John Goodman - NCPA
Consider that:
•More than half the cost of health reform will be paid for by $523 billion of cuts in Medicare spending over the next ten years.
•Although there are some new benefits for seniors (mainly new drug coverage) the costs exceed the benefits by a factor of more than ten to one.
- As many as 8.5 million of the 11 million seniors in Medicare Advantage (MA) plans may lose their coverage according to Medicares Chief Actuary.
- Those lucky enough to retain their MA coverage will face steep cuts in benefits or hefty increases in premiums or both.
- In addition to these direct costs there are indirect costs including new taxes on drugs and medical devices.
- Although these taxes dont single out senior citizens who do you think are the heaviest users of wheelchairs crutches artificial joints pacemakers etc.?
- To make matters worse severe rationing problems lie ahead as 32 million newly insured people try to double their consumption of medical care under a reform bill that produces not one new doctor or nurse or other paramedical personnel.
Because many of the newly insured will be in private plans paying market rates they will be more attractive to doctors than Medicare enrollees paying about 20 to 30 less.
So how did this happen? Arent senior citizens supposed to be the most powerful voting bloc? Arent they supposed to be represented by the all-powerful AARP?
Unfortunately for seniors (and indeed all Medicare enrollees) AARP sold out its own members. Just as the AMA sold out the doctors and the labor unions sold out their own members AARP signed on to legislation that helps AARP but hurts the millions of people who AARP claims to represent.
The table below lists the expected costs for Medicare enrollees over the next several years. As the table shows cuts in Medicare spending will average $22 per enrollee beginning next year and rising to $290 in 2014. Medicare Advantage members will face more severe cuts: $195 per enrollee beginning next year rising to $1267 in 2014.
In defense of its plans the Obama Administration claims that it will target these cuts to eliminate waste to encourage low-cost high-quality care and discourage high-cost low-quality practices. Yet there is no reason to be hopeful. The cuts in Medicare Advantage subsidies for example appear to be based on special interest politics alone not on any lofty goals.
We have been criticized in some quarters for apparent hypocrisy. NCPA studies have long established that Medicare is on an unsustainable course and that reform is urgently needed. How then can we criticize attempts to pare the program back?
My position is that (1) pay-as-you-go Medicare must be transformed into a funded system in which each generation pays its own way; (2) if there are savings to be found in Medicare we are going to need every penny to help pay for the reform; (3) it is a huge mistake to take money from any source to create a new health entitlement for young people on top of the $107 trillion in unfunded liabilities the federal government already has; and (4) it is doubly bad if we believe that future Congresses will not be bound by the planned cuts just as the current Congress is apparently not bound by the commitment of earlier Congresses to cut Medicare payments to physicians.
What about Medicare Advantage (MA) plans? Isnt the government paying these plans about 13 more than what enrollees would cost if they were in traditional Medicare? Yes but:
- Part of the overpayment is due to Congresss desire to make MA plans available in rural areas where they are less economical.
- Elsewhere overpayments are creating benefits for enrollees of up to $825 per person per year such as extra coverage for drugs.
- Even as Congress cuts MA payments it is expanding drug coverage for Medicare enrollees indicating that the pressure to provide the benefits will remain after the MA plans are gone.
- MA enrollees tend to be moderate-income seniors who do not have Medigap insurance; thus MA coverage is solving a social problem that will have to be solved in some other way if MA plans do not solve it.
- And if millions of seniors go from MA plans back into traditional Medicare paying discounted rates to providers all seniors may find access to care more difficult.
As for AARP we have previously noted that AARP markets its own Medigap insurance. With MA plans out of the way that market will greatly expand. Moreover AARP is getting special treatment under health reform. Specifically AARPs Medigap insurance is:
- Exempt from the prohibition on pre-existing condition exclusions.
- Exempt from a $500000 cap on executive compensation for insurance industry executives.
- Exempt from the tax on insurance companies.
- Exempt from a requirement imposed on MA plans to spend at least 85 percent of their premium dollars on medical claims.
Meanwhile the MA plans that are headed for extinction are ostensibly doing everything President Obama says he wants to accomplish with health reform:
- They provide subsidized coverage to low- and moderate-income people who could otherwise not afford it.
- They control costs better than conventional insurance by eliminating unnecessary care.
- They provide higher quality care.
- They have no pre-existing condition limitations and some plans actually specialize in attracting and caring for patients with multiple illnesses.
- They provide an annual choice of plans.
- They even compete against a public plan.
