Posts Tagged ‘national debt’

The Insider: News Round Up

Wednesday, November 2nd, 2011

File Under: “…and don’t let the door hit you on the way out”

Recently, two Florida insurers announced their intention to quit the non-group health insurance market in that state. The state of Florida is trying to use the exit to bolster its case for a waiver from the Affordable Care Act’s Medical Loss Ratio requirement. If the waiver is granted, it will cost Florida rate-payers millions of dollars. Given that the carriers in question cover well under one percent of the non-group market, their exit hardly makes for a compelling case in Florida. But setting the specifics of Florida aside for a moment, should we be worried about carriers leaving the market? In general, the answer is no.

When it comes to health insurance, the notion of “the more the merrier” is deeply flawed. Why? Because every insurer has to pay fixed costs for sales and marketing, claims processing, and underwriting. At the same time, unless you are talking about old-school HMOs where the insurer is essentially synonymous with the provider network, small insurers don’t have the ability to negotiate effectively with providers on price or to innovate with respect to quality. Basically, the insurers most likely to call it quits have a business model based on making sure that they don’t cover sick people. That business model is now obsolete thanks to the ACA. The only thing such insurers add to our health care system is cost, not value. (Click here for an economic model illustrating why too many insurers can be a problem.)

File under: “I’ve got some good news and some bad news”

The recent CMS decision to partially allow proposed cuts in California Medicaid rates is a mixed bag. First the good news: The state agreed to withdraw proposals to reduce reimbursements to pediatricians and for home health services. The state has also agreed to a first-of-its-kind Medicaid access monitoring plan to evaluate the impact of the cuts.

Now the bad news: CMS approved rate cuts to a broad cross-section of other providers. Although a few types of providers (family practitioners, internists and pediatricians) will see rate increases starting in 2013 courtesy of the ACA, most others will continue to be reimbursed at the lowest rates in the country. (Decisions on proposed benefit limits and increased cost-sharing are still pending.)

The decision elicited concern from consumer advocates and outrage from some providers. One worry is that cuts will undermine access and provider support in the run-up to the ACA’s Medicaid expansion. Another concern is that, notwithstanding the access monitoring plan agreed to by the state, the recent decision underscores the limits of CMS’s ability to block state cuts that could be harmful to patients. At the same time, the administration has taken a position on the wrong side of the question of whether individuals should have the right to pursue legal action to enforce access to care for Medicaid beneficiaries.

Unfortunately, what is most unusual about the California developments is the state access monitoring plan, not the cuts. Across the country states are cutting Medicaid benefits and rates. This is a dead end strategy. The bottom line is that states cannot solve their budget problems via Medicaid rate cuts. There is an urgent need for states to reform the delivery of care to maximize quality while reducing cost. At the same time, even the best crafted strategies will not be sufficient. Whether we are looking at the federal budget or the states, new revenue has to be part of the solution to balancing budgets without eviscerating services.

And speaking of revenue and budget balancing…

File this one under “What are they thinking (or smoking)?”

The $3 trillion debt reduction proposal by the majority of the “Super Committee’s” Democratic members has, apparently, crashed and burned (though elements of it could still rise from the dead). The proposal had a lifespan even shorter than a Kardashian marriage, and was immediately panned by Republican members and criticized by many Democrats off the committee, as well.

Although details are hard to come by, the $475 billion in proposed Medicare and Medicaid cuts would certainly have included both significant cuts to beneficiaries and cost shifts onto state Medicaid programs, violating the key demands of consumer advocates.

Committee Democrats may have been hoping to get political credit for “being the adults in the room” willing to make tough choices. But it is more likely that the only thing they accomplished was to further arouse the fears of older voters—an important voting bloc that largely turned against the Democrats in 2010—that the Democratic Party was unwilling to defend their health care benefits.

In earlier blog posts, we’ve shown how to achieve substantial federal health savings without harming Medicare and Medicaid beneficiaries, which means supporting proposals that harm seniors is not only politically unwise, but also unnecessary. So in the future, please folks, no more negotiating with yourselves. There is simply no upside to making symbolic gestures toward debt reduction as long as there is “no partner for peace” in the room. As one Democratic Hill staffer put it recently, “Because the GOP is not engaged at all on revenues … this could go on forever and they would still stand there offering a giant middle finger.”

