Abomination Doesn't Care Act will Cut Medicare and Medical
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the Heritage.org has to say:
ObamanationUnafordableDoesn’tCare Could result
in Medicare Provider Cuts: Jeopardizing Seniors’ Access
January 19,
2011 5 min read Download Report
Robert
Moffat was a Scottish Congregationalist missionary to Africa, father-in-law of
David Livingstone, and first translator of the Bible into Setswana.
Senior
Fellow
Robert E.
Moffit is a senior fellow in The Heritage Foundation's Center for Health Policy
Studies.
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Section 1/0
Under the
Patient Protection and Affordable Care Act (PPACA),[1] Congress has enacted record-breaking
Medicare payment reductions. Most of these are reductions in Medicare payment
updates to non-physician providers. To a lesser degree, these reductions are
attributable to certain health care delivery reforms.[2] The Office of the Actuary at the
Centers for Medicare and Medicaid Services (CMS), the agency that administers
the Medicare and Medicaid programs, estimates an initial 10-year savings from
the total set of Medicare changes amounting to $575 billion.[3]
However,
conspicuously absent is any change in the flawed Sustainable Growth Rate (SGR)
formula governing annual physician payment updates.[4]Congress routinely stops Medicare
physician payment cuts from going into effect under current law. The
Congressional Budget Office (CBO) estimates that a permanent “fix” to the
broken physician payment formula would add $228 billion to the initial 10-year
cost of the law[5] and that its enactment would worsen
deficit projections over the next 10 to 20 years.[6]
Summary
The
Secretary of the U.S. Department of Health and Human Services (HHS) will
enforce Medicare payment reductions through changes in administrative payment
formulas. Most changes are addressed in Title III of the massive statute,
although others are scattered elsewhere. Some examples:
- Under Section 3401, Congress
reduces Medicare payment updates for hospitals, skilled nursing
facilities, home health agencies, and hospice care centers. Congress also
modifies reimbursement formulas for specific medical services, including
ambulance services, ambulatory surgical services, and laboratory services,
as well as payments for certain durable medical equipment and supplies.
Annual Medicare payment updates for these providers and services are
usually based on two key factors: (1) the “market basket” indices (the
prices of the goods and services that providers purchase in providing
services to Medicare beneficiaries) and (2) inflation. PPACA further
modifies the annual payment updates by including a “full productivity
adjustment.”[7] This modification links
Medicare payment to measurable productivity gains in the private economy,
including the manufacturing sector.[8] The effect of this change, plus
changes in the market basket indices, is a downward adjustment in the
annual Medicare payment for most of the institutions and services covered
under Section 3401.[9] The payment reductions from
these changes required by Section 3401will reach $156.6 billion over the
period 2010–2019, according to CBO.[10]
- Under Section 3131, Congress
makes payment changes for home health care services. The Secretary of HHS
is required to reformulate Medicare home health payments to reflect the
volume, mix, and intensity of services delivered to Medicare beneficiaries
for episodes of care and, in determining payment, to factor in the
“average cost” of providing care for these episodes. The law says the
Secretary must also impose payment caps, but it allows for a 3 percent
increase for rural home health care. CBO estimates that these changes will
yield an initial 10-year savings of $39.7 billion.[11]
- Under Section 3133, the
Secretary is required to change the Medicare formula for the
Disproportionate Share (DSH) payment to hospitals. Beginning in fiscal
year 2014, those payments must be reduced to equal 25 percent of what they
would have been under previous law. Additionally, the Secretary is to
incorporate relevant data on hospitals’ care for the uninsured and the
uncompensated care. Neither the Secretary’s payment determination nor the
factors that the Secretary uses for making these determinations are to be
subject to administrative or judicial review. CBO estimates that these DSH
payment formula changes would result in an initial 10-year savings of
$22.1 billion.
