Ending the Medicare Debate

If you care about Medicare, then who lost last week’s Presidential debate?  Perhaps we all did.

That’s because both candidates favored some cuts in the Medicare program.  And cuts translate into a real impact on real people.

But no cuts could mean something even worse - unsustainable levels of spending in the Medicare program.

The question is what’s the lesser evil – a cut in payments to providers or a cut in benefits to individuals?  That’s the choice President Obama and Governor Romney gave us.

President Obama favored cuts in payments to providers.  Governor Romney favored cuts in benefits to individuals.  The difference in their positions became clear as Romney pressed his point about the $716 billion in “cuts” that Obama supported in the Affordable Care Act.

The “cuts” Obama favored actually fell into two categories that are built into the law – provider rate reductions and cuts to private insurers offering Medicare Advantage plans. 

The provider rate reductions arguably hit doctors the hardest, because ACA presumed that the so-called “doc fix” won’t happen anymore beginning next year.  The “doc fix” has had bipartisan support every year since 2002, because it corrects a provision in the Medicare reimbursement formula that would immediately reduce reimbursement by around 30%. 

The other provider cuts are realized by limiting the increase in future Medicare reimbursements to 5% per year – less than the 5.7% health care costs are expected to grow.

Romney was emphatic during the debate that as President he would restore not just these provider dollars, but the private insurers’ administrative dollars, too.

But Obama pointed out that these savings were used in part to finance the closing of the Medicare donut hole and new Medicare prevention benefits.

More significantly, they also change the trajectory of Medicare spending significantly over time.  According to the 2012 annual report of the Medicare Trust Fund trustees, even with the savings the overall cost of Medicare will grow from just under 4% of GDP today to just over 6% in around thirty years, and then grow a little higher through 2085 (those are the green lines in the chart). 

So Obama just cuts away at the increase.

Romney’s position is more extreme.  Because without the savings, the cost of Medicare will grow to 7% of GDP by 2040, and then skyrocket to over 10% (those are the red lines in the chart) by the time babies born today hit retirement age.

If we had to borrow to cover that, it could bankrupt America.

Romney obviously doesn't want to bankrupt America.  But he did say that he favored leaving Medicare alone for people age 60 and above. (Note: The Ryan plan says 55, but Romney said “60” in the debate.)

For everyone else, Romney wants to reduce the projected cost of Medicare by changing it to a voucher program. 

He would give a health insurance voucher to everyone when they turn 65, and let them use it to purchase either “traditional” Medicare or private insurance through a federal Medicare exchange. 

The value of the voucher will be tied to the second-cheapest plan available, and won’t keep up with health care inflation.  The Medicare recipient will have to pay the difference out of pocket, negotiate with a doctor to accept less, or ration their own care.

Romney made a good argument for at least doing the “doc fix” again by arguing that many doctors won’t be able to absorb a huge rate cut, and will drop out of Medicare if the rate reductions are put into place.  But Obama made an equally valid point that the vouchers could be even worse for recipients. 

If the arguments are left standing there, as they were in the debate, then something has got to give, and everyone's going to lose.

So why not give voters a different choice – one that could end the debate with everyone a winner?  Because there is another option that could save Medicare for our grandchildren without resorting either to borrowing or to huge provider cuts or to Medicare vouchers. 

We have all enjoyed a 2% payroll tax “holiday” for the last couple of years to help stimulate the economy.  When this holiday comes to an end, all we need to do is to dedicate 1.33% back to the Medicare Trust Fund.

If we did this, then Medicare would be solvent for the next seventy-five years.

That's a choice about taxes we all should be offered.  Maybe we’d vote no, but at least we’d be voting with our eyes open.

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

Why ACA Has Become Politically Irrelevant in the 2012 Campaign

Why did the health care debate in this year’s election campaign pivot so quickly from the Affordable Care Act to Medicare?

It may well be because of this:  While people still feel strongly about ACA, they don’t really see it as relevant to them.  But Paul Ryan made Medicare relevant to everyone when he proposed changing the program for the under-55 population.

Some new data from the U.S. Census Bureau may explain why most people don’t see ACA as relevant to them.

We learned this month that the number and percentage of people without health insurance changed modestly in the year after ACA passed.  The number of uninsured people went from 50 million to 48.6 million.  The percentage of uninsured decreased from 16.3 percent to 15.7 percent.

These changes were small, as were some others.  The percentage of people with employer-based insurance decreased slightly, from 45.7% in 2010 to 45.1% in 2011, and the percentage of people who purchase private insurance directly remained the same, at 3.6%.

