KFF offers facts about Medicare spending

As the new Administration and Congress consider changes to federal health care programs, including Medicare, a Kaiser Family Foundation (KFF) issue brief offers spending facts about the program, which currently accounts for roughly $1 of every $7 in federal spending. The brief indicated that repealing the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) would increase spending and worsen the program’s long-term financial outlook, but noted that Medicare faces challenges apart from ACA repeal, including higher health costs and an aging population.

Although the program faces financial challenges, KFF noted that Medicare “isn’t going broke.” The Hospital Insurance Trust Fund, which pays for Part A benefits, primarily through payroll taxes, is expected to pay for full insurance benefits until 2028, at which point it will be able to pay for 87 percent of hospital benefits. Part B physician services and Part D drug benefits, however, are paid for through a combination of general revenues and beneficiary premiums and are set only a year in advance. As a result, they are not subject to a funding shortfall, but higher projected spending would increase the amount of general revenue funding and beneficiary premiums required to cover costs. Spending on Part benefits is expected to rise faster than spending on benefits paid for under Parts A and B, with per-capita spending expected to rise 5.8 percent for Part D between 2015 and 2025, compared to 3.2 percent for Part A and 4.6 percent for Part B.

The aging U.S. population is resulting in higher Medicare spending. For example, the number of people over age 65 is expected to double from 2010 to 2050 from 40 million to 84 million, while the number of people over 80—who account for a disproportionate share of Medicare spending—is expected to nearly triple, from 11 million to 31 million. Medicare spending accounted for 15 percent of the federal budget in 2016, and is expected to increase to 18 percent of the federal budget, accounting for $1 in every $6 spent, by 2027. Average annual growth in spending is expected to increase more quickly between 2015 and 2025—at a rate of 7.1 percent—than it did immediately after the ACA was enacted between 2010 and 2015, when it increased at a rate of only 4.4 percent.

ACA provisions reducing payments to providers and Medicare Advantage (Part C) plans reduced overall spending growth from 9 percent between 2000 and 2010 to 4.4 percent between 2010 and 2015. KFF cited a Congressional Budget Office (CBO) report and stated that ACA repeal would add $802 billion to Medicare spending through 2025; KFF opined that repeal would lead to higher deductibles, premiums, and cost sharing for beneficiaries and would hasten the insolvency of the Hospital Insurance Trust Fund (see Repealing the Affordable Care Act—an unaffordable idea?, Health Law Daily, June 24, 2015). With the ACA in place, KFF reports that net Medicare spending is projected to grow from 3.2 percent of the gross domestic product (GDP) in 2016 to 5.7 percent of the GDP in 2046; prior to the ACA, net Medicare spending was projected to account for 8.5 percent of the GDP in 2046.

Contributor’s Corner: Even the Cat Has Lost Health Insurance!

Continuing Concerns for Both 2- and 4- Legged Creatures

Ok. Now that I have your attention, STOP LAUGHING! It’s not funny–but, true. Poor Milo is now uninsured. Several months ago, we received a notice that the health insurance pet policy that had been in effect for years was looking for a new underwriter, and the affordable policy would terminate on 10/31/16. Finally, a new policy was made available, at rates, which you guessed it, would be considerably higher with larger deductibles and less coverage. Not surprising, but true. The message: two- and four-legged creatures beware.

The decision to let that policy lapse wasn’t easily made; but economically, it didn’t make sense to purchase a policy that had a very low cost/benefit payoff. Of course, Milo wasn’t faced with paying a penalty on his taxes (LOL; we can’t even claim him as a dependent) for remaining uninsured, as you or I might possibly be subjected to, if we made the same decision. It was much more like passing on dental insurance. Unless you have it as a fringe benefit, the narrow networks, and limited benefit schedules makes the value proposition easy enough to pass on. In effect, being self-insured, while not desirable, is a viable option. However, for medical insurance, it’s a very different story.

Elections matter, and with some form of “repeal and/or replace” looming in the next Congress, millions of individuals will likely find themselves in Milo’s situation, except with more uncertainty and risks, as availability, benefits and costs are unpredictable at this point in time. For those that think it’s going to be as simple as ABC! Think again. The new Congress and Administration are soon going to realize that the denouement (I liked that word in high school when learning how the plot unraveled in a novel) will be complex and fraught with obstacles.

