Posts Tagged ‘Congressional Budget Office’

What Would Repeal Look Like?

Wednesday, July 18th, 2012

The nonpartisan Congressional Budget Office (CBO) has issued a report that the House Republicans’ bill to repeal President Obama’s health care reform legislation would increase the deficit by roughly $230 billion through 2021.   According to the CBO statement, “The March health care legislation would have a net cost of about $780 billion over the 2012-2019 period. Repealing that legislation would eliminate such costs. But [the health care legislation] also included a number of provisions to reduce federal outlays (primarily for Medicare) and to increase federal revenues (mostly by increasing the Hospital Insurance payroll tax and imposing fees on certain manufacturers and insurers); in March, CBO and JCT estimated that those provisions unrelated to insurance coverage would, on balance, reduce direct spending by about $500 billion and increase revenues by about $410 billion over the 2012-2019 period. If that legislation was repealed, such reductions in spending and increases in revenues would not occur. Thus, H.R. 2 would, on net, increase federal deficits over that period.”

Undeterred, Sen. Orrin Hatch (R-Utah), ranking member on the Finance Committee, said if Republicans gain control of the chamber next year, their efforts to replace the healthcare overhaul will focus on cost control, instead of coverage expansions. Hatch was the author (along with Ted Kennedy) of SCHIP, the largest expansion of taxpayer-funded health insurance coverage for children in the U.S. since Medicaid began in the 1960s. Hatch is in position to lead the committee with primary jurisdiction over federal health policy if Republicans retake the Senate, which Republicans would do if they net only four Democratic-held seats.

As evidence of ObamaCare’s inability to reduce overall healthcare costs, Hatch cited the 9.5% increase in the cost of an average family health plan to $15,073 last year over its cost when the law was enacted.

The first cost-control efforts he would undertake would come in Medicare and Medicaid, he said. Those steps include increasing physician pay and removing “government-dictated prices” in Medicare that increases costs for the privately insured when providers pass along the cost of caring for Medicare and Medicaid patients.

Current Individual Healthcare Coverage Doesn’t Meet ACA Standards

Monday, June 4th, 2012

The majority of individual policies currently on the market could not be sold on state exchanges in 2014, according to a new report.  The report, published in Health Affairs and funded by the Commonwealth Fund, examined individual plans from several states and found that 51 percent of the plans fail to meet the minimum requirements established by the Patient Protection and Affordable Care Act (ACA).

The law says that plans sold on public exchanges must cover at least 60 percent of the costs of treating a typical patient, a figure known as “actuarial value.”  Most of the policies the researchers analyzed covered less than that, meaning the possibility of high out-of-pocket costs for patients.  To meet the actuarial value targets for “bronze plans, “the lowest category, current plans would have to pay for more care. That likely means they would be more expensive to consumers.

“The individual market of the future will sharply contrast with the market of the past decades,” said John Gabel of the University of Chicago.  They do not say whether changes to the market will be good or bad for consumers, but they are likely to be a mixed bag.  Supporters of the ACA say that new regulation of insurance products provide key consumer protections.  Opponents believe that they will drive up the cost of insurance. “Deductibles will have to be lowered,” Gabel said. “The out-of-pocket limits may have to be lower.  They will have to offer maternity benefits” as well as coverage for mental-health and substance-abuse.

People who buy individual health insurance policies typically pay higher premiums and higher out-of-pocket costs than people who have employer-provided.  Individual policies usually offer less coverage and, until the ACA fully becomes effective in 2014, can exclude coverage for pre-existing conditions.  The ACA sets minimum standards for plans sold through the state-run exchanges.  Slightly more than 50 percent of people on the individual market have policies that cover less than 60 percent of plan costs.  One-third of individual policies pay 60 to 69 percent, enough to meet the lowest thresholds under the healthcare law.

Many consumers will get more generous coverage if they purchase insurance through an exchange.  But, according to the Congressional Budget Office (CBO), the boost in benefits could also increase premiums.  “Premiums for health insurance in the individual market will be somewhat higher on average under (the healthcare law) than under prior law, mostly because the average insurance policy in that market will cover a larger share of enrollees’ costs for healthcare and provide a slightly wider range of benefits,” the CBO said.  The increases would be partially offset by other policies that would cut premiums, but still come out slightly higher.  Consumers won’t have to pay the extra costs, though, because the federal government will provide subsidies to help cover the cost of insurance.

Approximately 62 percent of people who now try to buy insurance for themselves in the so-called individual market report that they can’t find an affordable policy, said Sara Collins, vice president for affordable health insurance at the Commonwealth Fund.  People who do “often end up with coverage that’s really not adequate.”  Enhancing current plans to meet the ACA’s requirements will probably raise consumer’s up-front premiums, Gabel said.  “Other things held constant, the cost of the plan will go up,” he said.  The ACA does not allow insurers to cherry- pick only healthy customers; adding sick people to insurance pools will also raise costs, he said.

