Posts Tagged ‘sustainable growth rate (SGR)’

The Unhealthy Consequences of Congressional Dysfunction

Thursday, December 22nd, 2011

After caving in to a rebellion from the tea-party wing of the House Republican caucus, Speaker Boehner has pulled the plug on a bipartisan agreement to do a two month extension on a number of expiring federal policies — including a patch on the Medicare physician Sustainable Growth Rate formula, an extension of unemployment benefits and continuation of a payroll tax reduction. The two-month extension was meant to give House and Senate negotiators more time to find agreement on a longer term deal.

At this point, with the Senate adjourned and the House rejecting the short-term extension, it is hard to see how the issue will get resolved. However, in a year that has featured several near shut-downs of government and routine 11th hour legislating, we can’t discount the possibility that some agreement will be reached. Still, it can’t be taken for granted that Congress will pull yet another rabbit out of its hat, and the cost of failure, in health care terms, will be high.

Although the most high profile health issue in the debate is preventing a 27 percent cut in the Medicare physician fee schedule, there are other important provisions at risk, including an extension of the “QI” program, which pays the Medicare Part B premium for low-income Medicare beneficiaries, and Transitional Medical Assistance, which allows families who would lose Medicaid eligibility as a result of an increase in earnings to temporarily retain that coverage. But the problem doesn’t stop there.

A failure to extend unemployment benefits and the payroll tax cut will have significant consequences for health care. First, at least some people losing unemployment insurance will end up on Medicaid, increasing the cost of that program as states struggle to recover from the recession and replace the lost federal Medicaid funds. Secondly, taking the purchasing power of unemployment benefits and the payroll tax cut out of the economy will be a drag on employment and will translate into further increases in the number of uninsured and people on Medicaid.

So what we are faced with is yet another example of Speaker Boehner and the House Republican caucus electing to play chicken, placing important health care programs and our fragile economic recovery at risk. This has become something of a pattern ever since they threatened to force a default on U.S. government debt earlier this year. Unfortunately, chicken is a risky game that often results in someone getting hurt.

– Michael Miller, Policy Director

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Weakening Affordability Protections (Again): The Wrong Way to Pay for the Doc-Fix

Thursday, December 8th, 2011

Congress must act before the end of the year to prevent an automatic 27 percent rate cut for Medicare doctors (the “doc-fix”, as it is generally known in DC). To pay for it, some Republican Members of Congress are floating the idea of further eroding health insurance affordability protections for low- and middle-income people under the Affordable Care Act (ACA). While averting a pay cut for Medicare’s doctors is an important priority, the costs of this adjustment should not come directly from the pockets of struggling families.

What’s the Proposal?
When the Exchanges are running in 2014, individuals can receive premium tax credits in advance to help pay for their health insurance coverage. But if their income rises during the year, they may no longer be eligible for those tax credits, or they may be eligible for a smaller tax credit than they were receiving.

In that case, they will have to pay back some of their subsidy when they file their taxes at the end of the year. To strike a balance between recapturing subsidies and not hitting working families too hard, the ACA capped how much an individual would have to pay back.

Congress has already increased this cap twice – once to pay for last year’s “doc-fix” and then again to pay to repeal enhanced tax reporting requirements on small businesses. Some in Congress are now proposing increasing that cap a third time, or even eliminating the cap altogether, to pay for this year’s doc-fix.

This proposal would hurt low-income people and the long-term success of the ACA by:

  • • Imposing financial hardship on low- and moderate-income families. It could force them to pay thousands’ of dollars in penalties for having found a better job or gotten a raise.
  • • Increasing the number of uninsured. Fearing this type of unexpected cost, fewer people will enroll in the advanced tax credits. In fact, when the CBO scored similar provisions in the past, most of the savings came from lower take-up of tax credits not from increased revenues.
  • • Jeopardizing public support for the ACA. The prospect that families will have a large unexpected cost at the end of the year is likely to undermine public support for the law.

Just Say “No”
The Republicans floating this proposal are well aware of its potential to undermine the ACA by reducing the number of insured and generating backlash against the law. This policy is a poison pill for health reform, and Democrats and President Obama should think twice before swallowing it again.

But the case against this proposal is broader than that. In his recent speech, President Obama spoke out forcefully about the need to address income inequality. Paying for physicians’ higher reimbursements by taking money from low- and moderate-income families is hardly a step in the right direction.

-Katherine Howitt, Senior Policy Analyst

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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: Last minute collapse on doc payments, Medicaid and COBRA subsidies a bad omen?

Tuesday, June 1st, 2010

In the lead-up to passing the health reform law, Congress debated what to do about the Medicare physician payment problem.  Under current law, the formula for setting Medicare physician payment rates, known as the Sustainable Growth Rate, or SGR, will impose large and escalating annual cuts on physician reimbursement.  The SGR issue was ultimately separated out from health care reform, and doctors were assured that the issue would be addressed before the scheduled payment cut June 1.  Physicians pressed for a permanent solution to the problem but because of the price tag, Congress scaled back, first to a 5-year patch and then to a 19-month fix.  The scaled-back SGR patch passed the House just before the Memorial Day recess, but without enough time for the Senate to act.  Theoretically that means that a Medicare payment cut of over 20 percent kicks in today, but CMS is holding onto claims for a couple of weeks assuming that when the Senate comes back they will enact a retroactive payment increase.