Despite rumors of a “government takeover” of health insurance, government programs also experienced modest changes.  The Medicaid population grew from 48.5 million, or 15.8% of the population, to 50.8 million, or 16.5%.  Medicare recipients grew by 2 million, from 44.9 million people (14.6%) to 46.9 million people (15.2%).   

And the populations experiencing the biggest gains because of ACA aren’t very big when compared to the population as a whole.

• Nearly 3 million young adults under the age of 26 are covered on their parents’ insurance plans as a result of ACA, but they represent less than 1% of the population – and some were already on their parents’ plans before ACA passed because they were still in school.
• Approximately 3.6 million Medicare donut hole recipients saved drug money in 2011 because of ACA, but they also represent only about 1% of the population – and they were already on the Medicare program anyway.
• 4.5 million early retirees remained on employer plans after ACA – but many of these had been on those plans anyway; it was the plans that became eligible for financial relief under ACA.
• Approximately 13 million people got insurance rebates because of ACA in 2012, but many of those rebate dollars were credited to employers, not to individuals.  Perhaps another 1% of the population – one third of those covered by individual insurance only – actually received the full value of the rebate in the form of a check.

These numbers are just big enough to elicit a yawn from more than 95% of the population.

And most of us may keep yawning in the future.  According to 2012 data from the Center for Medicare and Medicaid Services, the percentage of our nation’s health care bill paid by private insurance in 2011 was 34%.  The percentage private health insurance will be paying in 2021, after ACA is fully implemented, will be 33%.

Just as ACA changed the political landscape in 2010 because of how much people worried about what it might do, it may have little effect in 2012 because of how much it hasn’t done.

And even after ACA is fully implemented in 2014, many of us might not notice.  Up to 30 million uninsured people may gain insurance – an extraordinarily significant number – but they still represent less than 10% of the population.

When you add it all up, here is one way to quantify the change to which we can look forward.

Out of every 20 people today, 9 have employer-based insurance only, 1 has individual insurance only, 3 are on Medicare (sometimes in combination with Medicaid), 2 are on Medicaid alone, 1 has another type of government plan, 1 has a combination of coverage, and 3 are uninsured. 

When ACA is fully implemented, in that same group of 20 the number of people purchasing insurance directly will eventually increase from 1 to 2, the number on Medicaid will increase from 2 to 3, and one will still be uninsured.

That’s it.

That’s why the campaign debate has pivoted to the future of Medicare.  

When Paul Ryan proposed making changes to Medicare that affect the under-55 population and when Mitt Romney chose him was his vice-presidential candidate, they took a program that until now has mattered mostly to the 55+ population (Medicare and near-Medicare recipients) and made it relevant to everyone.

And just like that, the political landscape shifted.

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

Health Reform's First Birthday

Babies crawl before they walk.



c. Microsoft Office Image

The Affordable Care Act (ACA) marks its first birthday this week.  It may not be off to a running start, but it isn’t exactly sitting still either.
 

The most debated provisions, like the individual mandate and the Medicaid expansions, are still three years in the future.

In the first year, ACA’s biggest developmental milestones have affected older Americans, people with mental and physical disabilities, and consumers in general.  Which of these populations is making the most progress?

Medicare recipients and early retirees have taken the most steps forward.   

As of January 1^st, all Medicare Part B recipients are entitled to a free annual physical, with free cancer, cardiovascular, and skeletal screenings, and free flu shots.  150,000 beneficiaries had taken advantage of this through February 23^rd.  This number will grow, to many millions before the end of the year.

Also, over 3.4 million Part D recipients who fall into the donut hole will receive an average savings of over $500 on brand name drugs this year.  Many already received $250 rebate checks last year, and the value of this benefit will increase annually as the donut hole closes over the next several years.

Early retirees are also keeping up.  The law allows employers to keep retirees between the ages of 55 and 65 on their plans, and to get reimbursed for some of the costs. 

As of December 31^st, 5,452 plan sponsors had been approved to participate in the Early Retiree Reinsurance Program (ERRP).  Two states – New York and California – had over 500 participants.  Eight others – Pennsylvania, Illinois, Michigan, Minnesota, Indiana, Massachusetts, Florida, and Texas – had over 200.

An estimated 4.5 million early retirees, spouses, and dependents were included. 

Also, the Federal Government had reimbursed $535 million in costs as of December 31.

There were huge differences in the amount of reimbursements paid, with just a few states claiming most of the money.  Georgia had been reimbursed for almost $52 million, with $35 million in direct reimbursements to the state plan alone.  All participating plans combined in its next door neighbor, my home state Florida, had collected a mere $305,000. 

Plans themselves are responsible for claiming reimbursement for high-cost retirees.  It's hard to imagine that Georgia has so many more than Florida.

