• House Democrats’ memo to the supercommittee would do only one-third the job

    The House Ways and Means Committee has some deficit-cutting suggestions for the supercommittee. At the end of this post I add up what they’re proposing in terms of cuts. Even with the massive changes suggested (e.g., raising the Medicare retirement age to 67, including a public option in ACA exchanges), a conservative estimate of the savings is about one-third of what the supercommittee is supposed to come up with. Bottom line: without revenue increases, the supercommittee’s job will be very hard.

    As reported by Sam Baker:

    The biggest-ticket items on the Ways and Means list are, of course, the most politically charged. Raising the Medicare eligibility age to 67 could save about $125 billion over the next decade, according to the committee’s summary. But the document warns that “raising the Medicare eligibility age would be a radical departure from current policy and is only possible if the (healthcare reform law) is retained.” […]

    Republicans are largely opposed to the other triple-digit option Ways and Means described — extending rebates for prescription drugs so that they apply to people who receive both Medicare and Medicaid. That policy would save the federal government $120 billion over 10 years, and Ways and Means Democrats said the pharmaceutical industry’s objections are mostly baseless. […]

    Ways and Means outlined a handful of other policies that also would affect benefits. Charging co-pays for home health care could net up to $40 billion, according to the Congressional Budget Office, and higher cost-sharing for nursing-home care could save Medicare more than $20 billion.

    The list also covers a slew of payment cuts to doctors and other healthcare providers, which would not directly affect Medicare benefits.

    The full memo is here. In brief, the items included are as follows. All estimates are for a ten-year period except where indicated. Adding them up, they amount to about $520 billion in savings (using the low end of all figures below*), which is close to one-third of the deficit reduction the supercommittee is charged with coming up with (or it is close to one-half, if you think the target is $1.2 trillion instead of $1.5 trillion).

    Medicare Part A

    • Post-Acute Provider Market Basket Freeze (-$14 billion for one year freeze; -$28 billion for two year freeze)
    • Accelerate Home Health Rebasing (-$3 billion)
    • Increase SNF Cost-Sharing (-$21.3 billion)
    • Recoup FY11 SNF Overpayments (up to -$4.5 billion)
    • New SNF Value-Based Purchasing/Readmissions Program (no savings estimate)
    • New Home Health Copay (-$1 to -$5 billion over five years)
    • Eliminate Rural Hospital Payment Add-Ons (-$62.2 billion)
    • Eliminate or Phase-Down Reimbursement for Bad Debt (no savings estimate)
    • Cut Reimbursement for Graduate Medical Education (up to -$15 billion)
    • Recoup Overpayments from Inpatient Hospital Documentation and Coding Improvements (up to $5 billion)

    Medicare Part B

    • Subject Clinical Laboratory Tests to Deductible and Coinsurance (-$24 billion)
    • Increase Utilization Rate of Advanced Imaging Equipment (-$0.4 billion)
    • Require Prior Authorization for Advanced Imaging Services (-$1.1 billion)
    • Reform the Quality Improvement Organizations (QIO) Program (-$0.3 billion)
    • Align Payments for Retail and Mail Order Pharmacies for Diabetic Testing Supplies (-$0.6 to -$0.8 billion)
    • Strengthen Medicare Program Integrity Efforts (-$0.7 billion)
    • Reduce Payments for Drugs Administered in a Physician’s Office (-$3.2 billion)

    Medicare Parts C and D

    • Recover Erroneous Payments Made to Insurers Participating in Medicare Advantage (-$2.6 billion)
    • Establish a Part D Rebate for Dual Eligible Medicare Beneficiaries and Low-Income Subsidy Recipients (-$120 billion)
    General Medicare
    • Increase Cost-Sharing/Premiums or Impose Excise Tax on Beneficiaries with Medigap Coverage (-$12.1 Billion to -$53.4 billion)
    • Raise Medicare eligibility age to 67 (-$124.8 billion)
    • Freeze Income Thresholds for High-Income Beneficiaries and Increase Premium Shares (-13.7 billion)
    • Chained CPI (-$7.3 billion)
    • Medicare Improvement Fund (-$0.9 billion)
    Health Reform
    • Add a public option to the exchanges (-$88 billion)

    * Using the high end doesn’t push this total up very much, a few tens of billions at most.

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    • Small potatoes again, and toxic potatoes too.

      The 5 largest cuts include three that will harm safety net hospitals:

      – cuts to bad debt reimbursement

      – cuts to rural hospital subsidies

      – cuts to Graduate Education subsidies

      Of the other two largest cuts, one will harm millions of Americans

      (the raise in eligibility age), and one I do not understand (Part D rebate.)

      The end result of this economic bloodshed would be a projected $52 billion in annual cuts.

      There are much simpler and more reliable ways to cut $52 billion:

      a. Enact price controls on non-generic drugs

      b. Pay hospitals with flat global budgets, not individual claims for heart surgery, etc. Scrap the entire DRG fee schedule.

      c. Give seniors a flat $2500 each in vouchers for Plan B. Stop paying separate claims for lab work, diagnostic tests, etc.

      As Joseph White has described, this will be greatly resisted by all whose prosperity depends on “working the contract”, i.e. upcoding.

      But it would control the cost of Medicare.

      Bob Hertz, The Health Care Crusade

    • Note that the staff memo provides a list of options, not “suggestions” or recommendations.