People whose policies currently don’t meet the health law’s requirements will have to “buy up” in 2014, said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans.  “Any time new benefits are added to a policy that adds to the cost of coverage.”  Premium increases can be alleviated by other changes, according to Gabel.  The exchanges should reduce administrative costs for insurers and “make for more price competition” among plans.  The ACA also limits, to 20 percent of premium revenue, the amount insurers can keep for administrative costs and profit, and creates subsidies to cut the cost of insurance for low- and middle-income people.  “Presumably a lot of people on these really crummy plans in the study could potentially be eligible for premium subsidies,” Collins said.  “It’s really going to be important that other provisions of the law address the premium growth issue.”

Little-Known ACA Proviso Stirs Controversy

Wednesday, May 9th, 2012

There’s a largely unseen battle raging among consumer advocates, physician groups and some Democrats in Congress over a key benefit in the Patient Protection and Affordable Care Act (ACA) — tax credits that will help millions of people purchase insurance.

According to Kaiser Health News, “At issue is a section of the law that outlines when low- and moderate-income employees can opt out of their employer’s coverage and instead get federal subsidies to buy insurance through new state-based marketplaces, called exchanges.  The debate over who qualifies for subsidies has been overshadowed by more-polarizing issues such as the government’s authority to require most people to buy insurance.  But if the Supreme Court upholds the law — or even most of the law — the way the tax-credit dispute is resolved will help determine how many people can get subsidized coverage.  A proposed Treasury Department rule says workers and their families cannot qualify for those subsidies unless their employer’s plan is unaffordable because it exceeds 9.5 percent of their household income.”

Consumer advocates are steadfast in their opposition to the rule because it bases affordability on how much an employee might pay for individual coverage, rather than on the cost of covering their entire family.  As a result, many workers won’t be able to afford family coverage, yet their spouses and children will be ineligible to get help to buy insurance.  Approximately 3.9 million dependents might be impacted, according to one estimate.

“The proposed rule excludes people Congress intended to cover,” said Bruce Lesley, president of First Focus Campaign for Children, who sent a letter to Treasury signed by more than 100 advocacy groups, including the American Academy of Family Physicians, the Children’s Defense Fund, the March of Dimes and the National Council of La Raza.  The letter asks President Barack Obama and congressional leaders to take “administrative action or legislation” to spell out what Congress intended.

Treasury officials are drafting final rules, which are expected to be released soon.  “We are working with consumers, businesses and all interested parties to ensure women and families get the affordable care they need,” Treasury Department spokeswoman Sabrina Siddiqui said.

Supporters of the proposed rule, primarily employer groups and insurance brokers, say it is in keeping with the wording in the ACA that defines affordability in terms of the cost of “self-only coverage.”  Critics, including the National Partnership for Women and Families, say it allows for basing the affordability standard on the cost of family coverage. The group notes that Treasury officials plan to use the cost of a family plan as a basis for exempting some people from penalties for not buying insurance.  “It’s unlikely that Congress intended affordability to be determined one way” for penalty fines and another for subsidies, according to the groups.

Several Democratic lawmakers who played key roles in writing and passing the law say the proposed rule is not what Congress intended.  “The notion that Congress wrote the law in a manner that would exclude many families from access to more affordable coverage…is simply incongruent,” according to Representative Sander M. Levin (D-MI), the ranking Democrat on the Ways and Means Committee, and Representative Henry A. Waxman (D-CA), the ranking Democrat on the Energy and Commerce Committee.

Employers and taxpayers have a lot at stake in the way this rule is interpreted. For every worker who forgoes “unaffordable” job-based coverage in favor of subsidized insurance, the employer pays either a $3,000 per subsidized-worker penalty or $2,000 per employee.  The government’s stake will be less if more workers retain job-based coverage and fewer people seek subsidies.  At the same time, tax credits are the main way the law is expected to help low- and middle-income Americans buy insurance if they don’t have access affordable employer-based coverage.  By 2019, for example, the Congressional Budget Office (CBO) estimated that the government will spend $70 billion in tax credits to help 18 million people buy coverage through the exchanges.

Workers paid an average of $921 for an individual health insurance policy last year. That equals 18 percent of the total cost of the plan, according to an annual survey by the nonpartisan Kaiser Family Foundation and the Health Research & Educational Trust.  An employee’s share of a family plan averaged $4,129, or 28 percent of the total cost.

Based on those figures, a worker earning $40,000 will be ineligible to get subsidies because the $921 is less than 9.5 percent of income, even though the cost of the family plan exceeds that cap. In that scenario, the worker’s dependents will be ineligible to receive subsidies.  The policy is certain to impact women, who are 2.5 times as likely as men to be insured as a dependent, the hardest, according to the National Partnership.

“It will force more people into not having an affordable option,” said Dana Cope, executive director with the State Employees Association of North Carolina.  According to Cope, family coverage costs increased the ranks of the uninsured in North Carolina, where the state subsidizes employee coverage, but does not contribute toward family insurance.  “State employees…who earn on average $41,000…cannot afford to cover their dependents,” Cope said.

