Fix Health Care Policy

How to Fix the Medicare Physician Payment Problem

Photo credit: Newscom

The congressional formula that determines the annual Medicare payment update for physicians, the sustainable growth rate (SGR), was supposed to cut Medicare doctors’ pay each year starting in 2002. But that congressional formula is so flawed and unworkable that every year since 2003, Congress has stepped in to stop it from going into effect. In 2013, without another congressional “doc fix,” the physicians would have had a pay cut of 26.5 percent.

The formula is called the sustainable growth rate because it links Medicare physician pay increases to the performance of the general economy, not to the market-based conditions of supply and demand that would determine the price of medical services. So if Medicare physcians’ pay in any given year rises faster than economic growth, then their pay is automatically reduced the following year.

There’s an added dimension to this problem: Every year the pay cut is delayed, the size of the cut the following year is bigger.

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Tags: doc fix, flawed, Medicare, pay increase, performance, premium support, SGR, Sustainable Growth Rate, unworkable

Medicare Cuts vs. Medicare Reform

As the discussions over the fiscal cliff continue, the debate over entitlement reform is getting confused. The issue is not only how much savings constitutes reform, but also the underlying policies that get you there. Thus far in the fiscal cliff negotiations, Republicans have pushed for greater spending cuts, namely in Medicare.

To that point, a National Journal article commented, “In just a few short weeks, the dominant Republican line on Medicare has shifted from attacking the Democrats for making cuts to the program to demanding a new round of cuts to reduce the federal deficit.”

But this claim cannot be taken at face value, as all spending reductions are not created equal.

There are major distinctions between Obamacare’s Medicare cuts and Medicare reforms that would reduce spending and extend the life of the program.

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Tags: fiscal cliff, market competition, Medicare, ObamaCare, premium support, price controls, unsustainable

Saving Medicare: New Legislation from Retiring Congressman Herger

Congressman Wally Herger (R-CA). (Photo: James Berglie/Zuma Press/Newscom)

Retiring House Ways and Mean Health Care Subcommittee chairman Wally Herger (R–CA) has introduced the most complete and detailed major Medicare reform proposal in a decade.

Herger leaves a rich legacy with the Save and Strengthen Medicare Act (H.R. 6645). The bill moves Medicare to a defined-contribution model with competition between traditional fee-for-service Medicare and private insurance companies. Many of its provisions are closely aligned to Heritage’s Medicare reform outlined in Saving the American Dream.

Herger’s legislation would protect and enhance Medicare for low-income beneficiaries by offering them a more generous benefit, and it would protect future beneficiaries by making Medicare more financially sustainable. The act contains changes to traditional Medicare, but it also clearly lays out a transition to premium support with the federal contribution eventually based on the minimum bid from both private insurers and traditional fee-for-service.

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Tags: enhance, Medicare, premium support, private insurance, protect, Rep. Wally Herger, Save and Strengthen Medicare Act, traditional fee-for-service

By the Numbers: Medicare Costs for Seniors to Rise Under President’s Plan

Under current law, as amended by Obamacare, seniors enrolled in traditional Medicare can expect to face higher Part B and Part D premiums. Moreover, President Obama has planned in his 2013 budget proposal to increase income-related Part B and Part D premium coverage by 15 percent. As a result, out-of-pocket costs are expected to rise by 2017 under the president’s budget proposal.

Under Obama’s plan, “seniors will pay more — a lot more — and they will pay this steep price in many different ways,” Heritage’s Robert E. Moffit, Rea S. Hederman and Alyene Senger explain in a new paper analyzing the impact on seniors.

Americans may have diverse opinions on Medicare reform but what remains certain is that Medicare “as we know it” is already a thing of that past.

Tags: by the numbers, impact, Medicare, ObamaCare, Part D, premium support, traditional program

Medicare Roundup 10/19: Setting the Record Straight

In recent weeks, liberal politicians, editorialists, and policy analysts have vigorously attacked reform of Medicare based on a defined contribution financing. In fact, this approach to reforming Medicare has a long bipartisan tradition going back to the 1980s and Representatives Richard Gephardt (D–MO) and David Stockman (R–MI). In fact, much of this criticism is distorted, misleading, or just plain wrong.

Here are some articles that set the record straight:

Kaiser Study on Medicare Assumes Seniors Don’t Like Lower Prices (Drew Gonshorowski)

The Heritage Foundation, 10/16/12

“The Kaiser study assumes that an entire class of Americans—senior citizens—is insensitive to price. In reality, seniors are price sensitive when they are presented with options. Already, 90 percent of retirees can and do choose the private health plans they like, ranging from supplemental insurance to Medicare Advantage and Medicare drug plans.”

Presidential Debate Prep: Understanding Obamacare’s $716 Billion in Cuts to Medicare (Bob Moffit and Alyene Senger)

The Heritage Foundation, 10/16/12

“As the Medicare debate intensifies, there still seems to be popular confusion regarding the $716 billion in ‘savings’ from Obamacare’s Medicare payment cuts. Let us end the confusion.”

The Problem with Kaiser’s Premium Support Study? Seniors Are Smarter Than That—and So Are Health Plans (Joe Antos)

AmericanEnterpriseInstitute, 10/15/12

“The Kaiser report emphasizes a worst-case scenario. To reach their conclusion, the authors assume that no beneficiary would change health plans even if a less expensive option would save them hundreds of dollars a month.”

Read the rest on The Foundry…

Tags: Medicare, myths, ObamaCare, premium support, repeal the law, Seniors

Kaiser Study on Medicare Assumes Seniors Don’t Like Lower Prices

The Kaiser Family Foundation just released a study that grossly misrepresents the premium-support model of Medicare reform and apparently misunderstands normal market dynamics and the differences between efficiency, choice, and higher premiums.

