Of course changes, even cuts, to Medicare are necessary and will happen even if you don’t hear too much about them. No, there are no secrets, just indifference by the press and misleading politicians.
Mind you I am not criticizing these changes. These or similar and even stronger measures are necessary to preserve the program. I do question the assumed effectiveness of some of the proposals and the accuracy of the savings assumptions. I also worry about the cost shifting to the private sector that will result from some of the changes.
There is one major sleeper in these proposals that you should watch closely. That is “Strengthen the Independent Payment Advisory Board (IPAB) to Reduce Long-Term Drivers of Medicare Cost Growth.” I have highlighted the changes in red, read them carefully. Obamacare prohibits the Board from changing benefits. This proposal appears to allow the board to make changes and it lowers the cost point at which changes must be made. In other words, the IPAB has more power and responsibility to avoid Congress. Sneaky, huh?
Proposals to Cut Medicare Costs
Reduce Medicare Coverage of Bad Debts.
Today, for most eligible provider types, Medicare generally reimburses 70 percent of bad debts resulting from beneficiaries’ non-payment of deductibles and copayments after providers have made reasonable efforts to collect the unpaid amounts. Similar to a proposal made by the National Commission on Fiscal Responsibility and Reform (Fiscal Commission), the Budget proposes to align Medicare policy more closely with private sector standards by reducing bad debt payments to 25 percent for all eligible providers over three years starting in 2013. This proposal will save approximately $36 billion over 10 years.
Better Align Payments to Rural Providers With the Cost of Care.
Medicare makes a number of special payments to account for the unique challenges of delivering medical care to beneficiaries in rural areas. These payments continue to be important; however, in specific cases, the adjustments may be greater than necessary to ensure continued access to care. The Administration proposes to improve the consistency of payments across rural hospital types, provide incentives for efficient delivery of care, and eliminate higher than necessary reimbursement. To improve payment accuracy for Critical Access Hospitals (CAHs), the Administration proposes to reduce payments from 101 percent to 100 percent of reasonable costs, effective in 2013, and to eliminate the CAH designation for those that are fewer than 10 miles from the nearest hospital, effective in 2014. These changes will ensure that this unique payment system is better targeted to hospitals meeting the eligibility criteria and will save approximately $2 billion over 10 years.
Encourage Efficient Post-Acute Care.
Medicare covers services in skilled nursing facilities (SNFs), long-term care hospitals (LTCHs), inpatient rehabilitation facilities (IRFs) and home health. Over the years, expenditures for post-acute care have increased dramatically, and payments in excess of the costs of providing high quality and efficient care place a drain on Medicare. Recognizing the importance of these services, the Administration supports policies that will save approximately $63 billion over 10 years and improve the quality of care. These include adjusting payment updates for certain post-acute care providers, equalizing payments for certain conditions commonly treated in IRFs and SNFs; encouraging appropriate use of inpatient rehabilitation hospitals; and adjusting SNF payments to reduce unnecessary hospital readmissions.
Align Medicare Drug Payment Policies With Medicaid Policies for Low-Income Beneficiaries.
Under current law, drug manufacturers are required to pay specified rebates for drugs dispensed to Medicaid beneficiaries. In contrast, Medicare Part D plan sponsors negotiate with manufacturers to obtain plan-specific rebates at unspecified levels. The Department of Health and Human Services’ Inspector General has found substantial differences in rebate amounts and net prices paid for brand name drugs under the two programs, with Medicare receiving significantly lower rebates and paying higher prices than Medicaid. Moreover, Medicare per capita spending in Part D is growing significantly faster than that in Parts A or B under current law. This proposal would allow Medicare to benefit from the same rebates that Medicaid receives for brand name and generic drugs provided to beneficiaries who receive the Part D Low-Income Subsidy beginning 2013. Manufacturers previously paid Medicaid rebates for drugs provided to the dual eligible population prior to the establishment of Medicare Part D. The Fiscal Commission recommended a similar proposal to apply Medicaid rebates to dual eligibles for outpatient drugs covered under Part D. This proposal is estimated to save $156 billion over 10 years.
Increase Income-Related Premiums Under Medicare Parts B and D.
Under Medicare Parts B and D, certain beneficiaries pay higher premiums as a result of their higher levels of income. Beginning in 2017, the Administration proposes to increase income-related premiums under Medicare Parts B and D by 15 percent and maintain the income thresholds associated with income-related premiums until 25 percent of beneficiaries under Parts B and D are subject to these premiums. This will help improve the financial stability of the Medicare program by reducing the Federal subsidy of Medicare costs for those beneficiaries who can most afford them. This proposal will save approximately $28 billion over 10 years.