49 States Are Acting to Implement the ACA

Tuesday, May 8th, 2012

Although 26 states oppose sections of the Patient Protection and Affordable Care Act, a new report suggests that a majority are taking steps to implement it – no matter what the Supreme Court decides.  The Commonwealth Fund study looked at provisions of the law that went into effect in 2010, specifically the so-called “patient’s bill of rights.”  The law gave states a choice on those matters — they could regulate insurance companies or opt out and let the federal government step in.  According to the report, every state but Arizona has taken some steps to establish its own system. The “bill of rights” contains 10 provisions, including rules that insurers cannot retroactively drop coverage when a customer becomes ill, as well as one that allows parents of young adults to keep their children on their insurance policies.  Ten states have acted on all of the provisions.  Twelve have passed laws or written final regulations.  Yet others have reviewed insurance policy forms providing unofficial guidance to insurers.  “States are responding to the federal law in pragmatic ways that suit their political culture and regulatory needs,” according to the report.

Rhode Island, Maryland and Oregon led the pack in implementing the ACA.  In fact, those states were working to expand health coverage well before the law was passed.  If the ACA is overturned by the Supreme Court, these states — and others supportive of the law’s goals – will keep pursuing reforms.  “What I hear is, they still intend to proceed,” says John Holahan, director of the Health Policy Research Center at The Urban Institute.

One provision of the ACA is that states must set up public insurance exchanges where uninsured residents can shop for coverage.  So far, 16 states and the District of Columbia already have passed legislation enabling implementation of the law, or have governors who have issued executive orders to move forward.  New York was the most recent when Governor Andrew Cuomo bypassed Republican lawmakers who were holding up the state’s effort to create a state insurance exchange by issuing an executive order to proceed.  Another 20 states either have legislation pending or have received some federal grant money to move forward.  The remaining 15 states have made little or no progress.

Two-thirds of the states will have viable exchanges up and running by 2013, according to Sam Gibbs, president of the Exchange Technology Group at eHealth Inc., which runs an online insurance marketplace and is bidding to help build state-level exchanges.  According to the law, the federal government will operate exchanges in states that don’t start them on their own.  That could be difficult to achieve in states that are hostile to the ACA, because implementation requires close cooperation with state government and insurance regulators.

The exchanges will be the entry portal for individuals and families who are currently uninsured.  They will be eligible for a federal insurance subsidy in cases where family income is less than 400 percent of the federally defined poverty level.  The size of the subsidy is based on a sliding scale to hold costs as a share of income between two and 9.5 percent.  States also are required to offer dedicated exchanges for small businesses that would let employers provide a subsidy for employee coverage.  Lower-income families will be eligible for Medicaid under a dramatic federally-financed expansion.  Between the exchanges and Medicaid expansion, coverage will be extended to 23 million uninsured Americans by 2019, according to the Congressional Budget Office.

If the Supreme Court declares the individual mandate unconstitutional and doesn’t touch the rest of the ACA, insurance companies are certain to push Congress for a remedy sometime after the November elections.  This would ensure that enough healthy young people sign up for insurance to balance the ACA’s requirement that carriers accept all applicants and don’t charge high-cost premiums based on age or health risk.  A Government Accountability Office study identified nine alternatives to the individual mandate; for example, setting strict open-enrollment windows with harsh financial penalties for failing to enroll.  That tactic works for Medicare, which charges senior citizens a 10 percent annual lifetime Part B surcharge for each year of delayed enrollment.

Congressional action on a fix would depend on who controls the next Congress — but the recent track record isn’t encouraging. “Since the two parties don’t speak to one another, the odds of a federal fix aren’t very good,” Holahan said.

Writing for Think Progress, Igor Volsky says that “Indeed, it seems that the law has already created an unstoppable momentum towards change and it’s very unlikely that they will take away these new benefits or obtain efforts to modernize their operations (in an effort to reduce spending). Regardless of the Supreme Court’s anticipated ruling on the law in late June, the changes the ACA inspired are here to stay — in one form or another.”

Aging Population Stresses Medicare

Tuesday, May 1st, 2012

The aging population as millions of baby boomers turn 65 and a slowly recovering economy are stretching the long-term finances of Social Security and Medicare.

Soaring healthcare costs have put Medicare in a worse position than Social Security.  But both programs are likely to become insolvent in the coming decades, unless Congress takes action.  In 2011, the trustees projected the Medicare hospital insurance fund would run out of money in 2024.  Social Security’s retirement fund was projected to dry up in 2038, while the SSDI (Social Security Disability Insurance) fund was projected to be empty by 2018. Revised projections provided a more ominous assessment of the disability program, which has seen growth in applications as more disabled workers lose jobs and apply for benefits.  The non-partisan Congressional Budget Office said the disability fund will run out of money in 2016.  Social Security’s trustees have asked Congress to strengthen the disability system by reallocating money from the retirement program.  There is precedent for this since lawmakers did the same thing in 1994.

