Health insurance mergers have hit the headlines recently. Aetna and Humana led off by announcing their merger, followed by the agreement by Cigna to be purchased by Anthem. To some, the most notable outcome of these mergers is that they yield two very large insurers, and leave the U.S. with three large health insurers with annual revenues in the $150 billion range. In this populist, “big is bad” era there are already calls for the Justice Department to step in and prevent the mergers. Let’s think this through step by step.
The Medicare Trustees issued their annual report detailing the financial state of America’s entitlement programs. The report echoed past conclusions: Medicare and Social Security are still going bankrupt. At its current pace, Medicare will be bankrupt in 2030 and Social Security will go bankrupt in 2034 (a year later than last year’s projection). Despite what many will herald as good news for Medicare, a deeper look at the data proves just how broken our current entitlement programs are.
Medicare Advantage (MA) offers seniors a one-stop option for hospital care, outpatient physician visits, and prescription drug coverage. MA is popular; enrollment has increased every year since 2004 and reached 16 million individuals in 2014, which represents 30 percent of the Medicare population. Since 2008 MA plan performance has been rated on a 5-star scale to inform beneficiaries of the quality of plan options, and since 2012 plans with higher ratings receive bonuses that are in part returned to beneficiaries.
As the nation marks the 50th Anniversary of the creation of Medicare and Medicaid, it is important to both look back at how the programs have evolved, as well as forward at what’s to come. But be careful—the trajectory may alarm you. Between 2010 and 2023, total expenditures on Medicare and Medicaid will more than double to nearly $2 trillion annually, while enrollment during that same period is only expected to increase by 45 percent. Spending on Medicare did not surpass $500 billion until 2009, 44 years after the program began; but it will only take 13 years beyond that to increase by the same amount. In the 10 years between 2014 and 2023, average annual enrollment growth in both Medicare and Medicaid will be approximately 3 percent, while average annual growth in expenditures will be more than double the rate of enrollment for both programs—6.2 percent for Medicaid and 7 percent for Medicare.
The Medicare program was established 50 years ago and, as of 2013, provided health care coverage to 52.3 million beneficiaries at a cost of $583 billion. Serving 19.4 million beneficiaries in 1967, total Medicare expenditures were $4.7 billion. The growth in program expenditures is largely due to growth in the number of beneficiaries. However, growth in health care prices and the availability of more health care services has been a significant factor in the growth of real per-beneficiary spending, which has tripled since 1970. Between 1965 and 2010, average annual growth in health care prices outpaced general price inflation by approximately 2 percent. Average total spending per beneficiary was $12,210 in 2013, and will continue to rise. As the number of beneficiaries will also soon skyrocket—enrollment is expected to grow at an average annual rate of 3 percent over the next decade, this combination will dramatically increase Medicare expenditures, expected to surpass $1 trillion by 2022.
Medicaid, along with Medicare, was created in 1965 as a joint federal-state entitlement program to provide health care coverage to any low-income individual or individual with disabilities who meets the eligibility criteria in his or her state of residence. The Federal government sets minimum eligibility criteria and program requirements which can be expanded by the state, and funds anywhere from 50 percent to 74 percent of a state’s Medicaid expenses, based on the Federal Medical Assistance Percentage (FMAP) formula. Every state has participated in the program since 1982.
Medicare presents the single largest threat to the federal budget and long-term fiscal stability, and as such, requires substantial and immediate reform. Thankfully, the program is slowly acquiring the architecture for a more sustainable future. Through programs like Medicare Advantage (MA) and Medicare Part D, competition among private insurers can create value for beneficiaries and savings for the federal government. Further, the transition from fee-for-service to performance and quality based payments may be instrumental in slowing the rise of health care costs.
The need to ensure that individual autonomy is considered and respected near the end of life is rapidly increasing. Every single day, over 10,000 baby boomers turn 65 years old and gain Medicare eligibility. Between 2010 and 2050 the number of Americans on Medicare will double to 84 million, octogenarians will quadruple to 8 million, and the ratio of potential caregivers to Americans over 80 years old will dive from 7-to-1 in 2010, to 4-to-1 in 2030 Though we are fortunate that medical science has been able to extend the number of years a Medicare beneficiary is expected to live by about 300 percent, Americans have not changed how they talk about and plan the final stages of life.
The coverage expansion under the Affordable Care Act relies heavily on expanding eligibility for Medicaid, which raises important questions on the efficacy of the program. Proponents of the law applaud the expansion as a windfall for low-income households, while critics maintain that Medicaid provides poor access relative to private coverage and does not measurably improve the health of beneficiaries. In an attempt to answer these questions, the Commonwealth Fund has weighed in, suggesting that Medicaid beneficiaries are, in many respects, just as well off or better in Medicaid as in private coverage. The report has led some proponents of Medicaid expansion to exaggerate the findings.
The highest court in the land has spoken and Obamacare is being implemented legally. Now the debate, properly, returns to the key question: was it a good idea? Repeatedly in recent weeks, one has heard columnists, pundits and the president assert that "In many ways this law is working better than it's supposed to.”
This paper explores medical licensing laws as they stand today, why reform is necessary, and why it has been so elusory. It concludes with a description of various reform approaches and attempts that have been made to implement them.
One primary goal of the Affordable Care Act (ACA) was to expand access to affordable health care. However, in the five years since the ACA’s passage, we have found that while more people have health insurance, they do not necessarily have access to affordable health care.
I've been puzzling over the recent assertion by Committee for a Responsible Federal Budget (CRFB) that the proposed Sustainable Growth Rate (SGR) fix would blow a $400 billion hole in the budget. One part was clear. They estimate $210 billion in costs during the first 10 years. This requires they assume that – in the absence of the proposed fix – Congress would stand idly by and permit savage, double-digit cuts to doctors totaling $140 billion.
The main promise that we heard repeated over and over again was that the ACA would provide universal access to affordable coverage of high-quality health care. In these remarks I will discuss (1) coverage, (2) affordability, (3) quality, and (4) access to care under the ACA. The ACA has been riddled with wasted money and broken promises. It has proven to be poor growth policy, red-ink budget policy, flawed insurance policy, and poor health care policy. Instead of growth, it has contributed to a mediocre recovery. Instead of fiscal responsibility, it has exacerbated the red ink that plagues the government. Instead of universal coverage for the uninsured, the retention of valued policies and lower premiums, it has produced spotty, uneven coverage expansions, the forcible loss of valued polices and higher premiums for all. And instead of bending the cost curve and raising quality, it has delivered limited access to doctors and the loss of preferred providers.
Congress has the chance to eliminate an annual legislative nightmare, fix the reimbursement of doctors under Medicare, introduce substantive, structural changes to an entitlement program, and ensure the continued insurance coverage of needy children – all without raising a dime of taxes. Reports indicate that there is a bipartisan, bicameral leadership agreement for Congress to repeal the Sustainable Growth Rate (SGR) mechanism, as well as extend for two years the Children’s Health Insurance Program (CHIP) and numerous other health provisions. The legislation isn’t perfect – more on that below – but it is an important step forward.