Deep Sixing the CLASS Act

The debt ceiling and deficit reduction command the attention of Congress this week.  Its members are trying to find trillions of dollars of cuts to balance the budget.

So why are some members of Congress trying to do something that is guaranteed to increase the already sky-high cost of the Medicaid program?  Do they want to drive us further into debt?

The Senate Gang of Six wants to deep six the CLASS Act before it takes effect.  The CLASS Act is the new national long term care insurance program that will take effect next year.  It will cost the federal government nothing and is projected to save the Medicaid program billions of dollars.

The Medicaid program, as most U.S. citizens now know, is a federal/state partnership resulting in different plans in every state.  In 2010, roughly 55 million people were insured through state Medicaid programs.  If they were all combined into one plan, Medicaid today would be the single largest health insurer in the nation. 

Of the 55 million people on Medicaid, half are children, and many more were working adults.  But they are not the most expensive people on the program.

The biggest costs in the Medicaid program are incurred on behalf of the five million elderly and nine million people with disabilities on Medicaid – the long term care populations.

Many members of Congress have put the Medicaid entitlement program at the top of their deficit reduction hit list. The federal government paid about $275 billion for Medicaid in 2010, and total state outlays approached $200 billion more.  That constitutes almost a half trillion dollars of health care spending. 

Almost half goes to long term care.  Medicaid typically becomes a long term care payer when an elderly person develops an age-related condition, like Alzheimer’s, which forces them to enter an institution for twenty-four hour care and exhaust their personal savings.  It also pays for younger people with mental retardation, or people with serious mental illness or other chronic diseases. 

The challenge for policymakers wanting to control Medicaid costs is, therefore, to control long term care spending for people with chronic conditions.  Cutting nursing home provider rates has long been a favored strategy, but this has never succeeded in reducing costs for any length of time. 

Policy makers have also explored managed care options.  These don’t work as well with people with chronic conditions as they do with a healthier population, because people with chronic conditions already have significant care needs.

So policy leaders are faced with only two choices. 

The first is for government to deny people care.  This is taking health care rationing to an extreme, choosing to leave older, sicker, and poorer Americans to fend for themselves while the government protects the interests of those who are better off.  This choice is inhumane and morally reprehensible to most people. 

The second is to devise a plan through which all people can pre-pay some of the cost of their long term care through private insurance before they get sick, reducing the government’s financial burden.

When Congress passed the CLASS Act in 2010, it chose the second way, the humane and rational way.    

It didn’t want to burden taxpayers, so it required the CLASS Act to be self-sufficient.  Premiums had to pay the full cost of benefits.  The premiums will only be affordable if younger, healthier people participate.  But if having to rely on Medicaid when they get sick is the alternative, then that may be the only reason people need to purchase a policy.

Earlier this year, the Congressional Budget Office projected that the CLASS Act will save the federal government $83 billion in its first ten years of implementation. That’s a lot of money.

This month, however, the Gang of Six joined an increasingly dissonant chorus wailing against common sense and humane, rational decision-making.  They don’t like the CLASS Act, so they want to get rid of it.  This won’t save anyone – ever – even a dime. 

The law may be flawed in its present form and need some revisions, but it’s the right idea.  Private long term care financing has to be part of our Medicaid long term care financing solution.

It is too soon to tell whether the CLASS Act will be deep-sixed as part of “deficit reduction,” gutted before it takes effect, left to languish unimplemented in 2012, or implemented as promised.

But there’s no way for our elected officials to argue that they care about deficit reduction if they jettison an $83 billion savings in Medicaid.

Unless, that is, they’re planning to choose the morally reprehensible option.

If you have questions about this column, or wish to be put on an email list notifying you when new Our Health Policy Matters columns are published, please contact gionfriddopaul@gmail.com.

Get Medicare Out of the Debt Debate

The U.S. debt debate is heating up as Congress and the President argue about the “cut, cap, and balance” plan and move closer to the August 2^nd deadline to raise the debt ceiling.