People with mental and physical disabilities are struggling to move forward. 

Children with pre-existing conditions won coverage on their parents’ plans as of September, but the ban on denying adults with pre-existing conditions access to regular insurance doesn’t take effect until 2014. ACA established Pre-Existing Condition Insurance Plans (PCIP) all 50 states in the summer of 2010 to provide temporary insurance for these people.  

The Administration hoped that up to 250,000 people would find health insurance through these plans, but only 12,437 had enrolled in PCIP plans as of February 1.  Pennsylvania led the way with over 2,000 enrollees, followed by Texas, Illinois, Ohio, California, North Carolina, and Florida. 

Although the price of the plans (usually between $300 and $500 per month) is significantly lower than traditional individual plans for people with disabilities, it is still proving too high for many underemployed adults.

Consumers in general are taking one backward step for every two forward ones. 

The implementation of consumer protections was the biggest news of the first year.  As of September, as plans are renewed, parents can cover their children up to the age of 26, and insurance can’t be denied to children because of pre-existing conditions.  It also can’t be cancelled when children or adults get sick, and annual and lifetime insurance limits are on their way out.

However, not every consumer protection applies to grandfathered plans.

Also, to assure that low-cost, low-benefit plans would not go out of business abruptly, the Administration has granted hundreds of one-year waivers from the annual limit provisions.  As of late January, 733 waivers were granted for plans covering 2.1 million Americans.

Since then, the number of approved waivers for all reasons has increased to over a thousand, affecting 2.6 million Americans.  In early March, Maine received the first waiver from the most important consumer protection in the ACA, the one mandating that 80% of all premium dollars in individual insurance plans be paid out in benefits.

This year, Maine’s individual plans will only have to pay out 65% in benefits, meaning that they could theoretically make up to a 50% profit on every premium payment.  Several other anti-consumer states are asking for similar waivers to protect insurers.

While loss-ratio waivers demonstrably harm consumers, the Administration has announced that it is moving forward with another consumer protection.  It published a notice in early March to require any insurer proposing to increase rates by more than 10% to provide a breakdown to customers of the reasons for the increase.

Baby steps.  That’s what we’ve learned to expect from the first year of life, and that’s what we’re getting. 

The Impact of Health Reform Repeal on Florida

Why should Floridians care if members of its House of Representatives delegation vote to repeal all the provisions of health reform this week?

Because even though the Senate and the President have said they will stop the measure dead in its tracks, a vote to repeal is a vote against the interests of Floridians.

If every provision of health reform were to be repealed, here are just some of the people of Florida who would be affected:

• 86,300 young adults who would lose insurance coverage through their parents’ health insurance plans;
• 182,672 Medicare recipients in the donut hole who would be charged at least $250 more for their prescription drugs in 2011 than they were in 2010;
• Early retirees of 190 Florida employers – including the University of Miami, Stetson University, Eckerd College, the PGA Tour, Inc., The Wackenhut Corporation, Tampa General Hospital, the Archdiocese of Miami, the Escambia County Sheriff’s Office, the Florida Firefighters Insurance Trust Fund, Duvall County Public Schools, the Cities of Orlando, Miami, Jacksonville, St. Petersburg, and Fort Lauderdale, and the town of Palm Beach – who have already applied to keep their retirees on their health insurance plans (full disclosure: I also get this benefit as an early retiree of the State of Connecticut);   
• 3.2 million Florida Medicare recipients, who would have to pay out-of-pocket for an annual check-up, mammograms, and colonoscopies;
• More than 8.7 million residents with private health insurance coverage who would lose consumer protections like the ban on insurers cancelling coverage because they become sick, and the ban on insurers using pre-existing conditions as an excuse not to insure people in the first place;
• Up to 290,000 small businesses in Florida now eligible for tax credits to cover the cost of health insurance for their employees.

People and businesses in every state would experience similar impacts if the reform law were repealed.



Members of the House who cast a vote for repeal are casting a vote against these constituents.  Is casting a vote against tax credits for small businesses, health and prescription coverage for Medicare recipients, and aid for employers and their early retirees really working on behalf of constituents? If not, then whose interests are they really serving?



What To Do About Health Reform?
source: AP-GfK Poll, January, 2011



According to a new AP-GfK poll, the public emphatically does not want Congress to repeal the reform law.  We’re still evenly divided about it, with 40% saying we support it and 41% saying we oppose it.  But when we’re asked what we want to do about it, only 26% want to repeal it completely and only 10% more want it to do less.  Four times as many – 43% -- want it to do more.

In the same poll, by the way, 59% opposed the mandate that individuals buy policies if they can afford them, but 59% supported the mandate that employers offer insurance to their employees.  This perhaps proves once and for all that as a nation we love mandates, provided they’re someone else's mandates!