– Michael Miller, Policy Director

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Posted in Affordable Care Act implementation, Medicaid | No Comments »

We Can Have Our Deficit Reduction and Keep Our Health Security Too

Tuesday, September 20th, 2011

Yesterday, President Obama released a plan to reduce the deficit by more than $3 trillion over the next decade. It’s certainly not perfect, but his plan achieves these savings while largely protecting health security for the low-income families that rely on Medicaid and Medicare.

Reaction to the plan was almost entirely predictable. Republican lawmakers rejected it out of hand, while a wide range of health care interest groups offered up variations on the theme of: “I know we need to make an omelet but don’t break my egg.” The award for most cynical response among health care interests should probably go to the American Hospital Association which simultaneously attacked the President’s plan while embracing a proposal to raise the Medicare eligibility age—an idea that raises health care costs for everyone other than the federal government while also, not coincidentally, raising revenue for the hospital industry.

In fact the debate over raising the Medicare eligibility age underscores the danger of defining the health care cost issue narrowly as only a federal spending issue as opposed to taking a broader systematic approach. Community Catalyst laid out the core principles for sound health care cost containment here. Although there are a few unfortunate exceptions, most of the health care savings in the President’s plan come from good ideas that will reduce waste and inefficiency

Good News First
The president’s plan starts off on the right foot: it minimizes the cuts required in health and other entitlement programs by demanding a real contribution from the wealthiest Americans and corporations. New revenues, from sources such as closing corporate tax loopholes and cutting tax preferences for the wealthiest Americans, account for half ($1.5 trillion) of the total proposed deficit-reduction.

And while his proposal cuts $248 billion in Medicare spending and $73 billion in Medicaid and other health programs, it does so at least partially by targeting waste. For example, the president’s plan:

  • – reduces overspending on prescription drugs by requiring drug manufacturers to pay the same rebates for low-income Medicare recipients as they do for Medicaid beneficiaries
  • – improves access to low-cost generic drugs by ending “pay for delay” agreements, a practice that allows brand-name drug manufacturers to pay generic drugmakers to keep their products off the market
  • – creates new incentives for nursing homes to provide better primary care to residents to avoid needless and costly hospitalizations

These policies not only save federal dollars, they move our health care system in a better direction; they are smart policy regardless of their deficit-reduction effects.

Here’s the “But”
While the president’s plan represents the most serious attempt yet to trim the deficit without harming the health of low-income Americans who rely on Medicaid and Medicare, some of his policies are worrisome.

Particularly concerning are proposals that would shift costs onto Medicaid mainly by reducing federal Medicaid matching rates and limiting the ability of states to use provider taxes to finance the program. Raising state Medicaid costs is likely to reduce access to health care for very vulnerable populations. And, because Medicaid is already the lowest-cost health insurer and states have much less ability than the federal government to finance the program, there is something perverse – embarrassing, even – about the federal government attempting to get its financial house in order by shifting costs onto states.

Although we haven’t seen the details, even here there appear to be some positive features of the president’s plan. Specifically, although he proposes to save about $15 billion by reducing federal Medicaid matching rates (a smaller number than in earlier proposals) he also proposes to automatically increase federal matching rates during economic downturns—an idea advocates fought for during the ACA that did not make it into the final legislation. He also proposes to give states an incentive to make the ACA work by rewarding states who sign up a higher share of newly-eligible Medicaid beneficiaries.

Another concern is that under the president’s plan, Medicare cost-sharing requirements would increase. Not only will this create barriers to care for low-income Medicare beneficiaries, it will also increase state Medicaid costs since Medicaid pays the Medicare cost-sharing requirements for the “dually-eligible.”

Finally, the president’s plan cuts $3.5 billion from the $15 billion Prevention and Public Health Fund. This is particularly shortsighted because improving the underlying health of the American people is one of the three key pillars of a long term cost containment strategy.

What’s particularly unfortunate is that the White House missed an opportunity to do more to improve the health care system (click here and here to read about missed savings opportunities).

Where does this leave us?
What’s most striking about POTUS Debt Reduction Plan is what it does not do. Most of the egregious proposals that were bandied about in the context of the debt ceiling debate this summer – such as raising the Medicare eligibility age or cutting federal matching rates more significantly – have been eliminated or dramatically scaled back. It appears that administration strategists have concluded (and let’s be glad they did) that there was no advantage in unilaterally offering up cuts that would anger important constituencies while Republicans remain entirely intransigent on new revenue.