Modify Part B Deductible for New Beneficiaries.
Beneficiaries who are enrolled in Medicare Part B are required to pay an annual deductible. This deductible helps to share responsibility for payment of Medicare services between Medicare and beneficiaries. To strengthen program financing and encourage beneficiaries to seek high-value health care services, the Administration proposes to apply a $25 increase in the Part B deductible in 2017, 2019, and 2021 for new beneficiaries. Current beneficiaries or near retirees would not be subject to the revised deductible. This proposal will save approximately $2 billion over 10 years.
Introduce Home Health Copayments for New Beneficiaries.
Medicare beneficiaries currently do not make copayments for Medicare home health services. This proposal would create a home health copayment of $100 per home health episode, applicable for episodes with five or more visits not preceded by a hospital or other inpatient post-acute care stay. This would apply to new beneficiaries beginning in 2017. This proposal is consistent with a MedPAC recommendation to establish a per episode copayment. MedPAC noted that “beneficiaries without a prior hospitalization account for a rising share of episodes” and that “adding beneficiary cost sharing for home health care could be an additional measure to encourage appropriate use of home health services.” This proposal will save approximately $350 million over 10 years.
Introduce a Part B Premium Surcharge for New Beneficiaries That Purchase Near First-Dollar Medigap Coverage.
Medigap policies sold by private insurance companies provide beneficiaries additional support for covering healthcare costs by covering most or all of the cost sharing Medicare requires. This protection, however, gives individuals less incentive to consider the costs of health care services and thus raises Medicare costs and Part B premiums. Of particular concern are Medigap plans that cover substantially all Medicare copayments, including even the modest copayments for routine care that most beneficiaries can afford to pay out of pocket. To encourage more efficient health care choices, the Administration proposes a Part B premium surcharge equivalent to about 15 percent of the average Medigap premium (or about 30 percent of the Part B premium) for new beneficiaries that purchase Medigap policies with particularly low cost-sharing requirements, starting in 2017. Current beneficiaries and near-retirees would not be subject to the surcharge. Other Medigap plans would be exempt from this requirement while still providing beneficiaries options for protection against high out-of-pocket costs. This proposal will save approximately $2.5 billion over 10 years.
Strengthen the Independent Payment Advisory Board (IPAB) to Reduce Long-Term Drivers of Medicare Cost Growth.
Created by the ACA, IPAB has been highlighted by economists and health policy experts as a key contributor to Medicare’s long term solvency. Under current law, if the projected Medicare per capita growth rate exceeds a predetermined target growth rate, IPAB recommends to the Congress policies to reduce the rate of Medicare growth to meet the target. IPAB recommendations are prohibited from increasing beneficiary premiums or cost-sharing, or restricting benefits. To further moderate the rate of Medicare growth, this proposal would lower the target rate from the GDP per capita growth rate plus 1 percent to plus 0.5 percent. Additionally, the proposal would give IPAB additional tools like the ability to consider value-based benefit design.
Cut Waste, Fraud, and Abuse in Medicare and Medicaid.
In this fiscal environment, we cannot tolerate waste, fraud, and abuse in Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP)—or any Government program. That is why the Administration has introduced its Campaign to Cut Waste, together with long-standing efforts to boost program integrity and reduce improper payments (that is, payments made to the wrong person, in the wrong amount, or for the wrong reason). The Administration is aggressively implementing the new tools for fraud prevention included in the ACA. Also, it is implementing the fraud prevention system, a predictive analytic model similar to those used by private sector experts. In addition, the Administration is proposing a series of policies to build on these ongoing efforts that will save nearly $5 billion over the next 10 years. Specifically, the Administration proposes to:
- create new initiatives to reduce improper payments in Medicare;
- dedicate penalties for failure to use electronic health records toward deficit reduction;
- update Medicare payments to more appropriately account for utilization of advanced imaging;
- require prior authorization for advanced imaging;
- direct States to track high prescribers and utilizes of prescription drugs in Medicaid to identify aberrant billing and prescribing patterns;
- and affirm Medicaid’s position as a payer of last resort by removing exceptions to the requirement that State Medicaid agencies reject medical claims when another entity is legally liable to pay the claim.
Additionally, the Budget would alleviate State program integrity reporting requirements by consolidating redundant error rate measurement programs to create a streamlined audit program with meaningful outcomes, while maintaining the Federal and State’s government ability to identify and address improper Medicaid payments.