If the Social Security and Medicare funds ever run out of money, both programs would collect only enough money in payroll taxes to pay partial benefits.  “I don’t know how to make it clear to the public, but in my mind the sirens are going off,” said Mary Johnson, policy analyst for the Senior Citizens League. “I wouldn’t say we’re under attack, but we are in a very, very serious position.”

Tax revenues have started to rebound but they are still below pre-recession levels.  Also, this year’s cost-of-living adjustment (COLA) was much higher than the trustees projected it would be.  Last spring, the trustee’s projected that Social Security recipients would get a benefit increase of 0.7 percent for this year, but higher-than-expected inflation pushed it to 3.6 percent.  That was good news for seniors but it drained more resources from the system.

The trustees overseeing the programs include Treasury Secretary Timothy Geithner, Labor Secretary Hilda Solis, Health and Human Services Secretary Kathleen Sebelius and Social Security Commissioner Michael Astrue.  More than 56 million retirees, disabled Americans, spouses and children collect Social Security.  The typical retirement benefit is $1,232 a month; the average benefit for disabled workers is $1,111.

According to Geithner, the trustees’ reports demonstrate a real need for Congress to make substantial changes to entitlement programs, although he continues to oppose Republican proposals to partially privatize Medicare.  “We will not support proposals that sow the seeds of their destruction in the name of reform, or that shift the cost of healthcare to seniors in order to sustain tax cuts for the most fortunate Americans,” Geithner said.  Last year, the trustees said that the Patient Protection and Affordable Care Act (ACA) would extend the life of the Medicare trust fund — a point that Geithner emphasized.  According to Kaiser Health News, “One of the most important things we can do right now to preserve Medicare is to implement the Affordable Care Act fully and effectively.” Geithner said.  “Still, more needs to be done.”

The positive news for Medicare is that the pace of cost increases has eased a bit. “The trends in Medicare are more modest than the cost increases we have seen in the private commercial sector,” said economist David Blitzer, who administers Standard & Poor’s index of healthcare costs.  “But both Medicare and the commercial sector face rising cost pressures no matter what, and they seem to come from virtually all directions.”

Medicare sets prices on take-it-or-leave-it terms for hospitals and doctors, who complain it doesn’t pay them adequately.  That causes them to charge privately insured patients at higher rates.  Some experts say the longer Congress waits to act on the two programs, the more difficult it could become to make effective changes.  If Congress acts quickly, it can phase in changes over time, perhaps sparing current retirees while giving those closing in on retirement time to prepare.  Unfortunately, Washington has had difficulty making tough political choices that involve raising taxes, cutting benefits or some combination of both.  Advocates for seniors oppose benefit cuts, noting that Social Security’s finances are secure for decades.

“No one is saying you don’t have to maintain it,” said Eric Kingson, co-chair of the Strengthen Social Security Campaign and professor of social work at Syracuse University.  “What I worry about is reducing the benefit structure or radically changing the system.”  Kingson believes that Social Security can be shored up by simply increasing the amount of wages subject to Social Security taxes — an idea that the majority of Republicans in Congress oppose.  Social Security is financed by a 6.2 percent tax on an individual’s first $110,100 in wages and is paid by employers and workers.  Congress temporarily reduced the tax on workers to 4.2 percent for 2011 and 2012; the program’s finances are being replace through increased government borrowing.  The Medicare tax rate is 1.45 percent on all wages, paid by employees and workers.

$1,000 Toothbrushes and $140 Tylenols: And You’re Footing the Bill

Thursday, March 29th, 2012

As the debate about the future of Medicare heats up, the program’s chief actuary estimates that 15 percent to 30 percent of healthcare expenditures are wasteful. Cindy Holtzman, a consumer advocate with Medical Billing Advocates of America, cited several examples, such as a Florida patient who was charged $140 for a single Tylenol.  A patient in South Carolina paid $1,000 for a toothbrush.  A patient in Georgia who used one bag of IV saline solution was billed for 41 bags for a total of $4,000.  In the case of the Georgia patient, insurance paid the entire claim.  “Usually any kind of bill under $100,000, they (insurance companies) don’t look at the details.  And that’s where something like this can be paid in error,” Holtzman said.  After Holtzman investigated, the bill was fixed, and the insurance company was refunded its money.

Medicare spending exceeded $500 billion in 2010.  As much as $75 billion to $150 billion could be cut without reducing needed services.  A potential cause is that Medicare’s reimbursement procedures do not track the appropriateness of the care provided.  Medicare farms out its claims administration to private local contractors based on how quickly and cheaply they process claims.  These contractors are not given incentives to audit the taxpayer dollars they spend; even if they wanted to, they would need data that is typically not found on the claim form.

