By Steve Schulte of
Health Advocate Solutions
(213) 999-1227
One often hears charges---expressed fears, really---of "big government" hurled as an uncomplimentary epithet.
Yet few Americans truly understand the concept as it applies to our national health (apply both meanings here...).
How many, for example, understand that, of the entire federal budget, 20% is spent on defense ($715 B), 21% on health-related expenses (Medicare, Medicaid and CHIP; $753B) and 20% on social security alone ($708B)? The latter two percentages will grow dramatically in the next decade as Baby Boomers (born 1946 to 1964) age and become eligible for social entitlement program benefits.
Medicare provides healthcare coverage today for about 39 million Americans; Medicaid for about 33 million----many of them children and low-income working people. Medicare alone is expected to enroll up to 77 million people by 2030.
These few facts alone indicate why massive healthcare reform was so necessary. Set aside for a minute whether one thinks such reform is wise, whether it went far enough, whether it was done right, whether it will work.
Social entitlement programs and defense account for a total of 61% of the nation's expenditures. Put simply: reform was necessary to keep our huge economy from sinking. And our invaluable human capital from falling further behind in the world economic race since bankruptcies from health costs had risen to 1 in 4.
On the other hand, one can fairly argue that these huge (and growing) social programs alone should be cut. But, in fairness, one then has to lay out how a wealthy and powerful industrialized nation takes care of its elderly, sick and dependent in other ways.
It is not at all surprising that the large, well-established government vehicles of Medicare and Medicaid would be harnessed into helping with the implementation of healthcare reform.
Due to their size and the complexity of their involvement in healthcare reform I will devote two separate blog postings to Medicare and Medicaid. Let me begin with Medicare.
At one point, remember, Medicare expansion was considered as a viable form of the "public option". In fact, historically, back to 1965, many hoped that Medicare would become the basis of universal coverage. Instead it became a social entitlement program that sought to remove the scourge of end-of-life poverty for all older Americans. The results have been astounding.
Medicare is a hugely successful program---redtape, fraud, variations in benefits and service notwithstanding. It is rare indeed to hear that someone has refused to accept Medicare when they became eligible. (I do know of one case....). For the most part, if someone has Medicare they have great health coverage.
Therefore, it would have been immensely sensible---and no doubt more efficient in the long-run---to have tied Medicare to an expansion of healthcare coverage. Say, make it available to those 55 to 64 as was proposed.
This, of course, did not happen. There were fears that Medicare as it now exists would be trimmed per benefits and increased per cost. The truth is more complex and quite different.
There will be NO direct cuts in benefits. In fact, benefits overall will be INCREASED. There will be cost changes, but these need to be carefully understood before one asserts---incorrectly, I would argue---that Medicare will become more costly (as opposed to being a more expensive program overall as the numbers of clients grow).
In fact, Medicare costs, like healthcare costs, like the deficit will be CUT both in this decade and more over the next. Too bad: the cuts could have been---and may still turn out to be---even greater.
So let's look specifically at the changes the law will bring to Medicare:
2010: Those who have Part D prescription drug plans AND who enter the 100% cost responsibility area ("donut hole") will get a $250 rebate. Federal market basket benchmarks for inpatient/home health/skilled nursing/hospice care will be refigured. A Federal Coordinated Health Care Office will be set up to improve care for Medicare/Medicaid patients (dual eligibles).
2011: The federal coordinating body for Medicare/Medicaid (CMS) will set up an important new agency: the Center for Medicare and Medicaid Innovation. Reduce annual Part D premiums for those making less that $85,000/$170,000 (couples); freeze the income threshold at these income levels also for Part B premiums. Change (even out) the reimbursement for disadvantaged-area/population hospitals that take Medicare.Require pharmaceutical companies to give a 50% reduction of the cost of brand drugs within the "donut hole".
Also: prohibit Medicare Advantage plans (HMO/PPO and private)from changing cost-sharing ratios that differ from Original Medicare PLUS start reducing federal subsidies for these plans. Start a 10% subsidy for primary care physicians and surgeons that practice in disadvantaged areas. Start phasing in Part D subsidies for the "donut hole" share which will be cut to 25% by 2020 for generics. Eliminate cost-sharing for many preventive services.
2012: reduce Medicare payments to hospitals that exceed readmission goals. Create the new Medicare Independence at Home demonstration programs to reduce institutionalization. Continue reducing Medicare Advantage payments; begin bonus payments to high-quality Advantage plans.
2013: Begin phasing in subsidies to Part D patients for brand drugs in the "donut hole" (reduce cost-sharing to 25% by 2020). Begin pilots for "bundling" payments for acute/inpatient/physician/outpatient/post-acute costs---moving towards set payments for entire episodes of care (potentially huge cost savings...).
Begin increasing the Part A tax rate on wages by .9% (to 2.35%) on earnings over $200,000 or over $250,000 for couples filing jointly. Eliminate the Part D tax deduction for employers who subsidize those payments for retirees (was a double deduction...).
2014: require Advantage plans to have an 85% delivery efficiency ratio. The Medicare Independent Advisory Board (15 members) starts submitting cost-reduction and efficiency improvement plans to Congress annually.
2015: Reduce by 1% payments to certain hospitals for hospital-acquired conditions (MRSA, etc.).
So, much complexity, lots of detail. However, there are REAL changes here---improved benefits, reduced cost, a more even playing field overall. Again, no loss of benefits while providing a net reduction in Medicare spending of $428 billion between 2010 and 2019.
Sources: New York Times; CMS website; Kaiser Family Foundation Website; Center on Budget and Policy Priorities website; Washington Post series.
Next time: Medicaid and Healthcare Reform
Coming Soon: Public Seminars
To respond to this blog, email steve6schul@yahoo.com
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