O, what tangled web we weave when first we practice to deceive![1]

Right now, there is much speculation about the outcomes, and it is far too soon to really know. Call me skeptical, but after the pundits and polls missed the outcome of the election, I’m not too sure that conventional wisdom still applies. For all we know, Obamacare may become Trumpcare. After all, we learned that packaging and showmanship works. It reminds me of local government after an election, all of the town signage is changed so that the same park or arena now has the new town leader’s name emblazoned on the sign, lest we forget it’s still the same park. Nothing has really changed, just the name. The decision-makers should remember: Will the “quality go in before the name goes on?”[2]

Perhaps that’s wishful thinking, but just imagine like the game, “Cat’s Cradle,” when you try to take the string off your partner’s hand for the fourth or fifth time by correctly and deftly interlocking your fingers about the string to transfer it from your partner’s hand to yours while making sure the integrity of the cradle is preserved. From “cradle to grave,” there is plenty to be concerned about.

For the Young at Heart

The “invincibles” may find themselves unburdened by the penalties that may be lifted for not having health insurance. But the gamble still exists: what will you do if accident or illness befalls you in spite of your youth? Will insurance companies be able to make policies available at competitive or affordable prices without the youthful demographic helping to even out the risk pool? For those without company provided healthcare, will the likely elimination or reduction of government subsidies force newly insured individuals to abandon their insurance after finally obtaining it. Maybe there’s hope, based on some reporting, for those 26 and younger still being carried on their parent’s policy

For Those in the Middle

But wait a minute-what if the parent had an exchange policy with a 26 or under child on the policy, and now the exchange is defunct, or healthcare.gov no longer is supported, the entire family will be in need of insurance. The same will be true if exclusions or high risk premium pools are established for those with pre-existing conditions. And if lifetime benefit limits are reintroduced, given what we know today about the wonderful (but expensive) life-saving treatments and medications, it will give new meaning to the “sticker shock” millions will face as “open enrollment” periods will become a serious exercise to be called: “In search of….”

Crossing State Lines and Population Health

We generally associate the “state lines” argument with the anticipated competitive structure of premiums if insurance companies can sell their policies without geographic restrictions. It may also call into question in which state you live, and if there was adoption of the Medicaid expansion allowing many millions of individuals, previously above qualifying income levels, becoming eligible, and whether that too will change.

With all the emphasis on population health and treating patient outcomes, does the nation run the risk of losing ground it has just started to gain? I’ve never been a fan of the term “accountable care organizations.” When seeing the blue H, or MD after the name, there is the presumed quality and accountability associated with it. If what we now have today is better than what we had before, then the new Congress and the Administration will need to be “accountable” for whatever evolves as a result of its actions and/or inactions.

Don’t Mess with My Medicare

For those of us above a certain age, Medicare (whether “Regular” or “Advantage”) comes with a special “seal of approval” and certain safeguards. There may not be an appetite to change Medicare for those already on it, but it may not be necessarily true that it will be preserved “as we know it” for those approaching age 65 over a 5-10 year horizon. In today’s political landscape, it’s not clear that the “graying advocacy” of seniors will be strong enough to maintain this safeguard for all.

Metamorphosis

I wonder how many of us hope that when we wake-up we find this was all a dream.

One day, Gregor Samsa, a travelling salesman, wakes up to find himself transformed into a giant insect. Confused, he looks around his room which appeared normal. He decides to fall asleep again and forget what happened in the hope that everything will revert back to normal. He tries to roll over his right but discovers that he cannot due his new body he is stuck on his hard, convex back.[3]

Unfortunately, we are in a new reality. And it’s too early to forecast what will happen next. Change for the better will be good, and the current system can be improved. Change for “change’s” sake won’t do much except waste a lot of time and money, and cause needless anxiety. Milo’s just hoping that there’s water and food daily, and that his litter box is changed regularly, and that his visits to the vet are uneventful. For everybody else, pay your monthly premium, stay healthy and stay tuned.

Allan P. DeKaye, MBA, FHFMA, is President and CEO, DEKAYE Consulting, Inc., a revenue cycle healthcare firm. He is also a member of the Health Law Editorial Advisory Board for Wolters Kluwer Legal & Regulatory U.S. Mr. DeKaye is author/editor of The Patient Accounts Management Handbook. He is working on a second book, My Medical Bills Are Killing Me © What Americans Need to Know About Health Insurance.

