Posts Tagged ‘Super Committee’

Super Committee Failure: It Could Have Been Worse!

Wednesday, November 23rd, 2011

Late Monday, the 12 members of the Joint Select Committee on Deficit Reduction (aka the “Super Committee”) announced their failure to agree to a debt-reduction package. How should consumer health advocates react to the news?

A Plague on Only One of Your Houses
“He said/she said” media accounts suggest that the Super Committee failed because the Republicans rejected any meaningful revenue increases and because Democrats were equally obstinate in refusing to cut entitlement programs, such as Medicare and Medicaid.

The truth is that Committee Democrats were willing (far too willing in our view) to consider ill-advised and unnecessary cuts to Medicare benefits and to Medicaid. For example, one of their final proposals involved $50 billion in Medicaid cuts, including a $13 billion reduction in the federal-matching dollars that help states fund the program. It also cut $350 billion from Medicare, including $100 billion from beneficiaries – most likely by imposing higher premiums and co-pays.

Republicans did not offer equivalent concessions on revenues. Their proposal included a largely regressive revenue increase: caps on tax expenditures, such as the tax exemption on employer-sponsored health insurance. And it squandered most of these new revenues paying for an income tax cut that would lock us into rates well below the Bush tax cut levels, largely to the benefit of the highest-income earners.

Reports suggest that a last-ditch effort at a deal failed because not one Super Committee Republican would agree to even a nominal tax hike on the wealthiest Americans. Democrats – to their credit – drew the line at asking low- and moderate-income Americans to bear the entire brunt of deficit-reduction.

A Mixed Bag for Health Care
The failure of the Super Committee to come up with a deficit-reduction package triggers across-the-board cuts, starting in 2013. These cuts are designed to achieve $1.2 trillion in savings over 10 years – half in defense spending and half in domestic spending.

Fortunately, many important health care programs are exempt from these cuts, including Medicaid, the Children’s Health Insurance Program (CHIP), and the premium tax credits that are slated to help families in the Exchange starting in 2014. Medicare benefits are also largely protected: across-the-board cuts to Medicare are limited to two percent of the programs’ costs, and can only come from cuts to providers and insurers.

But not all health care spending is protected. The sequester will increase low- and moderate-income families’ out-of-pocket health care costs starting in 2014 by cutting into the cost-sharing subsidies in the Exchange. Cuts will also impact Basic Health Program funding, threatening the viability of a program that has great potential to lower health care costs for very low-income families. And they will restrict funds for the Public Health and Prevention Fund, undermining its potential to improve the health of the American people. In addition the cuts in the sequester are expected to have a negative impact on employment, meaning fewer people with employer sponsored insurance and more people either uninsured or on Medicaid.

A silver lining?
One possible silver lining to the across-the-board Medicare cuts triggered by Super- Committee failure is that they could open the door to improvements in our payment system.

Billions of dollars every year are wasted on preventable hospital admissions and complications, such as hospital-acquired infections. The Affordable Care Act begins to tackle this problem by reducing payments to hospitals with high rates of preventable readmissions and complications, but much more remains to be done.

Rather than relying on across-the-board rate cuts to achieve the necessary savings in Medicare, policymakers could target cuts at providers with higher levels of this type of preventable health care spending. This would translate to better care for patients as well as lower cost for the system, and gives providers a chance to reduce costs by improving quality instead of just having to absorb another rate cut. Better care at lower cost is also a better alternative than the benefit cuts that were considered by the Super Committee and would put Congress on the side of the American people, who want to see Medicare and Medicaid protected, not gutted.

As Yogi Berra would say, “it Ain’t over ‘til it’s over” (and it Ain’t over)
Although the Super Committee has closed its case, advocates cannot rest easy. Congress is headed straight into another spending battle that puts health care funding at risk yet again.

Health care industry analysts had hoped the Super Committee’s deal would fix the Sustainable Growth Rate (SGR), a broken formula that automatically reduces Medicare physician payment rates every year. The failure of the Super Committee to reach a deal means Congress has only five weeks to override the scheduled 27 percent Medicare physician payment cut required by the SGR formula, and they are likely to look to savings in health care programs to foot the bill.

To pay for last year’s SGR fix, Congress weakened the ACA’s affordability protections for low- and moderate-income families. It’s entirely possible that bad ideas bandied about by the Super Committee will be back on the table as potential pay-fors for this year’s SGR fix. So advocates need to take a deep breath, and get ready to fight once more to protect these vital programs.

-Katherine Howitt, Senior Policy Analyst
and Michael Miller, Strategic Policy Director

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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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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 »