Appended to Karen Davis? oral testimony is a set of 24 insightful exhibits that are loaded with Medicare information. For this module?s discussion, please interpret, assess, cite, and debate the Medicare reform implications of the facts and figures from this set of 24 exhibits.
Order Description
Appended to Karen Davis? oral testimony is a set of 24 insightful exhibits that are loaded with Medicare information. For this module?s discussion, please interpret, assess, cite, and debate the Medicare reform implications of the facts and figures from this set of 24 exhibits.
THE FUTURE OF MEDICARE: CONVERTING TO PREMIUM SUPPORT OR CONTINUING AS A GUARANTEED BENEFIT PROGRAM
Karen Davis The Commonwealth Fund One East 75th Street New York, NY 10021 kd@cmwf.org http://www.commonwealthfund.org
Invited Presentation House of Representatives Democratic Steering and Policy Committee Forum on Saving Medicare for Seniors Today and in the Future October 2, 2012
This testimony benefitted from the work of Sara R. Collins and Stuart Guterman and the report by Sara R. Collins, Stuart Guterman, Rachel Nuzum, Mark A. Zezza, Tracy Garber, and Jennie Smith, Health Care in the 2012 Presidential Election: How the Obama and Romney Plans Stack Up, The Commonwealth Fund, October 2012; the research assistance of Kristof Stremikis; and the editorial assistance of Deborah Lorber of The Commonwealth Fund. The views presented here are those of the author and not necessarily those of The Commonwealth Fund or its directors, officers, or staff.
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THE FUTURE OF MEDICARE: CONVERTING TO PREMIUM SUPPORT OR CONTINUING AS A GUARANTEED BENEFIT PROGRAM
Oral Statement
Today, Medicare works to provide access to care and financial protection for 50 million seniors and disabled beneficiaries. These men and women contributed to the program throughout their working lives and continue to contribute substantially to their own medical expenses through premiums for supplemental coverage and out-of-pocket expenses. Although Medicare covers people who are poorer, sicker, and more expensive to care for than private insurance plans do, it is a better buy than private coverage. Medical and administrative costs are lower than those in private coverage because of administrative efficiencies and the leverage Medicare exercises as the largest purchaser of health care in our country. The Affordable Care Act is projected to achieve estimated Medicare savings of $716 billion between 2013 and 2022. This will be achieved by phasing out the overpayments to private Medicare Advantage plans, reducing provider payment productivity updates (which has been accepted by the hospital industry in large part because covering the uninsured will reduce hospitals? bad debts), and various provider payment changes and improvements. The Affordable Care Act?s major payment and delivery system reforms are projected to slow Medicare spending per beneficiary to 3.1 percent annually over 2012?2021, extending the solvency of the Medicare Hospital Insurance (Part A) Trust Fund to 2024. A major concern, however, is that the retirement of the post-World War II generation will increase the numbers of beneficiaries at the same time that the decline in fertility rates in the 1970s and 1980s has lowered the number of active workers in the labor force. As a result, expenses are projected to grow faster than payroll tax revenues. To bring the Trust Fund into balance, more revenues will be needed, spending growth will need to be further restrained, or beneficiaries will need to pay more of their own health care expenses either directly or through premiums. Given this dilemma, a national debate on the future of Medicare, with careful consideration of the consequences of alternative strategies, is appropriate. Converting Medicare to a fixed sum of money capped at the growth of the economy, without effective health care cost control, would shift costs to beneficiaries who already struggle with out-of-pocket medical expenses and limited incomes. An alternative approach of continuing guaranteed benefits and rewarding hospitals and physicians for providing
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high-quality care in an efficient manner has the potential to achieve needed budgetary savings while reducing, not increasing, financial risk to beneficiaries.
Premium Support and Repeal of the Affordable Care Act The philosophy behind premium support holds that patients are best positioned to eliminate overuse of services, shop for lower-cost care, and pick lower-cost health plans. Rather than guaranteeing that Medicare will pay the cost of a defined set of benefits, under the most recent Medicare premium proposal advanced by vice presidential candidate Rep. Paul Ryan, chair of the House budget committee, beneficiaries would receive an allowance based on their age, health status, and income to be applied toward the purchase of a health plan. Over time, the dollar allowance would be capped at the rate of gross domestic product (GDP) growth per person plus 0.5 percent. Governor Mitt Romney endorses this Medicare premium support strategy. Because the federal government would cap future allowances by the rate of economic growth rather than the rising costs of health insurance premiums or medical care cost, this approach would result in the federal government spending less over time as beneficiaries spent more, assuming health care costs continued to rise at current rates. The value of the allowance or defined contribution for private insurance would erode over time, resulting in higher premiums for beneficiaries and/or reductions in benefits. The Congressional Budget Office (CBO), in fact, estimated that the latest Ryan premium support proposal, which shaped the 2012 House Budget Resolution, will raise costs for beneficiaries, with beneficiary cost rising over time. Our estimate is that aver
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