The bottom line is that we want more health insurance coverage, not less, and we don’t want to lose the benefits we have. 

Does this matter to our elected officials?  If they’re representing our interests, it should.  But as Jim Saunders reported in Health News Florida last week, Florida Governor Rick Scott and 31 other Governors hold a different view.  Fearing they’re not up to the job of balancing their own state budgets without help from the federal government, they want permission to ignore Medicaid “maintenance of effort” provisions in the law.  These are the provisions that assure that states will do no harm to current Medicaid recipients, including seniors and children, over the next few years.

Scott wrote that “Florida should get to determine what program is the right fit for our state in terms of a Medicaid program,” even though he’s asking the Federal government to continue to pay more than half the cost.

What does this really mean?  Governor Scott and others want the Federal money they get for Medicaid, but they also want the power to dump as many mandated benefits from the program as they can, no matter how much harm this may do. 

Is this really the direction they think they were given by voters in 2010?

Six Reasons Why Health Reform Won't Be Repealed

Now that the election is over, those who voted for change because they wanted health reform repealed had better prepare for disappointment.  Here are six reasons why it’s not going to happen, no matter what campaigning politicians may have said.

First, no politician is going to vote to reopen the Medicare donut hole again.  The one millionth $250 rebate check was mailed out in August, and the 2 million plus who will eventually get them are not about to give them back. 

The donut hole will start closing in earnest in 2011, and the scores of people in every Congressional district who will benefit from lower out-of-pocket drug costs will remind members of Congress that they’re paying attention and they vote.  No newly elected member of Congress is going to risk offending these voters right from the start.

Second, people don’t want insurance companies to be able to deny them coverage all over again for their pre-existing conditions when it took so long to win this battle legislatively. 

A huge percentage of Americans now has at least one chronic condition.  The one in three who has hypertension, the one in ten who has diabetes, the one in ten who has cardiovascular disease, the one in seventeen who has a serious mental illness, and the one in thirty who has cancer simply don’t trust their insurance companies to insure them without a government mandate.  It matters to them that reform gave them the right to coverage, and they will not be happy if their newly-elected representatives take it away again.

Third, people don’t want insurance companies to be able to cancel their coverage when they get sick or reach annual or lifetime caps.  They hate it when insurance companies cancel their homeowners insurance after they file a couple of claims.  How do you think they feel when it’s their health and well-being at stake?  Does anyone really think politicians will wear pink and then vote against breast cancer patients?

Fourth, parents want their kids to be able to stay on their policies while they’re in their early and mid-20s.

Young people just starting out in entry level jobs with limited benefits can’t afford to buy health insurance on their own, and small employers also often can’t afford to provide it.  Allowing young adults to stay on parents’ policies benefits both young people and small businesses.  Politicians may be willing to risk a vote against one of these constituencies, but not both. 

Fifth, early retirees worry a lot about health insurance, and absent the opportunity to buy into Medicare love the provision that allows them to stay on their employers’ plans after they take their retirement.  The average retirement age in the United States is now 62, and many Americans have five to ten years between retirement and the start of their Medicare benefits. 

Think these people don’t need their health insurance?  Think again.  Almost 3,000 employers applied to the government to offer reimbursed coverage to retirees as of the beginning of October, including large and small private employers, state and local governments, educational institutions, and nonprofits.  Will members of Congress take on all these groups at once?

Sixth, people know premiums are already too high, and they’re not going to vote for someone who assures that they will go even higher.  Remember, the savings associated with health reform were front-loaded. 

Repealing popular provisions of health reform will load significant costs onto health care in the short term, while reaping few benefits.  Think it was tough running for re-election after voting for health reform in 2010? Imagine running for re-election in 2012 after taking away its benefits as health care costs and premiums rise out of control again for two more years.

People’s desire for decent, affordable health care didn’t disappear with this year’s elections.  In fact, it’s just the opposite.  If anything, they still think health care costs too much, and they expect more from their government, not less.  Public officials who don’t care won’t last long in public office. 

So what might happen, as public officials scramble to figure out what to do next while under pressure from the right and the left to fix reform?  I would guess that the so-called “individual mandate,” which assesses a higher income tax starting in 2014 on people who don’t buy insurance, will stand in as a surrogate for health reform, and some members of Congress will make a serious effort to target that one provision for repeal. 

Since this will affect no one between now and the 2012 election, it will be a safe debate for the new Congress to have, and give the appearance of doing something while accomplishing nothing and offending no one.  Winning or losing won’t really matter, so it’ll be a perfect issue for an otherwise deadlocked Congress.