While the physician payment fix is likely to get sorted out, two other critical provisions face a more uncertain future.  With unemployment still high and state budgets still in trouble, House and Senate leaders attempted to extend enhanced federal Medicaid payments to states through the end of state fiscal year 2011 (the enhanced payments are currently scheduled to end halfway through the year) and to continue the subsidy of COBRA premiums created by ARRA last year.  But in what’s being described as victory for House fiscal conservatives, both of these measures were struck from the House legislation late last week, and whether the Senate will restore them remains uncertain.  Roughly 20 states are already counting on the extra Medicaid help in their state budgets.

However, that victory may prove short-lived. Both the COBRA and Medicaid provisions themselves are popular with core Democratic constituencies, and it’s entirely possible that the Democratic Blue Dogs who have drawn a line in the sand in the name of controlling federal spending will be punished at the polls, not rewarded, if the Medicaid and COBRA funding is not restored. They could lose support from the Democratic base without picking up any offsetting support from more conservative voters.

If funding is not restored there are several implications that go beyond politics.  The first is harm these cuts do to low- and moderate-income families who will lose coverage or services as a result. Second, the loss of COBRA subsidies is a blow to the drive to provide health security for all, while the loss of Medicaid funding will certainly turn up the heat on the already charged debate over the role of Medicaid in reform.  Finally, if there is a more conservative Congress in 2011 as anticipated, future debates over federal health care funding and implementation could become similarly difficult, with Congress unable to agree on funding for provisions in PPACA that are authorized but lack an appropriation.

The immediate implication for health care reform advocates is that we need to redouble our efforts to persuade the Senate to revive the COBRA and Medicaid funding.  It’s time to step in to keep reform on the right track.

More on Living in Chicken Little Land

You know it’s Chicken Little time when people can (and do) go on about how awful health reform is without any regard to the available facts.

Exhibit A:  Public opinion. The most recent Kaiser tracking poll (pdf) shows that the top concerns opponents have about health care reform is that it will increase health care spending and is not paid for.

Both the Congressional Budget Office and the CMS Office of the Actuary have refuted these claims in the past.  CBO has found that health reform will reduce the deficit (pdf) while the CMS actuary projects that reform will provide coverage to over 30 million people with a negligible increase in costs.  Recently, a Commonwealth Fund/Center American Progress analysis has suggested that both CBO and CMS are being too conservative in their projections.  Essentially both agencies assume no savings at all from efficiency gains, quality improvements and delivery system changes–sources that could, by moderate estimates, generate a potential $600 billion savings over 10 years.

Exhibit B: state government.  Numerous states have vociferously complained about the burden the Medicaid expansion, a core component of health reform, will impose on them; many going so far as to file a lawsuit to block the expansion.

The facts? A new paper released by the Kaiser Commission and the Urban Institute tells a different story (pdf).  The study shows that on average health reform will add only 1.4 percent to state Medicaid spending between now and 2019.  This is very similar to the 1.25 percent estimate developed by the Center on Budget and Policy Priorities.  And neither of these forecasts take into account savings to states from changes in the delivery system or from reductions in spending on services that are now 100 percent state funded but will be covered by Medicaid in the future.  Although state by state estimates vary, in no state does the federal government contribute less than 94 percent of the cost of the expansion.

Unfortunately, it isn’t much use telling the truth to people whose minds are already made up. Facts don’t matter to Chicken Little, who gets all his information from the Fox (news).  As we noted in the last post, the only thing that will persuade these folks is when the sky doesn’t fall in 2014 and, at least for some, they start receiving benefits under the law.  Then they’ll probably join the “keep government out of my Medicare” crowd.

DoJ presents its case
The Department of Justice has, in several legal briefs, laid out its basic arguments against the lawsuits seeking to undermine health reform.  Here’s a CliffsNotes version of the arguments:

•    States have no standing relative to the individual coverage requirement, which applies to individuals, not states (duh).
•    There is no need to block the law from going forward now since there is no possible injury until April 2015, when penalties for failure to purchase coverage would be due.
•    Individuals who now claim the law would require them to purchase coverage can’t know their circumstances in 2014, so the “injury” is purely speculative.
•    State residents cannot vote to exempt themselves from federal law they don’t happen to like.
•    The minimum coverage requirement is a reasonable part of the regulatory scheme that governs economic activity related to health care and health insurance, and thus falls within the Commerce Clause,
•    Tax penalties associated with the requirement to purchase coverage fall within Congress’ power to tax and spend for the general welfare.

Call it what it is—then change course

When responding to repeal proponents it’s important to:
a) Call the attacks what they are: an attempt to preserve an unsustainable status quo that leaves millions without coverage and millions more who have coverage at risk of financial ruin.

b) Turn to the benefits of the law—reform will:
•    Provide security to millions of working Americans
•    Guarantee people access to the same plans as members of Congress
•    Help women, children and people with serious medical conditions get more affordable and more secure coverage
•    Strengthen oversight of insurance premiums and help people get better value for their premium dollar

–Michael Miller, director of strategic policy

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