The left’s solution
for the end of Medicare as we know it.
Center for Medicare and Medicaid Services (CMS)
Richard S. Foster, the Chief Actuary
And
The Congressional Budget Office (CBO)
on the President’s Medicare changes
(The Patient Protection and Affordable Care Act)
Even with the anticipated Medicare savings
with the new health care law, according to CMS:
The projected date of Medicare’s Hospital Insurance (HI)
Trust Fund exhaustion is 2024,
five years earlier than estimated in last year’s report.
Click here to verify and view in full context
Under current law (2012), the balance of the Medicare HI trust fund will be exhausted in 2022, CBO projects.
Click here to view in full context at Page 126
The March 2010 health care legislation
also established the
Independent Payment Advisory Board (IPAB),
which will be required to submit proposals to reduce
Medicare’s spending per enrollee if the growth
of such spending is projected to exceed certain targets.
Those proposals would go into effect automatically
unless blocked or replaced by subsequent legislative action.
Click here to verify and view in full context at Page 38
A related concern is posed by the
requirements that will be placed on
the Independent Payment Advisory Board.
The Board will be charged with recommending changes
to certain Medicare payment categories in
an effort to prevent per-beneficiary Medicare costs
from increasing faster than the average of the
Consumer Price Index (CPI) and the CPI-medical for
“implementation years” 2015 through 2019. The Secretary
of HHS is required to implement the Board’s recommendations
unless the statutory process is overridden by new legislation.
Click here to verify and view in full context at Page 10
Health care providers for whom Medicare
constitutes a substantive portion of their
business 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).
Click here to verify and view in full context at Page 10
Providers might tend to accept more patients
who have private insurance (with relatively attractive
payment rates) and fewer Medicare or Medicaid patients,
exacerbating existing access problems for Medicaid enrollees.
Either outcome (or a combination of both) should be
considered plausible and even probable initially.
Click here to verify and view in full context at Page 20
On the basis of the cuts in payment rates under
PPACA and the Reconciliation Act,
along with the effects of the sustainable growth
rate mechanism, CBO projects that
Medicare spending per beneficiary (adjusted for inflation)
will increase at an average annual rate of
less than 2 percent during the next two decades—
compared with the rate of roughly 4 percent that
has occurred over the past two decades
(a figure that excludes the effect of establishing the
Medicare prescription drug benefit).
Click here to verify at Page 29, Para 3
We estimated that growth in such spending…
would drop from about 4 percent per year for the
past two decades to roughly 2 percent per year
for the next two decades; whether such a reduction
could be achieved through greater efficiencies
in the delivery of health care or would
reduce access to care or diminish the quality of care is unclear.
It is unclear whether such a reduction can be achieved,
and, if so, whether it would be through greater
efficiencies in the delivery of health care
or through reductions in access
to care or to the quality of care.
Click here to verify and view in context
Both the expansion of eligibility for Medicaid
and the provision of subsidies through new insurance
exchanges will increase federal spending.
At the same time, the legislation contains various
provisions that will substantially
reduce spending on Medicare relative to what
would have occurred under prior law.
Click here to verify and view in full context at Page 8
The 2010 health care legislation places a
number of limitations on the actions available to the IPAB,
including a prohibition against modifying Medicare’s
eligibility rules or reducing benefits.
Click here to verify and view in full context at Page 38
Total net savings in 2010-2019 from Medicare
provisions would offset about $575 billion
of the Federal costs for the national coverage provisions.
Click here to verify and view in full context at Page 21
Reductions in payment updates to health care providers,
based on economy-wide productivity gains,
are unlikely to be sustainable on a permanent annual basis.
If these reductions were to prove unworkable within
the 10-year period 2010-2019 (as appears probable
for significant numbers of hospitals,
skilled nursing facilities, and home health agencies),
then the actual Medicare savings from these provisions
would be less than shown in this memorandum.
Similarly, the further reductions in Medicare growth rates
mandated for 2015 through 2019 through the
Independent Payment Advisory Board may be difficult
to achieve in practice.
Click here to verify and view in full context at Page 20
For drugs covered by Medicare’s drug benefit,
CBO estimated that those provisions of the
legislation would raise the prices paid by pharmacies
less any rebates paid to insurers by manufacturers
by about 1 percent, on average.
Click here to verify and view in full context at Page 66
That increase in prices would make federal costs
for Medicare’s drug benefit and the costs faced
by some beneficiaries slightly higher
than they would be in the absence of those
provisions, while the new discounts would make
the costs faced by other beneficiaries substantially lower.
Click here to verify and view in full context at Page 66
CMS estimates that overall out-of-pocket
spending would be reduced significantly by the
PPACA (a net total decline of $237 billion
in calendar years 2010-2019).
Click here to verify and view in full context at Page 18
Federal spending on mandatory programs
can be lowered by reducing the federal
government’s share of the programs’
spending and increasing the shares borne
by state governments, program participants,
and others. Requiring people to pay more for
a service would decrease federal costs and might
lower the overall cost of providing that service
if people responded by using less of it.
Click here to verify and view in full context at Page 17
Spending on major mandatory health care
programs alone would grow from less than 6 percent
of gross domestic product (GDP) today to about
9 percent in 2035 and would continue to increase thereafter.
