This Is Why It's So Hard To Cut Medicare


Monty Python / Universal Pictures

Have you ever had a friend who is chronically about to start a diet? Yes, he admits, he needs to reduce his calorie consumption, and he has for a while. That's why he'll be starting a new eating regime tomorrow, or maybe next week. And because he knows how hard it is to cut back—he's tried before—he's not planning on making major changes, just trimming a little bit over time until he hits his goals. But tonight, he's hungry, and his stomach is grumbling rather loudly, so why not feast a bit more before the fast?

Even if you've never met someone like that, you can get a similar experience just by following various attempts to cut Medicare spending. Yesterday, for example, the Centers for Medicare & Medicaid Services (CMS) announced that a proposed 1.9 percent cut to Medicare Advantage, which allows seniors to get Medicare benefits through privately run plans, would not go into effect. Instead, the new rates for the program will likely result in a 0.4 percent spending increase.

This is not the first time that Medicare Advantage cuts have conveniently transformed into increases. Last year, CMS initially proposed a 2.2 percent cut—which, over the course of a few months, evolved into a 3.3 percent hike.

In both years, what happened between the initial proposal and the final was the same: an intense lobbying campaign by insurers who get paid by the program, as well as heavy political pressure from both sides of the aisle.

Insurers began their campaign in January this year, before the proposed cuts were even formally announced. A bipartisan group of 40 senators, led by Sen. Mike Crapo (R-Idaho) and Sen. Chuck Schumer (D-N.Y.), sent a letter to CMS head Marilyn Tavenner expressing concern about the cuts. "Given the impact that payment policies could have on our constituents," the letter said, "we ask that you prioritize beneficiaries' experience and minimize disruption in maintaining payment levels for 2015."

The stomach grumbled, and CMS listened.

The Medicare Advantage reversals in many ways recall the long-lived saga of the Sustainable Growth Rate (SGR), a formula put in place in the late 1990s to keep Medicare payments to physicians in check.

The original thinking was that the formula, which is designed to keep physician payments on a steady trajectory in line with the overall economy, wouldn't require cuts. But in 2002, when the economy didn't keep growing at late-90s rates, and the formula began to call for cuts, Congress balked, replacing the cuts with short-term increases—a pattern it has repeated over and over again, for more than a decade. Indeed, yet another one-year patch to the SGR, overriding a large scheduled cut, was passed just last week—in a deal worked out between Republican Speaker of the House John Boehner and Democratic Senate Majority Leader Harry Reid.

The fast can always come later.

This is a debate that sometimes scrambles easy assumptions about party roles in the entitlement fight: Republicans, from presidential candidate Mitt Romney down to Florida special election victor David Jolly have been quite successful at hammering the Obama administration for cutting Medicare in order to pay for Obamacare. 

At the same time, it exposes the hollowness of both parties' claims to fiscal responsibility. The Obama administration is counting on $156 billion in Medicare Advantage cuts by 2022 in order to help finance Obamacare; but the strength and influence of the opposition, which includes more than a few prominent Democrats, means no cuts to the program are ever a sure thing. Republicans, meanwhile, make the already treacherous path to Medicare reform even more difficult with their constant complaints about Democratic cuts to the program. For both parties, the time to feast is always now. The time to diet, or cut Medicare, is always later.