If the president had given up a lot of ground by offering up cuts to entitlement programs that would harm health security for low-income and older Americans, that would have undercut the ability of Democrats on the Super Committee to protect Medicare and Medicaid. It also would have blurred a key Democratic message point going into the 2012 election — Democrats are committed to preserving Medicare and Medicaid while Republicans have committed essentially to eliminating them and replacing them with programs that, even if they had the same names, lack key beneficiary protections.

Of course the President’s plan itself is dead on arrival — the Super Committee members will likely ignore the details of the President’s proposal as they develop (or attempt to develop, or attempt to appear as though they’re attempting to develop) a deficit-reduction plan of their own. But at least it offers us a tolerable, if imperfect, vision of how serious progress could be made on debt reduction without slashing programs that provide health security to the most vulnerable Americans.

–Michael Miller, Policy Director
–Katherine Howitt, Senior Policy Analyst

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Posted in Affordable Care Act implementation, Medicaid | 2 Comments »

A Tale of Two Deficit Reduction Approaches

Friday, April 15th, 2011

In his speech on Wednesday, President Obama laid out his plan for deficit reduction, and last week, Congressional Republicans released their 2012 budget proposal. Both plans reduce federal expenditures on Medicare and Medicaid, but they take strikingly different approaches. What are the key takeaways for health advocates?

Takeaway #1: The president gets the big picture right on key health care issues. Before the president’s speech, we laid out three key issues health advocates should be listening for. Between his speech and accompanying documents, it’s clear that the president is in a resoundingly good place on all three issues:

1. The president explicitly rejected proposals to turn Medicare into a voucher program and to convert Medicaid into a block grant. These approaches, the backbones of the 2012 Congressional Republican budget, do nothing to tackle the underlying drivers of health care costs. Instead, they shift these costs onto those who can least afford them: seniors, people with disabilities, and low-income families.

2. The president also understands the harm imposed by federal spending caps. While this is less clear from his remarks, follow up with White House officials makes it clear that the administration understands that a global cap is just a back door to turning Medicaid into a block grant and Medicare into a voucher.

3. He articulated an alternative, far more rational approach to cost containment, which builds on foundation of the Affordable Care Act. The president identified key approaches to build on the cost-containment structure laid out in the ACA. For example, he suggests strengthening the mandate of an independent commission of doctors, nurses, medical experts and consumers, created by the ACA, to weed out wasteful spending in Medicare without reducing benefits or increasing seniors’ costs. He also proposes using Medicare’s purchasing power to negotiate lower prescription drug prices for America’s seniors. And he recommends changing the way we reimburse for health care services, moving us away from a system that pays providers for more services and towards one that pays providers for better health outcomes.

(For more on the ACA’s approach to cost containment and how it can be enhanced going forward, see our one page graphic and issue brief.)

Of course there are still many details of the president’s proposal to be filled in, and there are some concerns about specific elements such as the overall size of the proposed Medicaid cut and new limits on states’ ability to tax health care providers to fund Medicaid. But it’s also important to put the President’s proposal in context, which brings us to…

Takeaway #2: The president’s approach presents a stark contrast to the one endorsed by Congressional Republicans. This contrast is most obvious in two key areas:

1. Reducing costs vs. shifting costs. As we laid out above, the president’s approach looks to reduce health care costs primarily by tackling their underlying causes.

Congressional Republicans, on the other hand, treat rising health care expenditures like a game of “hot potato”: they merely toss these costs onto states, seniors, people with disabilities, health care providers, and other vulnerable families. First, they turn Medicaid into a block-grant program that, by design, would not keep up with rising health care costs. This would impose crippling burden on states, leading to rollbacks in health care coverage for millions of nursing home residents, people with disabilities and low-income children and families. It is no exaggeration to say that some would die as a result.

Second, they end Medicare as we know it and replace it with a voucher that seniors would use to buy coverage on the private market. These vouchers, like the block grants above, are designed not to keep up with rising health care costs, leaving seniors to pay an ever-increasing share of their health care costs. According to the nonpartisan Congressional Budget Office, under this plan the average senior would shoulder $6,000 more in annual out-of-pocket costs by 2022.