The debt debate is important.  Our U.S. debt is now over $14 trillion, and we need to do something about it.  But Medicare cuts are on the table, and war spending is not.

So I would like to propose a switch.  Take Medicare cuts off the table, and put war cuts on it.

The wars in Afghanistan and Iraq have cost this country over $1.2 trillion since 2001.  The debt ceiling wouldn’t even be an issue if it weren’t for these, because we never paid for them.  We got the two men we wanted.  It’s time to pay the bill and get out.

On the other hand, the 2011 summary of the annual report of the Medicare Trust Fund trustees shows that we still have surpluses in the Medicare Trust Funds.  The Medicare Part A Trust Fund had $271.9 billion in it in 2010.  The Part B and D Trust Fund had $72.1 billion in it. 

Contrary to what some members of Congress would like us to believe, Medicare isn’t responsible for today’s national debt.

We should be talking about Medicare not because it has contributed to our debt, but because Medicare taxes are not covering the full cost of Medicare today and we’re dipping into the Trust Fund balance.

It won’t take very much to wipe out the Medicare deficit - certainly not as much as the Medicare “sky is falling down” politicians want us to believe. 

The net government outlay for Medicare in 2010 was in the vicinity of $450 billion for a program that covers over 48 million Americans.  Gross spending was about $100 billion higher than that, and included premium payments, co-pays, and costs covered by other non-governmental revenues. 

To pay for this, the Medicare Part A Trust Fund had $215 billion of income in 2010, including interest.  $182 billion came from dedicated Medicare taxes.  The Medicare Part B and D Trust Fund had $212 billion of total income, about $205 million of which was general tax revenues.

Those reflect a shortfall in Medicare tax revenues, which are supposed to cover the cost of the program.   The shortfall for this year isn’t insignificant.  It is projected to be $34 billion in the Medicare Part A Trust Fund, and that will have to come from the Trust Fund balance.

However, this short-term problem was almost completely solved by the passage of the Affordable Care Act, which includes a .9% Medicare tax increase for high wage earners beginning in three years.  Because of the ACA, even if Congress does nothing more to address the Medicare shortfall, it will go down to only $6 billion, or 1.8%, by 2016.

But that’s not good enough for the trustees, who also look at the problem from a long term perspective.  Today’s negative numbers will add up before then, wiping out almost half of today’s $270 billion balance in the next five years.

Looking 75 years down the road, the trustees identified another problem.  They calculated the current Medicare cost to be 3.76% of taxable payroll, and project that it will grow to 4.9% of taxable payroll in 2085. The current Medicare tax rate, however, is only 2.9% of taxable payroll.

So, now we know what it would take to close the long-term Medicare shortfall using tax revenues alone – a 2% increase in the Medicare tax rate.  Half of this would be paid by individual taxpayers and half by their employers.

This would cost the average American making $45,000 per year less than $38 per month.  It would preserve Medicare as we know it today for him, his children, his grandchildren, and probably even his great-grandchildren.

That’s it.  If we did this, we wouldn’t need to embrace any of the bad ideas floating around Congress today, such as privatizing Medicare, creating Medicare vouchers, further limiting or eliminating the prescription drug benefit, forcing beneficiaries into HMOs, or raising the age of eligibility.

But if we were to do anything positive to contain costs in the next seventy-five years, such as keeping our population healthier or finding cures for any of our major chronic diseases, it would take even less to guarantee every American low-cost health insurance in retirement. 

Think we can’t afford this?  The average monthly cost per Medicare taxpayer for the two wars for the last ten years has been around $63 per month.  Before continuing the cold war on Medicare, we should stop throwing away money on the hot ones.

If you have questions about this column or wish to be added to an email list letting you know when new Our Health Policy Matters columns are published, please email gionfriddopaul@gmail.com.

How Increasing Our Obesity Rate is Becoming Federal Policy

Obesity rates in America are higher than ever.

