Medicare

This Is Why It's So Hard To Cut Medicare

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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. 

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  1. Sen. Mike Crapo (D-Idaho)

    You mean (R-ID).

    Yeah, the spending cuts will probably never happen. The spending increases, though… Tax increases will probably happen, though sometimes those are cut. Spending is almost never cut.

  2. This Is Why It’s So Hard To Cut Medicare Anything

    1. Kevlar?

  3. Beneficiaries of a program are specifically interested in the continuation of spending, non-beneficiaries are vaguely interested in spending cuts. The squeaky wheel gets greased and dependency perpetuates itself, especially when the dependents have been told they have already paid in.

  4. Romney did run on immediately repealing these cuts. And he still lost Florida.

  5. You can’t cut medicare because it is wildly inefficient and thus requires ever increasing amounts of money to provide the same amount of service.

    Wish all you want, but it is not going away. The solution is to reform medicare to make it more efficient. The way to do that is two fold. First, raise the copay and the deductable such that it no longer pays for routine care. You could pay off the old people into accepting this by providing direct aid to help them with their large copays. Give them so much a year and let them keep what is left over. This would make them actually cost conscious and would start to lower the overall costs of the program. Second, follow the Ryan plan and make it a voucher insurance policy purchase program. Just give people vouchers and let them buy their own insurance. That way you could get out of the claim paying business and eliminate nearly the entire bureaucracy. Just make sure that people use the vouchers to buy insurance. What happens after that is up to the insurance companies and the people. No more regulations or bureaucrats trying to figure out the proper cost of a medical procedure.

    That wouldn’t be perfect, but it would be a lot better than what we have.

    1. First, raise the copay and the deductable such that it no longer pays for routine care.

      I have suggested exactly that.

      Damn! WTF?

    2. “This would make them actually cost conscious and would start to lower the overall costs of the program. ”

      It also helps with fraud. Seniors don’t notice an EOB with $0 out of pocket. They do if it’s even $5.

    3. If only we could isolate Medicare’s effect on the market (assuming we could go to a totally free market in health insurance and medical services), then the alternative would be more attractive. But with everything totally fucked up, it’s no surprise seniors aren’t up for messing with their bennies.

  6. 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?

    Hey! I resemble that remark!

    1. I used to too. But the science of obesity shows our simileic friend can’t cut back because his cells are starving. Survival demands that hunger overcomes his discipline. Until his system stops sending needed nutrients to his fat cells, he can’t lose weight.

  7. Let’s go back. The Medicare trust has been long used as a slush fund for expenses outside those initially designed. Medicaid is not Medicare — no matter how they are grouped within the CMS. If you want to start, start with the fraud in Disability which is lumped in with Medicare. Move onto the fraud within Medicaid. Take a look at the growing numbers in Medicaid — willing or unwilling — since the start of ObamaScare. Then look at Medicare. I suspect that won’t happen. After going after Medicare, the next move will be onto TriCare, and perhaps never to Medicaid which is where we are all going anyway — single payer Baby

  8. Medicare will soon cost more per year than the Old Age Insurance part of Social Security. The present 2.9% tax on all wages will have to be raised to 4%. Otherwise Medicare will be insolvent by 2030 at the latest. Cutting Medicare is proving impossible because a large part of the health care industry has revenues that are directly linked to Medicare reimbursement rates. I see no way forward here until there is a young people’s revolt.
    Health care costs are set to be enormous in all OECD countries, with one difference. At the end of the day, the state sets doctor’s incomes in all other nations. Hence a cram-down is possible.
    The USA will rue the day it agreed to reimburse fees set by an automous medical profession.

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