Healthcare spending is wasteful across the board, not just in Medicare.  Writing for Politico, Ralph G. Neas, CEO of the National Coalition on Health Care (NCHC), a non-profit, non-partisan organization working to improve America’s healthcare system, says that “Total expenditures on healthcare represented 17 percent of the gross national product in 2010 and are projected to reach 20 percent by the end of this decade.  The federal government already spends more for health care than for defense, Social Security or any other single spending category.  The nonpartisan Congressional Budget Office has emphatically identified rising health costs as the greatest threat to our fiscal future.  It doesn’t have to be this way.  Our current system is devastatingly inefficient.  The United States spends 141 percent more on healthcare than other economically advanced nations.  But our far higher bill is not buying us a healthier population.  Roughly 30 percent to 40 percent of medical and hospital costs can be attributed to waste and inefficiency.  That means, America is on a path to squander $10 trillion over the next decade. That hemorrhage would leave our economy — and our cities, states, small businesses and middle-class families — on life support.  Given our financial condition, preventing this kind of spending and the economic drag it represents should be the kind of urgent national problem that overrides ideological differences and encourages us to find common purpose.”

NEHI, an independent non-profit national network for health innovation, has recommended actions that would reduce wasteful healthcare spending by up to $84 billion. The plan was produced in collaboration with the National Priorities Partnership.  One major area for savings is eliminating emergency department overuse.  More than half of the 120 million annual ED visits can be avoided, representing a $38 billion opportunity for savings.  Medication errors add up to seven million inpatient admission and outpatient visits involving serious but avoidable medication errors, representing a $21 billion opportunity for savings.  Unnecessary hospital readmissions is another area where savings can be achieved.  Seven million people are readmitted to hospitals within 30 days of discharge annually but 836,000 of these cases could be avoided, representing a $25 billion opportunity.

Another study believes that healthcare spending waste is much more widespread.  As much as 50 cents of every dollar spent in healthcare is wasted, according to Pricewaterhouse Cooper’s Research Institute. The organization determined that unnecessary price gouging makes up $1.2 trillion of the $2.2 trillion spent on healthcare nationwide.  “Our best estimate is that for the country as a whole, probably half of what we’re spending on healthcare delivery today is technically waste from a patient’s perspective,” said Dr. Brent James, chief quality officer for Intermountain Healthcare in Salt Lake City.  “There are better ways of doing it.”

The Institute of Medicine (IOM), a division of the non-partisan National Academy of Sciences, reports that “excess costs” – which translates to waste — in the American healthcare system cost $810 billion every year. Their findings?  Overly-high insurance administrative costs absorbed by doctors and hospitals cost $190 billion.  Insurance company inefficiencies cost $20 billion.  Unnecessary services (brand name drugs instead of generics, repetitive tests and procedures, etc.) cost $210 billion.  Too-high prices for doctors and hospitals cost $85 billion.  High drug and device prices cost $20 billion.  Errors and avoidable complications cost $75 billion.  Inefficient delivery of services costs $ 80 billion.  Fraud costs $75 billion.  Missed disease-prevention opportunities cost $55 billion.

Time to Resolve the “Doc Fix”

Wednesday, December 21st, 2011

Congress’ end of year to-do list inevitably includes the “doc fix” – billions of dollars to avoid deep rate cuts for physicians who treat Medicare’s 48 million patients.  Congressmen and Senators always defer the cuts demanded by a 1997 reimbursement formula — known as the sustainable growth rate (SGR) and which most believe needs to be entirely rewritten.  The deferrals are temporary, and the doc fix has become increasingly difficult to pass through a divided and deficit-wary Congress.  In 2010, Congress put off scheduled cuts five times, with the longest delay lasting one year.

The story is the same heading into 2012.  If lawmakers are unable to agree before returning home for the holidays, 500,000 physicians will face a stiff 27 percent cut beginning January 1.  Although Congressional leaders have vowed to prevent that, they disagree over how to pay for the fix.  There is little doubt some agreement will be reached, but that deal could be delayed until early next year.

The cost of congressional intervention, not surprisingly, has grown: Delaying the cuts — the solution Congress has chosen since 2003 — will cost $21 billion for a one-year delay and $38.6 billion for two years.  Repealing the formula would add approximately $300 billion to the deficit, according to the Congressional Budget Office.

No one imagined that the SGR would cause so much trouble when it was passed as a minor element of the Balanced Budget Act of 1997.  Nearly 15 years ago, Medicare physician spending, which accounts for a small share of the program’s overall outlay, was growing slowly.  The law included other restraints that have since been repealed.  Analysts predicted that, at most, the SGR formula would curb physician payments minimally.  “It wasn’t viewed as a big deal at the time,” said Paul Van de Water, an economist specializing in Medicare with the research group Center on Budget and Policy Priorities.  “They needed a few more billion dollars in savings (for the Balanced Budget Act), so they just tacked on the SGR arrangement.”

