Under the terms of the recent deficit agreement, a “super committee” of 12 lawmakers will be meeting between now and Thanksgiving to come up with recommendations to trim the deficit by at least $1.2 trillion over the next decade. The super panel can recommend changes to any part of the budget and may suggest cuts in Medicare. Congress will then need to either agree on a debt reduction plan or allow automatic reductions to take effect, including large cuts in defense and a 2 percent reduction in Medicare payments to hospitals and other providers.
I’m an advocate for seniors. My proclivity is to oppose cuts that will reduce Medicare services that my clients need. But there may be a number of steps that the super committee could recommend that would save many billions in Medicare payments each year while actually improving the program.
In a recent newsletter, The Center for Medicare Advocacy suggest a number of changes that Congress could make in Medicare that would both protect Medicare coverage and reduce costs to taxpayers. Here are a couple of their ideas that seem particularly worthy of close consideration by the super committee and Congress:
1. Negotiate Drug Prices with Pharmaceutical Companies
The Medicare prescription drug law, passed in 2003, prohibits the Secretary of Health and Human Services from negotiating prices with pharmaceutical companies. These companies gained 47 million customers when Medicare began covering prescription drugs, but they did not have to adjust their prices in return. Requiring the Secretary to negotiate drug prices for Medicare would save taxpayers billions of dollars – potentially about $200 billion over ten years. Taxpayers currently pay nearly 70% more for drugs in the Medicare program than through the Veteran’s Administration, which does have direct negotiating power. Savings realized from reducing Medicare drug costs could be used to improve benefits for beneficiaries and reduce the deficit.
2. Stop Paying Private Medicare Plans Anything More Than Traditional Medicare
According to the Medicare Payment Advisory Commission (MedPAC), Medicare pays, on average, 10% more for beneficiaries enrolled in private Medicare (Medicare Advantage, also known as MA) than for comparable beneficiaries enrolled in traditional Medicare. Despite these extra payments, beneficiaries in private plans who are in poor health, or who have chronic conditions, often have more limitations on coverage than they would under traditional Medicare. A large portion of the overpayments made to private plans actually goes to insurers rather than to benefit Medicare beneficiaries. Although the Affordable Care Act (ACA) changed the payment formula for Medicare Advantage plans, some plans will continue to be paid as much as 115% of the average traditional Medicare payment rate for their county when the new rates are fully implemented. MedPAC estimates that by 2017 Medicare Advantage payment benchmarks will average 101% of traditional Medicare. ACA also provides additional payments for plans that receive high quality ratings, increasing the likelihood that some MA plans will continue to be paid more than under Traditional Medicare. Reducing private MA payments to 100% of traditional Medicare, as MedPAC proposed before the enactment of ACA, will increase the solvency of the Medicare program and curb costs for taxpayers. Private plans simply should not receive higher pay than traditional Medicare.
3. Include a Drug Benefit in Traditional Medicare
Offering a drug benefit in traditional Medicare would give beneficiaries a choice they do not now have, encourage people to stay in traditional Medicare, and save money for taxpayers It would also provide an alternative to unchecked private plans that leave many with unexpected high out-of-pocket costs. A drug benefit in traditional Medicare would also insulate beneficiaries from expensive and sometimes abusive marketing practices. Further, traditional Medicare’s lower administrative costs could free up money for quality care, would result in lower drug prices for beneficiaries, and save taxpayers over $20 billion a year.
4. Extend Medicaid Drug Rebates to Medicare Dual Eligibles
Dual eligibles (people eligible for both Medicare and Medicaid) comprise one-fourth of all Medicare drug users, and are among the most costly beneficiaries. Because Medicare, rather than Medicaid, covers most of their drugs and because Medicare cannot negotiate drug prices, their drugs are not eligible for the same rebates as they would be under the traditional Medicaid program. Extending these rebates for dual eligibles would save at least $30 billion over ten years.
5. Lower the Age of Medicare Eligibility
People between 55 and 65 who are not disabled are currently unable to enroll in Medicare. Lowering the age of Medicare eligibility to allow this healthier population to enroll would add revenue for people who will likely need less care and fewer services than older and disabled enrollees.
6. Let the Affordable Care Act (Health Care Reform) Do Its Job
The Affordable Care Act includes many measures to control costs as well as models for reform that will increase the solvency of the Medicare program and lower the deficit while protecting Medicare’s guaranteed benefits. The Congressional Budget Office estimates that repealing or defunding ACA would add $230 billion to the deficit while ignoring the real issue of rising overall health care costs, which contribute heavily to the growing national debt. ACA includes strong measures to allow CMS to combat fraud, waste, and abuse that will bring down costs, as well as a variety of pilot and demonstration projects that aim to bring better care and quality to beneficiaries. The bipartisan Bowles-Simpson Deficit Commission recommended that these projects be implemented as quickly as possible. Allowing ACA to do its job will create a foundation on which to build by improving care and holding down costs for taxpayers.
See The Center for Medicare Advocacy: “You Can’t Save Medicare by Ending It.” http://www.medicareadvocacy.org/wp-content/uploads/2011/07/Flyer-Voucher-and-Medicare-Solutions.pdf.
For help in telling Congress to reform Medicare instead of cutting it, visit http://salsa.democracyinaction.org/o/777/p/dia/action/public/?action_KEY=7255.