This is the conclusion in a new Robert Wood Johnson Foundation report entitled F as in Fat: How Obesity Threatens America’s Future.   Released last week, the document notes that one-third of children and two-thirds of adults are now obese or overweight. 

Obesity is no minor health matter.  It is linked to disease, disability, and premature death.

The report received some media attention for a couple of days, but then we had our fill of it.  It faded into the news background largely because we’ve heard the story before. 

No one disputes the two major causes of obesity in America.  Americans take in too many calories, and work off too few.

If we accept these causes at face value, the story ends as we decide that weight is a matter of individual – not governmental – responsibility. 

The individual choice argument is a powerful one for those who do not think that the government needs to “interfere” with people’s food and exercise choices.  But it’s wrong.

The forces of governmental inaction regarding the food we eat are powerful. 

First, the “freedom to choose” argument is the same argument the Tobacco Institute used successfully against governmental regulation of smoking for many years.  Smoking was “an adult custom,” the argument went.  Two-thirds of people chose not to smoke, and those who did should be left alone.

Despite overwhelming evidence about the harmful effects of smoking, it took almost thirty years to overcome most of the prejudice against governmental regulation of smoking in public places.

Second, there is an even stronger prejudice against governmental action regarding weight, because weight doesn’t have second hand effects like smoking.  On the contrary, the weight debate often devolves into an argument about the extremes.  Isn’t it worse to be morbidly underweight than it is to be morbidly overweight?  Many people think so.  Morbid underweight even carries a diagnostic label, anorexia, with no real counterpart on the opposite end of the scale.

When former Surgeon General David Satcher issued a call to action against obesity in 2001, the nation responded by grabbing a snack, taking a seat, and tuning him out.  In a Forward to the RWJF report, he writes that 12% of children were overweight in 2001.  The percentage tripled over the next decade.  Three out of every five adults were overweight in 2001.  Two out of three are today.

So why are we so bad at exercising our individual responsibility to eat well? 

Governmental action, or in this case, inaction, may have something to do with it.  As individuals, we are doing some things right, like eating more fruits, vegetables, and milk products today than we did a generation ago.

But the biggest weight culprit may have nothing to do with individual choice.  It appears to be the sugars added during processing to the foods we eat, and the government’s failure to use its own data to regulate this added sugar effectively.

A recent USDA report notes that Americans now consume 30 teaspoons of added sugars every day.  These are often added to our foods during manufacturing, long before we reach for our own sugar bowls.  They add the equivalent of 477 total calories to our daily diet.  We’re hooked on added sugars, which may well be the nicotine of the 21^st century.

Food manufacturers start spooning added sugars into our mouths early in our lives.  Baby foods need no added sugars.  According to another  USDA report published in 2006, however, more than half of the sugars in babies’ teething biscuits were added sugars, as were two-thirds in a “fruit supreme” baby dessert.

We expect sweet desserts, but some non-dessert products have even more added sugars.  Frozen lemonade from concentrate had more added sugar per 100 grams of carbohydrates than cinnamon raisin sweet rolls or chocolate glazed donuts.  A “low calorie” Caesar dressing had almost as much added sugar as a jelly donut.

Telling us to eat less is just background noise when we’re pumping empty calories into our manufactured foods.

Our government should report on, and regulate, the sugars and other substances that are added to our foods.  But the USDA agency program that produced the two reports lost 10% of its funding in 2010.  It will suffer much deeper cuts if the USDA budget passed by the House in June is approved as part of the deficit reduction deal.

This program area accounts for 2% of USDA spending, and 8/100ths of one percent of the US Federal budget.  Eliminating the program area entirely would close the deficit by two-tenths of 1%.

Without information or regulation, the sugars will keep coming whether we want them or not.  And we’ll continue to get fat.

If you have questions about this column or wish to be added to an email list notifying you when new Our Health Policy Matters columns are published, please email gionfriddopaul@gmail.com.

