Health Care Entitlements
Congressional Republicans are insisting that big cuts to Medicare and Medicaid be on the table in the negotiations over the so-called fiscal cliff and deficit reduction. That stance is largely a political move against two programs, which have been critical to the public welfare for the past half-century.
Postelection polls show that large majorities of voters for both President Obama and Mitt Romney opposed making large Medicare cuts as a way to reduce the budget deficit. And, the fact is, the Obama administration has already pledged to extract more than $1 trillion in savings over the next decade from these programs. There is not much more that can be cut without hurting the most vulnerable Americans.
The Affordable Care Act contains provisions that will reduce projected Medicare spending by $716 billion over 10 years, primarily by reducing the annual increases in Medicare reimbursements for hospitals, nursing homes and other health care providers and by reducing unjustified subsidies paid to private Medicare Advantage plans. During the campaign, the Romney-Ryan ticket criticized the president for making such a big cut and even fatuously promised to restore all of it.
On top of those savings, President Obama, in his budget for fiscal year 2013, proposed cutting another $340 billion from Medicare spending over 10 years through tactics like requiring drugmakers to pay rebates to Medicare in some circumstances; reducing payments to some health care providers for treating patients just released from the hospital; reducing coverage of bad debts that hospitals and skilled nursing homes have failed to collect from patients; and charging higher premiums to high-income beneficiaries.
Those cuts seem acceptable as part of a larger budget deal to avert the fiscal cliff. There may be room to squeeze additional savings from health care providers as long as their fiscal health is not jeopardized. But, beyond that, there are very limited options for further reducing Medicare or Medicaid spending.
Upper-income beneficiaries already pay higher Medicare premiums, and there may be some room to charge them more. But middle-income beneficiaries need to be protected from higher costs. And the half of all Medicare beneficiaries who have incomes below $20,000 already pay sizable portions of their income for health care and certainly cannot afford to pay more.
Some ideas should be off the table entirely. The election made it clear that there is strong opposition to turning Medicare into a voucher system. And, as for raising the Medicare eligibility age, respected analysts have concluded that this change would actually increase total health care costs and shift the burden to employers and individuals, without saving the government much money.
Finally, it’s important to keep in mind that short-term cuts in Medicare are not urgently needed. Medicare spending per enrollee is projected to increase more slowly than per capita gross domestic product or private insurance spending per enrollee over the next decade, and it is only in the following years that strong cost controls may have to come into play as the population ages and medical costs continue to rise.
Maine’s health reform law back to the drawing board
BY GINA HAMILTON, Times Record, Brunswick, Maine November 28, 2012
When Public Law 2011 Chapter 90 was being debated last year in the Legislature, supporters insisted the reason Maine’s health care costs are among the nation’s highest was that the market was over-regulated.
End some of the red tape, they argued, and the free market will provide competition and bring down costs. Supporters went so far as to say that all uninsured people in Maine would be able to afford coverage.
Although much of the plan remains to be implemented, four of its provisions have already gone into effect, and have already caused higher net premiums for most policyholders.
The law permits insurance companies to increase the difference between what they charge older or rural customers and what they charge younger or urban customers in the individual and small group markets. As a result, Maine’s largest insurance provider — Anthem Blue Cross — raised premiums for the majority of its individual policyholders, especially older ones. Small-business premium rates increased, especially in northern and eastern Maine — rate increases of 70 percent, in some cases.
Relatively few policyholders saw a decrease in premiums, averaging 7 percent to 8 percent.
The law permits an insurance company to “close” its individual or small-group book of business at will and issue new plans. Because the plans are “new,” they do not qualify for regulatory protection. Anthem again led the way: It closed its existing programs and offered a new plan called HealthChoice Plus that drastically reduced benefits, cut maternity coverage altogether, increased deductibles and increased cost-sharing compared to the older, defunct plans.
The law imposes a new tax that requires every privately insured person to pay up to $6 per month to establish coverage for high-risk people by a new private, nonprofit corporation whose meetings — where they decide how public tax money will be spent — will not be open to the public. Maine policyholders together will pay a tax of $22 million — and possibly up to $33.5 million — for this high-risk pool, without knowing what or whom constitutes “high risk.”