to its current baseline, with the largest effects resulting from these PFFS restrictions.

“While the [Medicare Modernization Act of 2003] MMA increased the availability of private plan options across the country, it is important to remember that a significant number of beneficiaries who have chosen these options earn lower incomes. The latest data show that 49 percent of beneficiaries enrolled in MA plans report income of $20,000 or less. These beneficiaries have made a decision to maximize their Medicare and supplemental benefits through the MA program, in part because of their economic situation. Cuts to MA plan payments required by this legislation would reduce benefits to millions of seniors, including lower-income seniors, who have chosen to join these plans.”  http://www.politico.com/blogs/thecrypt/0708/Bush_vetoes_Medicare_bill.html

The Administration did have one valid criticism, when President Bush’s statement said “H.R. 6331 would delay important reforms like the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies competitive bidding program, under which lower payment rates went into effect on July 1, 2008.”

Nevertheless, do not be misled by the reference to low-income beneficiaries participating in Medicare Advantage plans.  The Republicans have a long-term plan to solve the projected insolvency of the Medicare system by privatizing Medicare, and they view the Medicare Advantage Plans as a stepping stone to that goal.  The Democrats acknowledge that Medicare expenses are growing at a rate that will lead to a problem in ten years.  However, Democrats view the Medicare Advantage program as a failed experiment in Medicare privatization.  Introducing insurance companies as middle men in the senior health insurance system adds cost rather increasing either efficiency or quality.  

Another way must be found to control the growing cost of health care in this country.  Democrats are not offering a separate long-term Medicare solution, but many view this problem as part of the overall problem of introducing a universal health care system for everyone in the United States.  This will not be a single payer system like traditional Medicare, but some parts of the system such as a national health database and information system could be used by doctors to treat patients of all ages.

Why don’t the Republicans recognize the failure of the Medicare Advantage plans and allow them to be eliminated?  Why do Republicans stick to their ideological beliefs in the face of the facts?  Perhaps it is because their brains lie to them.  A recent Op-Ed piece in the New York Times explains how this may happen.  http://www.nytimes.com/2008/06/27/opinion/27aamodt.html?scp=1&sq=Your+Brain+Lies+to+You&st=nyt

When facts are first learned, they are stored in the hippocampus.  However, information does not stay there.  Every time information is recalled, it is processed and restored.  Over time, the information is gradually transferred to the cerebral cortex, and the facts are separated from the source context.  The brain may disassociate information that is learned to be false from the disclaimer, so that the “fact” is stored in the cerebral cortex even though it learned from a source that identifies the information as false.  This storage of false “facts” in the cerebral cortex is easier when the “facts” fit a previously learned belief system – ideology or world view.  It takes an unusually intelligent person to identify “facts” previously learned as true with new information that shows those “facts” to be false, and to modify one’s beliefs accordingly.  So a Republican who has been taught in his/her early years that private enterprise is always more efficient than any government program, that a laissez-faire economy is always superior to any other, may listen to or read the results of many studies showing that Medicare Advantage plans are more costly than traditional Medicare, and still believe that Medicare Advantage PFFS plans are the solution to reining in rising Medicare costs.  All the evidence refutes this belief, but the Republican attitude “My mind is made up; don’t confuse me with the facts!” is entirely consistent with recent brain research.