Why Health Care Reform Will Be Good for Medicare
by Mark Miller
Many of the protesters showing up at this month's town hall meetings on health care reform are old enough to be on Medicare--or they're pretty close. They're also old enough to know better; here we have beneficiaries of a gigantic, successful federal health insurance program screaming at their legislators to keep the government out of healthcare.
Let's skip past the obvious irony and contradictions at the town halls, and instead focus on a substantive question: Would the health reform bill now taking shape really pose any kind of threat to Medicare recipients? Do seniors have a reason to feel threatened?
While we don't yet know what the final health reform bill will look like, the key components of importance to Medicare can be found in HR 3200, the bill passed by the House of Representatives. A dispassionate look at the bill suggests that health reform actually will be good for the Medicare program.
On the surface, the bill may look somewhat threatening because it calls for $538.5 billion in Medicare spending reductions over a 10-year period to fund overall reform. But while it sounds like a big number, the cuts being proposed won't hurt beneficiaries. Let's look at the details contained in the two biggest spending reductions:
Thirty-two percent of the spending cuts come through reforms in payments to Medicare Advantage plans, the privatized Medicare insurance that offers all-in-one medical and drug coverage. Most Advantage plans offer managed care options--PPOs, HMOs and the like--and have doubled their enrollments to about 10 million since 2003, when they were created under the Bush Administration.
The idea was to revitalize a privatized plan option by boosting federal payments to the plans and creation of new plan options. But here's the rub: Those incentives mean private-sector providers are reimbursed at 114 percent of the cost to provide the same services through basic Medicare. That's a massive, unjustified subsidy, and HR 3200 would achieve savings by pulling the reimbursements back to basic Medicare rates over several years.
"The promise of managed care is we can do a better job and provide extra benefits for no or little costs," argues Joe Baker, president of the Medicare Rights Center. "President Obama and the House bill are really just saying, 'make good on that promise.'"
Another 37 percent of the Medicare cuts come in the form of reduced pay increases to health care providers over 10 years--but the cuts only reduce the rates of increase--they aren't actual reductions. And Baker notes that most providers have either already agreed to the savings because they think they'll have more to gain overall from near-universal coverage and fewer instances where they need to provide charity care.
These cuts will be enough to alleviate part of Medicare's long-term solvency woes, by adding five years of funding to the program's Hospital Insurance Trust Fund--currently projected to run out of money in 2017.
The remainder of the cutbacks focus on home health payment reforms, drug coverage rebates and reducing preventable hospital admissions.
Meanwhile, HR 3200 contains some important new benefits for Medicare recipients.
The bill would close the "doughnut hole" in Medicare Part D prescription drug plans. Under the current program, drug coverage stops when a beneficiary's spending exceeds $2,510 in a given year; at that point, you pay 100 percent of costs up to $4,500, when so-called "catastrophic coverage" kicks in. HR 3200 would gradually phase out the coverage gap over a 14-year period.
HR 3200 also contains a whopping $320 billion in new Medicare funding for primary care and prevention. It would establish a new model for coordination of care among a patient's various physicians. The idea here is to begin shifting the health care delivery model away from expensive acute care services and toward doctor's office visits and other primary care. In the long run, that should save the program money and lead to a better quality of care.
Baker is optimistic about Medicare's future. "It is a successful program and it's survived a long time. And we have a huge demographic wave (of baby boomers) who will be entering the program now--and they are very empowered folks. It's appropriate to look to Medicare for some savings to get reform moving, but it won't be the focus of all the savings initiatives we'll see in the future."
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