By Robby Stern
One of the most significant Medicare bills in decades just became law. Every Washington Representative voted in favor of H.R. 2, “The Medicare Access and CHIP Reauthorization Act of 2015” with the exception of Rep. Adam Smith who did not vote. Both of our U.S. Senators also voted for the bill and the President has signed it.
The Congressional Progressive Caucus voted for the bill. Families USA, The Center for American Progress, The Center for Budget & Policy Priorities, SEIU, American Nurses Association, and a whole raft of medical associations supported the legislation. I was told by my contact at the Center for Medicare Advocacy that AARP first opposed the legislation and in the end supported it. Meanwhile, the Tea Party organizations and the ultra-conservative magazine American Spectator hated the legislation for a variety of reasons I will not enumerate here.
Nancy Pelosi joined hands with Speaker Boehner talking about “bipartisan compromise”. Speaker Boehner spoke of H.R. 2 as one of the most significant “entitlement” reforms in decades. What was the compromise and what is it likely to mean in the long term?
When trying to understand what is going on with Medicare policy, I turn to the Center for Medicare Advocacy (CMA), the equivalent of Social Security Works (SSW) in terms of Medicare policy but not nearly as influential politically as SSW. While there are a number of nationally influential organizations that serve on the Board of Social Security Works, from what I can tell, the Board of CMA are individuals who support progressive Medicare policy but do not have nearly the political clout.
After researching this legislation for the last several weeks, I am fairly certain that it will have the long-term impact of continuing the process of undermining traditional Medicare, one of the best hopes for universal health care in our country. I believe some of its provisions will drive a larger proportion of future Medicare recipients into the privatized Medicare Advantage programs.
There were some significant sweeteners in the legislation. The driving force for H.R. 2 was the repeal of the flawed SGR formula for determining payments to physicians. Everyone agreed, including critics of H.R. 2, that the SGR formula was a bad method for determining provider reimbursements. The SGR formula was part of the Balanced Budget Act of 1997. It was a cap on aggregate spending on physician services which led to recurrent lastminute crises. H.R. 2 applies a new and controversial payment system known as “merit-based incentive payment system” (MIPS) which is, as yet, untested. It is based on the principle that levels of reimbursement should be based on quality of the care provided.
I am not ready to pass judgement on this effort to pay for quality. It might be a step forward and then again it might be an administrative nightmare providing lots of opportunities to game the system. I do know that the previous system of paying per procedure created incentives to order tests and procedures that were sometimes unnecessary. I am glad the SGR formula is no longer being used but worry about what they have decided to use to replace it.
The SGR fix is projected to cost $70 billion over 10 years and $35 billion of that will come from Medicare beneficiaries including changes that increase out-of-pocket costs by adding deductibles to Medigap plans purchased in the future, further means-testing premiums for higher-income beneficiaries, and overall increases to Part B premiums.
A big sweetener was that the legislation extends the Children’s Health Insurance Program for two years, which is obviously a good thing, although advocates hoped for a four-year rather than a two-year extension. It also extends funding for community clinics that was part of the Affordable Care Act for an additional two years.
There are two provisions of the legislation which most concern me because I believe they will create even more incentives for Medicare recipients to abandon traditional Medicare and enroll in Medicare Advantage plans, further privatizing the Medicare social insurance system.
Currently, Medigap Plans C and F cover the deductibles that are part of Medicare Part A and B. The Medigap provision in H.R. 2, which takes effect in 2020 for new Medicare enrollees, will eliminate the ability of Medigap plans C and F to cover Part A and Part B deductibles. You can be sure that Medicare Advantage Plans will utilize this provision to entice an even higher proportion of enrollees into private Medicare. It will weaken the traditional Medicare program and strengthen the private insurance market.
As a Medicare recipient, I am in the traditional Medicare program. I purchase a Medigap plan F policy and Medicare Part D prescription drug coverage. Beginning in 2020, the Medicare Advantage plans will be able to develop and promote no- or low-deductible products to new Medicare recipients and continue advertising one premium for all services including prescription drugs. With Medicare Advantage plans receiving higher reimbursement rates (which we heard nothing about in the discussion of H.R. 2) they will have a competitive advantage over traditional Medicare by offering simplicity and smaller or no deductibles.
Additionally, there is a further undermining of Medicare as a social insurance program. Seniors with incomes above $133, 501 or couples with incomes above $267,001 will pay higher premiums. I do not cry crocodile tears for these folks but that is not the point. Part of the principle of a social insurance program is that we all have the same skin in the game. This provision, which further stratifies what was already a stratified payment system, creates less support for the Medicare program across the board among our population. I predict that we will see a movement on the part of higher-income people to remove themselves from the Medicare system and allow themselves to purchase their health insurance separate from the rest of the population. Let’s be clear what that means. In general, this group is a healthier cohort, and if they successfully withdraw from the Medicare system, costs will be driven up. In addition, they will lose their incentive to defend Medicare.
We had genuinely good friends vote for H.R. 2. It is puzzling to me why we heard so little criticism. I hope I am wrong and H.R. 2 improves Medicare, but I have my serious doubts.