The Kaiser study assumes that an entire class of Americans—senior citizens—is insensitive to price. In reality, seniors are price sensitive when they are presented with options. Already, 90 percent of retirees can and do choose the private health plans they like, ranging from supplemental insurance to Medicare Advantage and Medicare drug plans. Premium support encourages intense competition that will change premiums and hold down costs. The larger impact is that seniors would have a choice of the health options they want, while creating needed savings for themselves and the federal government.

Take a simple analogy: Assume that the price of a gallon of gasoline rose from $3 to $300. How much would this affect your driving habits? It is doubtful that you would still buy the same amount of gas every week. Yet that is the economic intuition embodied in the Kaiser study.

The authors of the Kaiser study assume that zero beneficiaries would switch from traditional Medicare to a cheaper plan, despite cost increases. Part of the gain from competition is that health plans must compete for beneficiaries in order to retain or gain market share. They have to secure high satisfaction, as they do today, for example, in Medicare Part D and Medicare Advantage. To create a scenario that simply ignores the gains of market competition grossly misrepresents the economic impact of any consumer-driven market, including a health care market with premium support. The study’s headline is that 53 percent of enrollees in traditional Medicare would pay more, but within the study, when benificiaries respond to higher premiums, the number falls to as low as 33 percent.

Read the rest on The Foundry…

Tags: choice, efficiency, health plans, Kaiser Family Foundation, Medicare, premium support

Medicare Roundup 10/12: Setting the Record Straight

In recent weeks, liberal politicians, editorialists, and policy analysts have vigorously attacked reform of Medicare based on a defined contribution financing. In fact, this approach to reforming Medicare has a long bipartisan tradition, going back to the 1980s and Representatives Richard Gephardt (D–MO) and David Stockman (R–MI). In fact, much of this criticism is distorted, misleading, or just plain wrong.

Here are some articles that set the record straight:

Commentary:

Obama’s Medicare Cuts Will Affect Benefits (Bob Moffit)

National Review Online, 10/12/12

“Question: If you cut funding for benefits, will you then affect persons dependent upon those benefits? Of course you will. Financing directly affects the quantity and quality of the benefits available to the beneficiaries.”

Vice Presidential Debate: True/False Quiz on Medicare (Alyene Senger)

The Heritage Foundation, 10/12/12

“During the debate between Vice President Joe Biden and Representative Paul Ryan, several claims were made about Medicare. Some of these were true, others false.”

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Tags: beneficiaries, Medicare, Medicare Advantage, myths, premium support, truth

Medicare and Seniors: Answering the $6,400 Question

Opponents to Medicare reform have been making plenty of erroneous claims about Medicare premium support lately, one of the worst being that Representative Paul Ryan’s (R–WI) premium-support model, co-authored by Senator Ron Wyden (D–OR), would cost future seniors an extra $6,400 a year. This claim is simply false.

Buried beneath the wild and scary allegations are the facts, which Heritage expert Rea Hederman details in his recent paper “Why Medicare Premium Support Would Not Cost Future Beneficiaries $6,400 More.”

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Tags: $6400 extra, beneficiaries, erroneous claims, Medicare Advantage, myths, premium support, reform

Medicare Roundup 10/5: Setting the Record Straight

In recent weeks, liberal politicians, editorialists, and policy analysts have vigorously attacked reform of Medicare based on defined-contribution financing. In fact, this approach to reforming Medicare has a long bipartisan tradition, going back to the 1980s and Representatives Richard Gephardt (D–MO) and David Stockman (R–MI). Much of this criticism is distorted, misleading, or just plain wrong.

Here are some articles that set the record straight:

Read the full list on The Foundry…

Tags: Medicare, Medicare Advantage, misleading, myths, premium support

Debate 2012: Obama’s Dubious Medicare “Voucher” Claim

President Obama made an oft-repeated claim on Medicare during Wednesday night’s presidential debate that distorts attempts to reform the program.

The president accused Governor Mitt Romney of favoring a “voucher” program for Medicare, by citing, ironically, a plan previously supported by Romney’s running mate, Representative Paul Ryan. The voucher label can be politically toxic, but bears little resemblance to Ryan’s actual Medicare proposal (in its most recent iteration).

Heritage’s Robert Moffit explained in a National Review column:

It’s all scary nonsense. The Ryan proposal, among others, is a defined-contribution system that in, say, 2023 would provide direct payment from a government account to a health plan of a person’s choice, including traditional Medicare; health plans, including employer-based retiree plans, would have to meet government standards, including benefit standards of the traditional Medicare program, plus new and much-needed protections against the costs of catastrophic illness; all such plans would be offered through a Medicare exchange; all such plans would be governed by existing Medicare insurance rules, meaning persons could not be legally denied coverage or dropped merely because they are sick; low-income persons would be specially protected from unforeseen out-of-pocket cost hikes; and all enrollees would benefit from an improved risk adjustment among plans in the competitive market to guarantee continuity of patient care and health-plan stability.

A voucher is, of course, a defined contribution; but not all defined contribution programs are “vouchers.” A voucher is just one form of defined contribution. TheMerriam Webster definition of a voucher is a “form or check indicating a credit against future purchases or expenditures.” Many ordinary Americans have had some experience with vouchers when their flights were cancelled or delayed, and airlines issued them compensatory certificates redeemable in cash value for the purchase of food and lodging.

Read the rest on The Foundry…

Tags: Gov. Mitt Romney, Medicare, myth, ObamaCare, premium support, President Obama, presidential debate, voucher