Kaiser Health News wonders why Congress doesn’t just scrap the SGR formula.  “Money is the biggest problem.  It would cost about $300 billion to stop the doc fix cuts over the next decade and Congress can’t agree on where to find that kind of cash.  Some lawmakers, including Senator Jon Kyl (R-AZ), have proposed using money saved from winding down the wars in Iraq and Afghanistan to finance a permanent fix.  While the idea has found favor among some Democrats, other Republicans oppose it.  For physicians, the prospect of facing big payment cuts is a source of mounting frustration.  Some say the uncertainty led them to quit the program, while others are threatening to do so.  Still, defections have not been significant to date, according to MedPAC.  Physician groups continue to lobby Congress to enact a permanent payment fix.”

Dr. Florence C. Barnett recently decided to quit seeing Medicare patients.  She said the plan covered approximately 33 percent of what it cost her to see patients — and found herself facing a growing Medicare patient population after other local neurosurgeons left the program in 2010.  “This is the way the government will ration healthcare,” Barnett said.  “The people who can afford it will have healthcare, and the people who are only on government support — they will not be able to find a doctor or they will have a very long wait.  It’s happening now.”

A survey conducted by the Medicare Payment Advisory Commission found that among patients looking for a new primary-care physician in 2010, 79 percent experienced no problems finding one.  According to the American Medical Association (AMA), which generally resists limits in reimbursements, nearly 33 percent of primary-care physicians already restrict how many Medicare patients they accept in their practices.

Physicians are once again relying on Congress to put off the impending cut.  It’s a scenario that Glen Stream, M.D. and president of the American Academy of Family Physicians, calls a “Lucy and Charlie Brown and the football thing.”  In other words, physicians have become numb to the whole situation.  This year, that numbness could be risky.  “Doctors are sort of numb from this,” Stream said.  “It’s concerning because I think there’s a very serious chance that this cut could go into place and yet many practicing physicians have heard this years and years in a row and it always seems to get averted at the last minute.  I think that they may not understand the gravity of the situation this time.”

Writing on the MDNews.com website, Maggie Behringer says that “Last year the battle to fund the Medicare deficit — $19 billion for the fiscal year — ended in a one-year measure.  The summer saw a hands-off stance from the Center for Medicare and Medicaid Services when the administration instructed providers to temporarily cease filing claims until Congress resolved a standstill over stimulus spending and unemployment benefits.  The cut projected for January, 2012, should Congress fail to enact the customary doc-fix, totals to 27.4 percent.  The core conflict for legislators — 19 of whom are physicians, themselves — emerges in the inability of the SGR to adapt in today’s economic environment.  The formula was originally developed to bind spending to the economy’s growth.  Despite initial success, the exponential climb in healthcare costs quickly surpassed the overall market.  The subsequent deficits to fund Medicare were further compounded by the recent depression and ongoing recession.  Even if Congress is able to act in time with a temporary doc-fix over the holidays, the fundamental dilemma will remain a question of funding just as the patient population eligible for Medicare benefits enters a major boom.”

Medicare Advantage Premiums to Fall Four Percent in 2012

Tuesday, October 4th, 2011

The Obama administration’s announcement that Medicare Advantage insurance plans premiums will decline in 2012, at a time when enrollment is expected to rise, is good news for the leading health insurers in that segment.  Wall Street analyst Ana Gupte said that the announcement suggests strengthening support in the administration for the privately-run versions of the government’s Medicare program, which covers the elderly and disabled.  Medicare Advantage plans offer basic Medicare coverage with extras like vision or dental coverage oratremiums lower than standard Medicare rates.  Health and Human Services Secretary Kathleen Sebelius said that Medicare Advantage premiums will average four percent less in 2012, and insurers running the plans believe that enrollment will rise by 10 percent.  “Overall, we were very encouraged by the announcement and see this as reinforcing our bullish thesis on the Medicare Advantage and (prescription drug coverage) segments,” according to Gupte.

It’s highly unusual to see healthcare insurance premiums falling. Reduced premiums and growing enrollment are the opposite of what insurers and Republicans predicted would happen to Medicare Advantage after the passage of the Patient Protection and Affordable Care Act (ACA).  The ACA cut payments to fee-for-service Medicare Advantage plans by about $136 billion over the next 10 tears.  Right before the law passed, American’s Health Insurance Plans predicted that “millions of seniors in Medicare Advantage will lose their coverage, and millions more will face higher premiums and reduced benefits.”  So what accounts for the drop?  The decrease in premiums doesn’t have a lot to do with policy decisions made in the ACA.  It’s three outside factors that are putting downward pressure on Medicare.  One is that Medicare costs are growing more slowly.  Both in Medicare and in private insurance, the recession has seen patients using fewer medical services.  This looks to be especially true in Medicare, where seniors might have more limited resources because they tend to live on a fixed income.  The latest S&P Healthcare Economic Indices data indicates that Medicare spending appears to be rising at a slower rate than just a few years ago.

