“Premium Support” Is Just Another Way To Privatize Medicare

Note: This post comes from my new blog reforminghealth.org I have left The Century Foundation and can be reached at nfreund2@gmail.com

Out of the rubble of the failed budget deficit negotiations, it seems a new movement is afoot to transform Medicare into a “premium support” program with the goal of moving more seniors and the disabled into the private insurance market.

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You Heard It Here First: Medicare Spending Slows

Sunday, a New York Times editorial confirmed that “Since January 2010 the growth in Medicare spending has actually slowed to an annual rate of about 4 percent, less than half the annual rate for the previous decade. No one is quite sure why, but one theory holds that hospitals are scrambling to squeeze a lot of fat out of the system even before the health care reforms pressure them to do it.”

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“Essential Benefits” that Insurers Must Offer Under Health Care Reform

Will Universal Coverage Mean “Medicaid for All”?

Often, I refer to the health care reform bill that President Obama signed into law in March of 2010 as “the Affordable Care Act” or ACA.  Friday,  as I read the Institute of Medicine’s (IOM’s) report on the “Essential Health Benefits” (EHB) that private insurers will be required to cover under reform, I resolved never to make that mistake again.

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Health Care Reform: The Next Stage, Part 1

Free Market Competition Cannot Make Heath Care Efficient: Why Health Care Should Be Regulated, Not By Government, but By Science

Not a few politicians and pundits continue to believe that free market competition offers the best solution to creating a health care system that offers good value for our health care dollars. House Budget Committee Chairman Paul Ryan, for one, argues that if we just give every American a tax credit, and let each person shop for his or her own insurance, consumers would pick the insurance network that offered the best care at the lowest price.

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Medicare and the President’s Deficit Reduction Plan: Shifting Costs to Seniors

How Cost-Sharing Leads to More Cost-Sharing: A Slippery Slope

President Obama’s newest proposal for reducing the federal deficit would slice Medicare reimbursements to drug-makers, nursing homes, rehabilitation facilities, home health services and teaching hospitals. As I explained in Part 1 of this post, using figures from the non-partisan and highly respected Medicare Payment Advisory Commission (MedPAC), these are groups that Medicare often overpays.  Some skilled nursing facilities turn an 18 percent profit on Medicare patients while reimbursements to home health agencies have consistently and substantially exceeded costs.

By and large, these recommendations make sense, and could help throw a spotlight on excesses in Medicare spending. But I very much doubt that either Congress or the Super Committee charged with addressing the deficit will embrace the President’s proposals in these areas. The lobbies that represent drug-makers, our most prestigious academic medical centers and three health care industries that have been taken over by for-profit companies (skilled nursing facilities, rehab centers and home health service agencies) can write the checks that help swing elections.

Proposals That Are Far More Likely to Find Support in Washington

President Obama’s plan also targets future retirees, asking them to shoulder a larger share of Medicare’s costs. Specifically, starting in 2017:

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Medicare Advantage Grows; But Not Without Government Help

When the health reform bill was passed in 2009, it looked like the end of the gravy chain for Medicare Advantage plans; the privately-run health care plans that are sold to seniors as an alternative to traditional, government fee-for-service Medicare. The Affordable Care Act cuts $136 billion over 10 years from Medicare Advantage, following years of concern over the fact that the plans cost the government about 14% more (about $12 billion a year) than traditional Medicare. These overpayments allowed MA plans to offer perks like vision, dental and prescription benefits as well as lower out-of-pocket costs for some subscribers. Now about one-quarter of all seniors are covered under these plans.

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Medicare and The President’s Plan to Reduce the Deficit—Cuts That Make Sense

Some of the largest cuts in President Obama’s proposed package of Medicare savings target areas where Medicare does, in fact, over-spend. Unfortunately, these are the reforms that Congress is least likely to adopt. In each case a powerful lobby representing those who profit from Medicare’s largesse will howl, and many legislators may well bow to their wishes. Nevertheless, it is useful for the President to call attention to areas where Medicare can save money—without cutting benefits.

  • Prescription Drugs: The President’s plan would save $135 billion over ten years, starting in 2013, by requiring that drug companies provide additional discounts, or rebates, to Medicare for prescription drugs bought by low-income beneficiaries enrolled in the Part D Low-Income Subsidy program. In the past, I have written about the drug industry’s double-digit profit margins. In theory, the industry needs these margins in order to innovate. In fact, the number of new and effective drugs coming out of the pharmaceutical industry has slowed in recent years. Too often, they focus on creating “me too” drugs that they know will find a large market.

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The Affordable Care Act: Laying Out the Details in One Place

An Itemized List of Savings and Revenues

Today, over at The American Prospect, Robert Kuttner makes an important point: “in 2010 Republicans convinced a lot of seniors that the Affordable Care Act would come at the expense of Medicare. In truth, you can demonstrate that the ACA will actually save costs without cutting care,” he adds. But to do that, “you have to get so far down in the weeds of health policy that you lose most voters.”

Kuttner is right: the truth lies in the details, and this makes it difficult to explain the Affordable Care Act (ACA) to the public. If Congress had chosen to pay for health care reform by slashing doctors’ fees by 20 percent, and capping how much Medicare will spend on anyone over the age of 75, it would be far easier to sum up the ACA in a few pithy paragraphs.

Instead, legislators focused on trimming $19 billion here, saving $145 billion there, and another $20 billion over there, by; closing tax loopholes, phasing out overpayments to those private sector Advantage insurers that are not delivering  good value for Medicare dollars, and eliminating redundancies within Medicare. These are just a few of the ways that the legislation squeezes some of the waste out of Medicare spending without cutting benefits, or reducing reimbursements to doctors. In addition, reform legislation raises new revenues, including $107 billion in new fees that insurers, drug makers, and medical device companies have agreed to pay. (They can afford to contribute to reform because they know the legislation will bring them millions of new customers.)

I have written a few posts that delve into the details of how “The Affordable Care Act Pays for Itself and Cuts the Deficit.” And now I have put all the numbers together in an issue brief titled “Better Care for Less.”

Granted, it takes more than a few pages to lay everything out, itemizing and explaining both savings and new revenues. This is why you won’t find a detailed breakdown of the ACA in the newspaper, or even on the blogosphere. Most bloggers believe that they must be brief. I should add that I admire tight one-page overviews of reform legislation, but I also think there is a place for clear in-depth analysis of the most important piece of legislation this nation has seen in more than 45 years.

You may not want to sit down and read “Better Care For Less” in one sitting, but I hope you’ll find it a useful resource that will answer many of your questions about the ACA. It may also help you explain reform legislation to skeptical friends. You can click here to download the brief from The Century Foundation’s website.

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