Florida's Medicaid Millionaires

Florida recently elected to turn down – again – over $2 million in Federal money to pay the administrative costs of expanding its Medicaid long term care program’s home and community based services.

In March 2011, Florida qualified for over $35 million to join most of the rest of the nation in participating in the Money Follows the Person program.  The program was created during the Bush Administration as a way of helping people move back out of nursing homes into the community. 

It became so popular in the 29 states (and District of Columbia) participating in it that it was expanded as part of health reform.  Thirteen additional states, including Florida, were invited to participate.  Former Governor Charlie Crist authorized Florida’s Agency for Health Care Administration (AHCA) to file Florida’s application.

Rejecting the program means that people who want to leave Florida nursing homes won’t be given control of the resources they need to do so. 

On the other hand, as a result of Florida’s 2011 Medicaid reform legislation, people who don’t want to leave Florida nursing homes may be forced out, and the money will go to managed care companies.

When Florida’s current Governor Rick Scott took office there was some question as to whether he would pursue the Money Follows the Person program.  After saying he would not implement anything in the Affordable Care Act, he changed his mind and said that he would accept the federal money for this program.  He sought approval from the Legislature to draw down the dollars. 

Then, he apparently changed his mind in May, and allowed the legislative session to pass without pushing for the action needed to allow AHCA to accept the money. 

After a strong reaction from the public against this decision, the Governor asked legislative leaders to revisit the issue in late June.  Key Senators cast a bipartisan vote to accept the money, but House members refused on a party line vote.

Though DHHS earlier said that it would leave the door open to Florida for the remainder of the year, this action may finally kill Florida’s participation in the program.

According to an Associated Press article, at least one of those who voted against it argued that Florida did not need to duplicate its existing programs.

But Florida spends only about half as many of its Medicaid dollars on home and community-based services as the national average.  In 2009, AARP put Florida’s percentage at 14%, while the national percentage was 27%.

This would suggest that at the very least, Florida does need to “duplicate” its existing programs.

Another House member correctly pointed out that although these dollars could have lessened the burden on state taxpayers, they were still federal taxpayer dollars.

This begs a bigger question.  Why would Florida’s elected officials not want tax dollars Floridians pay to Washington to come back to Florida to help meet our needs?  Because of this decision, Florida’s share of these federal home care tax dollars is going to be sent to, and used by, residents of 41 other states and the District of Columbia instead of Florida. 

It was a nice gesture for Florida’s state legislators to send $35.7 million to the people of Texas, Arkansas, North Carolina, Georgia, Louisiana, Mississippi, Kansas, Iowa, and Ohio, among others.  But they don’t represent these states. 

What they did to the Floridians they do represent was the equivalent of either imposing $35.7 million in additional taxes without adding new services, or cutting $35.7 million in services without reducing taxes.  Either way, Floridians lose.

These home and community-based dollars typically provide for the care of adults with disabilities.  About a third of program participants nationwide have physical disabilities, and about a third more have developmental disabilities.  Most of the people in Florida who would have benefited from the program are among the almost 900,000 Medicaid recipients between the ages of twenty and sixty-five. 

In nursing homes, many will become Medicaid Millionaires.  The lifetime cost of their nursing home care will probably exceed $1 million.  So long as they remain institutionalized, there is zero chance that they will ever be able to contribute independently to the cost of that care.

If they were to return home, that picture changes.  People with significant disabilities on the Money Follows the Person program are living and even working in the community again, spending – and sometimes even saving – a little money.  Early evaluation data from the Kaiser Family Foundation also suggest that the program is less costly per person than either nursing home care or other home and community-based programs, like Florida’s.

Nationwide, twelve thousand people had returned to homes and apartments because of the Money Follows the Person program as of the end of 2010.  It’s too bad at least some don’t get to call Florida their home today.  Perhaps they’ll retire here.

If you have questions about this column or wish to receive an email notice when future Our Health Policy Matters columns are published, please contact gionfriddopaul@gmail.com.