Spending on major mandatory health care programs
and Social Security would grow from roughly 10 percent
of GDP today to about 15 percent of GDP 25 years from now.
(By comparison, spending on all of the federal
government’s programs and activities,
excluding payment on debt, has averaged
about 18.5 percent of GDP over the past 40 years).
Click here to verify at Summary Page
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The right’s solution
for the end of Medicare as we know it.
The Congressional Budget Office
Analyses of Chairman Paul Ryan’s
Proposals
Individuals who are age 65 or older in 2020 as well as disabled
Medicare beneficiaries receiving benefits in 2020 would continue
in the current Medicare program for the rest of their life,
although some higher-income enrollees would pay higher
premiums, and some program payments would be reduced.
Page 10
(see link to full report below)
Starting in 2021, new Medicare enrollees
would no longer receive coverage through
the current program but instead
would be given a voucher with which
to purchase private health insurance.
Page 21
The Roadmap specifies income thresholds
to determine whether an elderly person
would receive 100 percent of the voucher amount,
50 percent, or 30 percent.
People in the top 2 percent of the income
distribution would receive 30 percent
of the voucher amount, and people in the next top
6 percent income distribution would receive
50 percent of the voucher amount. The remaining
92 percent would receive the full voucher amount.
Page 21
Federal spending on mandatory programs
can be lowered by reducing the federal
government’s share of the programs’
spending and increasing the shares borne
by state governments, program participants,
and others. Requiring people to pay more for
a service would decrease federal costs and might
lower the overall cost of providing that service
if people responded by using less of it.
Click here to verify at Page 17
Under the Roadmap, the value of
the voucher would be risk-adjusted
so that less healthy people
received a larger voucher to cover
their greater expected costs while
healthier people received a smaller voucher
to reflect their lower expected costs.
Page 28
The voucher would be adjusted to reflect the age
and health status of enrollees; thus, in the
initial years of the new program, the average
value would be lower to reflect the lower
expected costs for health care of
individuals who had recently turned age 65.
Page 21
It would institute a premium for higher-income
enrollees under Medicare’s drug benefit
similar to that used in Part B.
Page 20
It would increase the fraction of
beneficiaries who pay an income-related
premium for Part B of Medicare
(Supplementary Medical Insurance).
beneficiaries would face higher premiums
in the private market for a package of benefits
similar to those under Medicare.
In response, beneficiaries would probably
purchase less comprehensive health plans
or plans that were more heavily managed
than traditional Medicare.
Additionally, over time,
the value of the voucher would grow more
slowly than baseline spending would, with
implications like those discussed for
the tax credit.
Pages 27-28
Federal spending on mandatory programs can be lowered
by reducing the federal government’s share of the
programs’ spending and increasing the shares borne
by state governments, program participants, and others.
Requiring people to pay more for a service would
decrease federal costs and might lower the
overall cost of providing that service if people responded
by using less of it.
Click here to verify at Page 17
For people enrolled in the Medicare program prior to 2023, net
Medicare spending – including offsetting receipts, which are
mostly payments of premiums – would grow at the same rate as
under the extended baseline scenario.
Click here to verify at Page 3
For people born in 1958 or later (that is, people who turn 65 in
2023 or later) or for those who otherwise become eligible for the
program in 2023 or later: Total spending for those beneficiaries
in 2023 would be set to a total that works out to be $7,500 (in
2023 dollars) for each new 65-year-old beneficiary on a full-year
equivalent basis. Total spending would grow in subsequent
years with nominal growth in per capita GDP plus 0.5 percentage
points per year, and with an adjustment for the health status
and number of beneficiaries who entered the program in 2023
or later.
Click here to verify at Page 3
The eligibility age for Medicare would increase by two months
per year beginning in 2023 until reaching age 67 in 2034.
Click here to verify at Pages 3-4
Under the specified paths, by 2030, 39 percent of Medicare
beneficiaries would be subject to the spending constraints
established for the program (that is, they will have entered the
program in 2023 or later); that share would rise to
91 percent by 2050.
Click here to verify at Page 5
A final factor affecting Medicare outlays
is the proposed increase in the
program’s eligibility age, from 65 for people born
before 1956, as it is under current law,
to 69 and 6 months for people born in 2022 and later.
Page 22
The Roadmap would put the federal budget
on a sustainable path, generating an
annual budget surplus of about
5 percent of GDP by 2080. The economy would be
considerably stronger under the proposal
(as analyzed by CBO) than it would be
under the alternative fiscal scenario.
Real gross national product per person would be
about 70 percent higher in 2058 under the
proposal than under the alternative fiscal scenario.
Page 14-16
Much less uncertainty about future
federal spending on Medicare would
exist under the Roadmap than exists today.
After 75 years, annual Medicare spending
under the Roadmap would be less than
one-quarter of that projected under
the alternative fiscal scenario.
Under the proposal, national health
expenditures would almost certainly be lower
than they would under the alternative fiscal scenario.
Federal spending for health care would be
substantially lower, relative to the amount
in that scenario, for working-age people and
the Medicare population.
Page 13
Click here to read full report
Question:
Do you think that a program with $37+ trillion dollars in unfunded liabilities can remain the way we have always known it?
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