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Senior Citizen Politics
Analysis: Medicare, Liberals And The Lesser Of Two Evils
Fear is that cuts would leave the elderly without adequate financial protection or access to medical care
By Jonathan Cohn
analysis is a collaboration between Kaiser Health News and
The New Republic
Aug. 15, 2011 - Why does the debt ceiling deal give liberals so much heartburn? Many reasons, obviously. But a big one is
the possibility that it will trigger automatic cuts to Medicare, the jewel of the Great Society and the program on which virtually every
senior citizen depends for health insurance.
Under the terms of the debt deal, which President Obama reached with Republican leaders in late July, a bipartisan "super
committee" has until Thanksgiving to come up with at least $1.2 trillion, over 10 years, in deficit reduction proposals. But if
this committee can’t agree on recommendations or if Congress fails to pass them – two very distinct possibilities – then a series of
across-the-board spending reductions would take effect. Some of them would take money from Medicare.
The fear is that those cuts would leave the elderly without adequate financial protection or access to medical care. It’s
a rational fear but, perhaps, not a necessary one. Talk to policy analysts, industry lobbyists, or advocates for the elderly, and you’ll
detect an emerging, if tentative, consensus: The impact of automatic cuts would be relatively modest and, most likely, less severe than
whatever that super committee would devise as an alternative.
By design, the actual benefit structure of Medicare would be exempt from the automatic cuts. That’s a critical
distinction given some of the ideas under discussion in the past few months.
At various points, negotiators from the administration and Congress talked about raising the age at which people become
eligible for Medicare, charging higher premiums to beneficiaries with higher incomes, and forcing holders of supplemental Medigap policies to
face bigger out-of-pocket charges for routine medical care. For better or for worse, or maybe for both, all of these changes would have meant
less insurance coverage for seniors.
The automatic cuts, by contrast, would affect providers exclusively, by reducing what Medicare pays them by up to 2
percent. "Providers" is wonk-speak for the people, institutions, and companies that provide medical care – not just doctors and hospitals, but
also skilled nursing facilities and the insurance companies that deliver Medicare benefits to some seniors. In 2013, the first year the
automatic cuts would take effect, that 2 percent would work out to something in the neighborhood of $12 billion, according to estimates from
Bipartisan Policy Center.
By itself, and in the context of all U.S. health care spending, that’s not a ton of money. But it’d be in addition to
Medicare cuts, roughly three times as large, that the Affordable Care Act is imposing. And unlike the cuts in the Affordable Care Act, many of
which are in the form of payment reforms designed to penalize low-quality providers or reward high-quality ones, the automatic cuts in the
debt deal would not make such fine distinctions.
That last part is important:
Across the health care industry and even within particular parts of it, some providers can, and should, cope with
reductions better than others. Paying less to specialists might be a good idea, for example, given all the data on excessive procedures in
American medicine. But reducing income to family doctors could make an existing shortage of those physicians even worse. “Some see this as too
blunt an instrument,” says Tricia Neuman, a vice president of the Kaiser Family Foundation. (KHN is an editorially-independent program of the
But, as Neuman also notes, scale is important. Even if the automatic cuts took effect, the total reductions in
Medicare spending providers would face over the next decade would likely be smaller, relative
to the size of the program, than the ones they faced a little more than a decade ago, thanks to the Balanced Budget Act of 1997.
Although Congress ultimately restored a portion of those 1997 cuts, by and large the health care industry adapted to the
new reality, frequently by finding new ways to become more efficient. While automatic cuts from the debt ceiling deal could have a harsher
effect, experts like Paul Ginsburg, president of the Center for Studying Health System Change, agree they would likely be "indiscriminate but
Of course, neither Ginsburg nor anybody else can be sure about that, in part because of some outside variables. Chief
among them is the fate of separate, already-planned cuts to physicians under what is known as the Sustainable Growth Rate formula. In recent
years, Congress has postponed the SGR cuts - the "doc fix." If Congress doesn’t postpone them again, physicians would see much more dramatic
declines in income – the kind that might discourage them from seeing Medicare patients, just as low Medicaid reimbursements presently
discourage specialists from seeing people who get insurance from that program.
Still, the unknowns of leaving deficit reduction to the super committee loom larger. If Congress meets the deadline for
approving the super committee’s recommendations, reductions could start taking effect a year earlier than automatic cuts, on Jan. 1, 2012.
"For businesses that prefer to plan ahead," Politico’s Jennifer Haberkorn
noted last week, "the trigger could seem more stable and predictable."
And timing isn’t the only issue. According to Chris Jennings, president of Jennings Policy Strategies and longtime
advisor to Democrats, both advocates and industry insiders are realizing that "any likely deal emerging from the super committee would include
policies that are significantly bigger in size and scope than the fall-back sequester…they get that if this political environment produces
anything, it would almost inevitably be new and large Medicaid cuts and a package of Medicare savings that would dwarf the 2 percent cap on
Medicare spending, which the sequester limits to approximately $130 to $140 billion in savings."
Not that the automatic cuts are ideal in anybody’s estimation. A frequent complaint about the Affordable Care Act was
that it didn’t reduce health care spending quickly enough. As
Tevi Troy, a senior fellow at the Hudson Institute and former Bush Administration official,
notes, "the lack of severity may also coincide with a lack of significant impact on the budgetary side."
Even for progressives, the best possible outcome might be for Congress to head off the automatic cuts by enacting
significant, but more carefully designed, Medicare reductions as part of a balanced deficit reduction plan that mixed spending cuts with new
Obama and his allies tried for such a deal a few weeks ago. They didn’t get one, primarily because Republicans refused to
consider it. Unless that political reality changes, progressives may find that a set of automatic Medicare cuts are the lesser of evils, both
as politics and as policy.
information is reprinted from
kaiserhealthnews.org with permission from the Henry J.
Kaiser Family Foundation. You can view the entire Kaiser
Daily Health Policy Report, search the archives and sign up
for email delivery. © Henry J. Kaiser Family Foundation. All
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