FEATURED RESEARCH, TESTIMONIES AND ANALYSIS:
The Patient Protection and Affordable Care Act (PPACA) will dramatically reduce the number and variety of healthcare plan choices available to seniors and reduce benefits and enrollment, according a new study released today by the American Action Forum. The report outlines that by 2017 nearly all Medicare Advantage (MA) enrollees will find that the plan they have chosen for themselves is either no longer available at all, or available with reduced benefits, higher out-of-pocket costs – or both. Many people who would have preferred a Medicare Advantage plan will now find themselves under Medicare fee-for-service, which will also be subjected to substantial cuts. View the full study and download the state-by-state impact charts.
RECENT RESEARCH, TESTIMONIES AND ANALYSIS
Last week, the Medicare Trustees issued their annual report detailing the financial state of America’s entitlement programs. The report confirmed what many Americans know: Medicare and Social Security are going bankrupt – quickly. At its current pace, Medicare will be bankrupt in 2024 and Social Security in 2033.
For several years running, the Medicare Trustees have warned of Medicare’s impending insolvency. This year proved to be no different. The Trustees report released on Monday tells us that by 2024, Medicare will be bankrupt—leaving seniors to fend for their own health care costs. Why is Medicare so broke? Taking a look at Medicare’s income and expenditures tells the story: expenditures have been higher than income in every year of the program besides 1966 and 1974 (Figure 1).
Yesterday's release of the 2012 Trustees Report provides a non-partisan evaluation of President Obama's Medicare stewardship. Prepared annually for Congress by the Office of the Chief Actuary, the Trustees Report offers unparalleled detail on the financial operations and actuarial status of the Medicare program. In short, it's where every President's soaring Medicare rhetoric meets fiscal reality.
The President and some members of Congress have proposed requiring that prescription drug manufacturers pay rebates to the federal government for drugs dispensed to Medicaid/Medicare dual-eligible beneficiaries and other low-income seniors through the Medicare Part D program. (The required rebates would be in addition to the manufacturer-paid rebates already in the Part D program due to the market-based negotiations between manufacturers and Part D plans).The Office of Management and Budget (OMB) estimates that the President’s proposal will reduce federal outlays by $135 billion over 10 years. However, the reduced revenue is likely to substantially affect the pharmaceutical industry, and OMB did not provide any estimates of the effect on jobs – somewhat ironic in that the President’s proposal came in the context of his “jobs bill.” In this short paper, we take a step toward filling that analysis gap. In particular, using the historic relationship between revenues and employment, we find that by 2021 the proposal could reduce pharmaceutical and related employment by up to 238,000 jobs.
Medicare spending is unsustainable. The entitlement carries a $550 billion price tag that is expected to double around 2020. Many point to rising healthcare costs and finger prescription drug spending as a culprit. However, the growth rates of both Medicare Part B and Part D drug spending have been much slower than other areas within Medicare. Pharmaceuticals covered by Part B, the largest category of which is cancer drugs, provide life-saving benefits to beneficiaries. Many of the other cost-drivers within the program, such as repetitive and unnecessary care and fraudulent billing, provide no such benefit. However, drug reductions are easier than cutting down on overutilization or fraudulent practices, and therefore the Joint Select Committee on Deficit Reduction (the “Super Committee”) is looking at proposals to cut drug spending.
American Action Forum President Douglas Holtz-Eakin emphasizes four points in testimony examining the Independent Payment Advisory Board (IPAB). First, the IPAB is a dramatic policy error that will fail to deliver meaningful reform to the Medicare program. Second, the IPAB is likely to exacerbate existing reimbursement problems that already limit access to care for Medicare beneficiaries. Third, the IPAB will tend to stifle U.S. led medical innovation in the medical device, pharmaceutical, biotechnology, and mobile health industries. Fourth, if left unaddressed, the Medicare status quo and the IPAB will pose a danger to the fiscal health of the federal government, the U.S. economy, and Medicare beneficiaries.
American Action Forum President Douglas Holtz-Eakin discussed five main points in his congressional testimony regarding The Future of Medicare. First, Medicare must be reformed. The status quo is dangerous to the fiscal health of the federal government, the U.S. economy, and especially Medicare beneficiaries. Second, Medicare is at the heart of the debt explosion that dominates the federal budget outlook. Third, the federal debt explosion represents a severe economic risk that threatens national security and our future economic and job growth in the United States. Fourth, under current law, Medicare providers are likely to depart the market reducing access for beneficiaries. If reimbursement rates fall as in Medicaid, we will see the same kind of dramatic health consequences. Fifth, the Independent Payment Advisory Board is a dramatic policy error that will exacerbate reimbursement problems and stifle innovation.
A simple solution would be switching Medicare to a defined contribution program — as proposed by the House. Seniors would be budgeted an annual contribution, which could be adjusted to reflect costs associated with their health status and financial wherewithal. For the federal budget, the result is a capped exposure to Medicare — one that would adjust to reflect the number of seniors and inflation but not unlimited desires.
The Patient Protection and Affordable Care Act (PPACA) fails to secure Medicare’s future and instead diverts $332 billion dollars in program savings into new unsustainable entitlement programs. By not improving the Medicare program’s solvency, the White House and Congress threaten to burden America’s seniors with rising premiums and reduced patient access. Healthcare reform should have paved a more fiscally responsible path forward for the Medicare program by fixing the sustainable growth rate (SGR) formula for physician reimbursement and ensuring long-term Medicare affordability.
Medicare Advantage Primer
More than 47 million Americans are enrolled in Medicare. Each year, enrollees are given the option to choose a private Medicare Advantage (MA) plan through which to receive their Medicare benefits. These Medicare approved private health plans are required to cover basic Medicare benefits, but can also offer reduced cost sharing or additional benefits like vision, dental, and enhanced or lower cost prescription drug coverage. This Congressional Primer outlines how the MA program works, the history of private plans in Medicare, and examines how the Patient Protection and Affordable Care Act will impact existing MA beneficiaries.