Jonathan Blum, director of the Centers for Medicare and Medicaid Services (CMS) Center for Medicare, said the more affordable costs and growth forecasts demonstrate that companies are still interested in offering such plans despite new consumer protections under the healthcare law and payment caps to insurers.  According to Blum, “We can say with complete accuracy that despite projections in 2010 that the program will decline, the program has grown and will continue to grow.  The plans have made a very strong statement that they intend to commit to the program.  Plans that do a better job serving the needs of their Medicare members should be rewarded and all plans should be encouraged to improve their performance.” 

Healthcare insurers warned that seniors can expect more costs and receive fewer benefits from their Medicare Advantage plans after payment cuts take effect.  They point to projections from the Congressional Budget Office, which predicted Medicare Advantage enrollment would fall to just 7.8 million participants in 2019.  “Medicare Advantage plans remain committed to the program and are doing everything they can to preserve benefits and keep coverage as affordable and possible for beneficiaries,” said Robert Zirkelbach of America’s Health Insurance Plans (AHIP).  “However, as these cuts take effect in the coming years, Medicare Advantage beneficiaries will face higher out-of-pocket costs, reduced benefits, and fewer health care choices.”  The group and its insurer members, who opposed many of the healthcare reforms before they passed, are now committed to implementing the law.

“Many people raised fears that under the Affordable Care Act, beneficiaries would see their Medicare Advantage options shrink and their premiums rise,” Sebelius said.  “Instead, we have seen just the opposite.”

Some in the industry are looking at other ways to bring Medicare costs down.  According to the Fierce Pharma website, “Healthcare industry leaders are poised to make their own deficit-reduction suggestions — including some that might not win them points in a popularity contest.  Uncertain what budget cuts the deficit-reduction committee might propose, the Healthcare Leadership Council has come up with its own proposal that would ask Medicare beneficiaries to endure more belt-tightening themselves.  The group is aiming to put forward an alternative more palatable than across-the-board Medicare cuts mandated by the deficit-reduction bill if the “supercommittee” doesn’t agree on its own plan.  And it’s betting that its proposal will be easier to bear than budget-cutting ideas floated in the past, such as drug re-importation.  The council, which includes Big Pharma executives, hospital companies and insurers, crafted a plan that would raise the Medicare-eligibility age little by little to 67 from 65, beginning in 2014. It would hike co-pays and deductibles.  It would require well-off seniors to pay higher premiums.  And it would add private-sector competition to traditional Medicare coverage, pitting government-subsidized private insurance plans against regular Medicare.  Requiring seniors to pay more might be considered a non-starter; after all, consumer groups, particularly AARP, have vociferously fought against such moves in the past.  But the council figures that provider-based Medicare cuts will end up costing beneficiaries when all is said and done.  ‘This thinking that we’re protecting beneficiaries because we’re only cutting providers — that’s mythical,’ said Mary Grealy, the council’s president.”

Medicare Changes Would Hit Lower-Income Seniors Hard

Tuesday, August 2nd, 2011

At a time when concern about federal deficits and the national debt are growing,  few quarrel with the need to reform Medicare.  The health insurance program for seniors and people with certain disabilities accounts for 15 percent of the federal budget – in third place behind Social Security and defense spending.  That share is rising as healthcare costs continue to rise and more baby boomers retire, threatening the program’s long-term solvency.

Several of the most prominent solutions under discussion largely derive their savings by shifting a greater share of the cost onto beneficiaries.  The plan sponsored by Representative Paul Ryan (R-WI) and passed by the House of Representatives would significantly cut Medicare spending by capping the government’s contribution to the program and transforming it into a system of “premium supports” given to seniors to help subsidize their purchase of private insurance plans, with seniors paying additional costs.  This would double out-of-pocket spending by the average senior to $12,500 each year, according to Congressional Budget Office estimates.

The ability of a majority of seniors to shoulder that burden appears dubious.  Just five percent of Medicare beneficiaries make $80,000 or more, a figure that includes any income from a spouse. For the 47 percent of seniors who are at or close to poverty, on average they are already spending nearly 25 percent of their budgets on healthcare, according to an analysis by the Kaiser Family Foundation.

“There’s this impression that there’s a great deal of wealth among the Medicare population, this image of wealthy seniors playing golf and enjoying their retirement years,” said Tricia Neuman, director of the Kaiser Family Foundation’s Medicare Policy Project.“But while some are lucky to do so, many are living on a fixed income, struggling to make ends meet…with really limited capacity to absorb rising costs.”

According to the Kaiser Family Foundation’s report, raising Medicare’s eligibility to 67 in 2014 would generate an estimated $5.7 billion in net savings to the federal government, but also result in an estimated net increase of $3.7 billion in out-of-pocket costs for 65- and 66-year-olds, and $4.5 billion in employer retiree healthcare costs.  In addition, the study projects that the change would raise premiums by about three percent both for those who remain on Medicare and for those who obtain coverage through health reform’s new insurance exchanges.  The study assumes both full implementation of the health reform law and the higher eligibility age in 2014 in order to estimate the full effect of both the law and the policy proposal.  In the absence of the health reform law, raising Medicare’s age of eligibility would result in an increase in the uninsured, according to other studies, as many older Americans would have difficulty finding affordable coverage in the individual market in the absence of Medicare.  With health reform, virtually all 65- and 66-year-olds would be expected to obtain alternative sources of coverage.”