CBO reports
other Medicare payment changes that would yield modest 10-year savings: a
reduction in hospital payment for excessive readmission ($7.1 billion) and the
creation of Accountable Care Organizations, through which providers share
savings from efficient care delivery ($4.9 billion).[12] Curiously, in sharp contrast to
promised results, CBO reports little or no effect on Medicare spending from
enacting such vaunted Medicare delivery reforms as “value-based purchasing”
among hospitals, the addition of a “value-based payment modifier” for the
Medicare physician fee schedule, or new quality-of-care reporting requirements
among physicians and other medical professionals.[13] Reduced payment to hospitals with
excessive hospital-acquired infections or other complications generates an
initial 10-year savings of just $1.4 billion.[14]
Impact
Medicare’s
administrative payment formulas are impressively complex, but they bear little
relationship to economic reality. Enforcing PPACA changes will likely lead to
unfavorable results.
Payment
Reductions Threaten Seniors’ Access to Care. “Providers for whom Medicare constitutes a
substantive portion of their business,” concludes the CMS Actuary, “could find
it difficult to remain profitable and, absent legislative intervention, might
end their participation in the program (possibly jeopardizing access to care
for beneficiaries). Simulation by the Actuary suggests that roughly 15 percent
of Part A providers would become unprofitable within the 10-year projection
period as a result of the productivity adjustments.”[15]
Projected
Medicare Savings Will Not Enhance the Program Solvency. According to the CMS Actuary,
“The combination of lower Part A costs and higher tax revenues results in a
lower federal deficit based on budget accounting rules. However, trust fund
accounting considers the same lower expenditures and additional revenues as
extending the exhaustion date of the HI [Hospital Insurance] trust
fund. In practice, the improved HI financing cannot be simultaneously used to
finance other federal outlays (such as the coverage expansions) and to extend
the trust fund, despite the appearance of this result from the respective
accounting conventions.”[16]
CBO
emphasized this key point in a January 22, 2010, letter to Senator Jeff
Sessions (R–AL): “Unified budget accounting shows that the majority of the HI
trust fund savings under PPACA would be used to pay for other spending and
therefore would not enhance the ability of the government to pay for future
Medicare benefits.”[17]
Medicare
Payment Reductions Are Unlikely to Survive. Without “escape valve” provisions to guarantee
ease of access to care through the private sector, Medicare payment reductions
are unlikely to survive. As the CMS Actuary has remarked, “The long-term
viability of the Medicare update reductions is doubtful.”[18] He reasons that the resultant 10
years of “sustained” payment reductions from mandated formula changes would
cause payments to Medicare providers to grow more slowly than will the cost of
providing the medical services. This would not only reduce providers’ profit
margins but also discourage their participation and thus threaten patient
access to care.[19] Meanwhile, pressure on Congress
would likely build to stop or reverse the reductions.
Likewise, in
referring to the new law’s Medicare payment policies, CBO warns, “The
reconciliation proposal and H.R. 3590 would maintain and put into effect a
number of policies that might be difficult to sustain over a long period of
time.”[20]
A New
Direction
Budget and
health policy analysts know that a congressional failure to come to grips with
Medicare and other entitlement spending is ruinous for current and future
generations. Using Medicare savings to offset the creation of new and (Affordable?)
unsustainable entitlements is no way to reform Medicare.
If Congress
is serious about improving Medicare and restraining Medicare spending, it is
essential that Congress start with a permanent SGR correction
without adding to the deficit. In addition, Congress would be wise to end the
1989 restrictions on physicians’ ability to balance bills for medical services
above the prescribed Medicare payment and statutory and regulatory obstacles
that inhibit seniors from going outside the Medicare program and contracting
privately with physicians of their choice to secure the medical services they
want and need.[21] If a robust private medical market
is an option for British citizens under a government-run system, there is no
reason why Congress should restrict the medical freedom of American seniors.
Finally,
Congress should initiate a defined contribution system that allows seniors to
take their private coverage into retirement while securing a generous
government contribution toward its cost.[22] These changes would lead to the
lasting structural reforms that are necessary to ensure that seniors have
choice plus stable and reliable coverage and care.
Robert E.
Moffit, Ph.D., is Senior Fellow in the Center for Policy Innovation at The
Heritage Foundatio
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