2. Bank accounts of millionaires vs. health security for seniors, people with disabilities and low-income children. Unlike President Obama, the Congressional Republicans would extend Bush-era tax cuts for the wealthiest Americans. Under this plan, the average person earning at least a million dollars a year would receive an average tax cut of $125,000 per year. Through severe cuts to Medicaid and Medicare outlined above, Congressional Republicans essentially force America’s most vulnerable citizens to finance these tax cuts for its wealthiest citizens.

These contrasting budget proposals offer us a clear choice: We can maintain and improve health security for American families, or we can have tax cuts for the wealthiest people and corporations. We can’t have both and still reduce the deficit. The American people have already indicated their policy preference—for example, three quarters think Medicaid funding should either be kept the same or increased, and 70 percent would prefer shielding the program from cuts to using it for deficit reduction.

The president is clearly listening. Is Congress?

– Katherine Howitt, Policy Analyst and
Michael Miller, Policy Director

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Obama’s Speech Today: A Listeners Guide for Health Care Advocates

Wednesday, April 13th, 2011

Later today when the President speaks about the national debt, what should health care advocates be expecting and hoping to hear? Given that long-term projections of rising public debt rest almost entirely on growth in health spending, we should expect at least some substantial attention will be paid to health care cost containment. However, don’t expect a detailed prescription. 

Since the President is addressing the public at large, he is unlikely to get too deep in the policy weeds, but there are a few key things health care advocates should be listening for (even if only “between the lines”):

Does the President address block grants and vouchers?
We should expect the administration to reject explicitly or implicitly both a Medicare voucher and a Medicaid block grant. It’s notable that two of the President’s top health policy advisors were leading public opponents of Medicaid block grants during previous efforts to transform the program, and it is very unlikely that the President will move off of this position.  This is where we should expect the most clarity as the President works to distinguish his approach from the one laid out by Congressman Ryan in the context of the FY2012 federal budget.

Does the President endorse a global federal health spending cap a la Bowles-Simpson?
While the Bowles-Simpson debt reduction plan does not call for either a Medicaid block grant or a Medicare voucher, it does call for limiting the growth of federal health spending to the rate of GDP plus one percent. Such an inflexible spending target would fail to allow for growth in the number of elderly or Americans with disabilities, an economic downturn, an epidemic, or changes in health care delivery that bring substantial benefits but also new costs. While we can expect the President to be somewhat clear in rejecting a block grant or voucher, his position on a global spending cap is truly unknown. Since the spending cap approach has garnered some favorable attention from a bipartisan group of Senators working on a debt reduction plan, a signal of Presidential approval or disapproval of this position could be very important. Silence on this point would also be important and would likely be interpreted on Capitol Hill as a green light to continue to negotiate a global spending cap.

Does the President offer a rational framework for reducing health care spending, consistent with the Affordable Care Act?
One of the big lies about the ACA is that it doesn’t tackle health care cost containment.  In fact, the ACA approaches cost containment in a very rational way.  If you look at the sources of excess health care spending in the U.S. relative to the rest of the world, you see that high prices and high administrative costs, particularly in the private sector, are among the main causes. Within public programs, high administrative costs and high prices are much less of an issue (with prescription drug prices for Medicare beneficiaries being a notable exception). Instead, the sources of low-value public health care spending primarily include preventable hospital and nursing home admissions, preventable complications (such as infections and other medical errors) and improper payments. Finally, any long-term cost containment approach must include improvements in the underlying health of the population.

The ACA already tackles all of these issues with: Exchanges, Minimum Medical Loss Ratios, beefed up rate review, enhanced payment oversight for Medicare and Medicaid, new Medicare and Medicaid payment and delivery models, investments in community care and improving transitions between hospital and community, major investments in public health and more. 

Of course more could be done, but generally that would require reopening some of the deals that were negotiated in the context of the ACA debate.  It will be instructive to listen for clues as to whether President Obama stands behind the cost containment path chartered by the ACA and whether he indicates a desire to go further down that road, or if he signals a change in direction—one that would involve placing more of a burden on elders, people with disabilities, and low-income children and families. 

Stay tuned for follow up analysis tomorrow.

- Michael Miller, Policy Director

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Posted in Affordable Care Act implementation, Medicaid, Uncategorized | 1 Comment »