Healthcare remains a major focus of budget talks on Capitol Hill,Senator Mark Kirk (R-IL) recently told the American College of Surgeons (ACS).  Every group that relies on federal funding should expect a 10 to 20 percent drop in that funding.  When Dr. L.D. Britt, president of the ACS, warned that such cuts could send some healthcare providers into a “tailspin,” Kirk responded that “the tailspin is the U.S. economy.  There is a new audience at play,” Kirk said, referring to U.S. creditors.  “The judgments they render, they are swift and severe.”  Kirk is optimistic that a solution to the country’s debt-ceiling dilemma “will have a way of concluding itself one day before the August 2 deadline.”

Is Getting People on Medicaid Doing More Harm Than Good?

Tuesday, July 19th, 2011

To control soaring Medicaid costs,  several states have started the new fiscal year by cutting payments to doctors, hospitals and other healthcare providers that treat the poor.  Some experts say the cuts could add to a shortage of physicians and other providers participating in Medicaid.  “Further depressing payment rates can only worsen the situation,” said Sara Rosenbaum, chair of the health policy department at George Washington University.  She says some states cutting rates — South Carolina, for example — already have acute Medicaid physician shortages.

Insurers and employers believe that cutting the rates will prompt providers to raise their prices for patients who have private insurance.  “It’s always a concern that when providers get less from Medicaid, that they will shift the costs to private insurance so families and employers pay more,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans (AHIP), the healthcare industry’s lobbyist group.

States reducing Medicaid payments to physicians are Colorado, Nebraska, Oregon and South Dakota.  Arizona, which cut rates in April, will impose another cut in October.  States reducing payments to hospitals include Colorado, Connecticut, Florida, Nebraska, New Hampshire, North Carolina, Oregon, Pennsylvania, South Carolina, Texas, Virginia and Washington.  New York cut hospital payment rates in April.  In March, California okayed a 10 percent Medicaid cut to doctors and hospitals; those reductions are pending because of a lawsuit that has not yet been resolved.

The payment cuts, which require federal approval, are part of an effort by states to cut Medicaid costs, typically the largest- or second-largest expense after education.  A joint state-federal program, Medicaid serves more than 50 million low-income and disabled Americans.  Under the provisions of the Patient Protection and Affordable Care Act (ACA), more than 16 million more people will become eligible 2014, with the federal government picking up the majority of the cost.  To lure more physicians to accept Medicaid patients, the law raises rates for primary-care physicians in 2013 and 2014 to match those paid by Medicare.  On average, states currently pay Medicaid providers approximately 72 percent of what Medicare pays.

Federal-state Medicaid costs totaled $366 billion in fiscal 2009.  The federal stimulus package gave states $100 billion to help pay their share, but that funding ended June 30, and “states are struggling,” said Laura Tobler, a policy analyst at the National Conference of State Legislatures.  The ACA does not allow states to restrict eligibility for the program.

Because of cuts in reimbursement, the Government Accounting Office (GAO) has found that fewer physicians are accepting children on Medicaid as patients.  More than 75 percent of 932 doctors surveyed by the GAO reported difficulty when referring children with public insurance for specialty care, citing an overall shortage of specialists, and different waiting lists for children receiving Medicaid or Children’s Health Insurance Program (CHIP) benefits than children covered by private insurance.  In 2010, more than 40 million children in the country received healthcare through one of the two programs which cost $79 billion in federal and state funds.  Physicians serving rural areas are more likely to accept new patients with Medicaid and CHIP than doctors in urban areas.  Rural primary-care doctors reported greater difficulty referring their Medicaid and CHIP patients to specialists than urban physicians.

Writing in Forbes, Avik Roy says that “The real problem, however, is that many physicians don’t accept Medicaid patients, primarily because Medicaid underpays them for their time and costs.  The Health Tracking Study Physician Survey found that internists are 8.5 times as likely to reject all Medicaid patients versus those with private insurance.  The New England Journal of Medicine recently published a study showing that 66 percent of Medicaid children were denied an appointment with a specialist for an urgent medical condition — such as uncontrolled asthma or seizures — compared to only 11 percent for the privately insured.  What makes this even more appalling is that we’re spending billions of dollars to take millions of children away from high-quality private insurance, and shoving them in Medicaid instead.  As Peter Suderman notes, the Congressional Budget Office has estimated that of the children who have been added to Medicaid’s sibling, the State Children’s’ Health Insurance Program (CHIP), one-quarter to one-half were adequately covered by private insurance beforehand.”