Not long ago, I wrote about the Center for American Progress’ (CAP’s) “Senior Protection Plan” —a report that aims to rein in Medicare “by $385 billion over ten years without harming beneficiaries.” In that post, I suggested that CAP’s proposals might well give us a preview of the “modest adjustments” that President Obama had said he would be willing to make to Medicare. At the time, I highlighted three of CAP’s recommendations:
— increase premiums for the wealthiest 10% of Medicare beneficiaries (raising $25 billion);
— insist that drug-makers extend Medicaid rebates to low-income Medicare beneficiaries (saving $137.4 billion);
— prohibit “pay for delay” agreements that let “brand-name drug manufacturers pay generic drug manufacturers to keep generics off the market” (saving $5 billion).
Last week, in his State of the Union address, President Obama embraced the first two: “Already, the Affordable Care Act is helping to slow the growth of health care costs,” he noted. “The reforms I’m proposing go even further. We’ll reduce taxpayer subsidies to prescription drug companies and ask more from the wealthiest seniors.” (In time, I suspect that the administration also will call for a ban on those decidedly seamy “pay for delay” deals.)
“On Medicare,” he added, “I’m prepared to enact reforms that will achieve the same amount of health care savings by the beginning of the next decade as the reforms proposed by the bipartisan Simpson-Bowles commission.” The commission called for reducing Medicare spending by roughly $350 billion over 10 years– a sum that is not far from CAP’s $385 billion target.
Are These “Adjustments” Too Modest ?
These may seem like small numbers. But keep in mind that this is on top of the $950 billion that the Affordable Care Act (ACA) saves by squeezing waste out of health care spending, while simultaneously raising new revenues. Of that $950 billion, some $350 billion comes in the form of Medicare savings achieved by:
— Pruning over-payments to private sector Medicare Advantage insurers– $132 billion
— Containing Medicare inflation by shaving annual “updates” in payments to hospitals and other large facilities by 1% a year for ten years, beginning in 2014– $196 billion
— Cutting disproportionate share hospital payments to hospitals that care for a disproportionate share of poor and uninsured patients over 10 years beginning in 2014 – $22 billion.