[1] “Marmion,” by Walter Scott, 1808.

[2] Original slogan of Zenith Electronics

[3] Franz Kafka, Die Verwandlung (or The Transformation or Metamorphosis), 1915.

 

Copyright © 2016-2017 Allan P. DeKaye. All Rights Reserved. Reprinted with permission of the author.

Now that Medigap can’t cover drug costs, why exclude younger beneficiaries?

Although 31 states require Medigap insurers to provide at least one policy to Medicare beneficiaries under 65 with disabilities, only 2 percent of these beneficiaries have such a policy. The Kaiser Family Foundation (KFF) noted that insurers’ original concerns about paying high prescription drug costs for younger beneficiaries are now moot, and questioned the justification of excluding younger adults with beneficiaries from buying Medigap policies.

Medigap

Medigap serves as supplemental insurance to help Medicare beneficiaries cover out-of-pocket expenses, which can be significant due to how the program is structured. About 20 percent of the 57 million Medicare beneficiaries have such a policy. In 1990, the federal government required insurers to allow new senior beneficiaries to buy a Medigap policy. At that time, when many Medigap plans covered some drug costs, insurers did not want to cover the high drug spending of those under 65 with disabilities.

Although the vast majority of beneficiaries are seniors, about 9 million people under 65 with disabilities have Medicare. Usually, those under 65 must become eligible for disability benefits, and then wait for 24 months until Medicare coverage becomes active. The KFF noted that younger Medicare beneficiaries generally have poorer self-reported health status than seniors and are operating with lower incomes. They also report more difficulty in accessing the care they need, sometimes due to costs.

Drug coverage

 Although Medigap plans could originally cover drug costs, the government now prohibits drug coverage due to the Part D benefit. Although Medicare per capita spending on prescription drugs is much higher for younger beneficiaries than for seniors (about $3100 more in 2014), Medigap insurers no longer have to worry about this cost. Excluding Part D expenditures, average spending per capita for younger beneficiaries is about $400 more than for seniors.

Still No “Sunshine” – in the Name of Lighter Regulatory Burdens

Centers for Medicare and Medicaid Services (CMS) Administrator Don Berwick said on October 31 that the agency would delay further rules implementing a provision in the health reform law that requires drugmakers and device companies to report all payments and gifts to physicians.

The Physician Payment Sunshine Act was included in the health care reform law enacted last year (Patient Protection and Affordable Care Act, P.L. 111-148), as a way to reduce healthcare costs through greater transparency. PPACA requires pharmaceutical, medical device, biological, and medical supply manufacturers to track and report to the CMS all payments to doctors above $10. Non-compliance may result in fines of up to $10,000 for inadvertent non-compliance and up to $100,000 for knowing non-compliance. The first reports will be due March 31, 2013 for the calendar year 2012 reporting period which begins in three short months.

The effort is meant to “shine light” on the industry’s gifts to physicians, which critics maintain can improperly influence patient care and treatment decisions, as explained here.

CMS missed the statutory October 1 deadline for publishing the regulations that would clarify certain definitions and provide detailed instructions on how these reports are to be compiled and submitted, but not because the rules are controversial – which they are – but because the agency is trying to lighten the burden of red tape.

In an October 28, 2011 letter to Senators Herb Kohl (D-WI) and Charles Grassley (R-IO), Berwick cited a presidential order from last January that calls on federal agencies to minimize regulatory burdens. “I believe we can implement the statutory goals of (the Sunshine Act) while minimizing burden on the regulated parties. In that vein, CMS is carefully reviewing this statutory requirement and working hard to ensure we meet these goals.”

[Earlier this year, President Obama instructed federal healthcare agencies to streamline regulations that impede flexibility, unnecessarily burden resources, reduce efficiency, increase costs and decrease quality of care. In that vein, CMS recently released three new rules intended to remove or revise outdated, duplicative, overly burdensome and unnecessary regulations, thereby saving the healthcare system an expected $1.1 billion per year and more than $5 billion over five years. Whether the expected savings and efficiencies called for by the Obama administration will actually be achieved through these new rules remains to be seen.]

In his letter to Senators Kohl and Grassley on the Sunshine Act rules, Berwick gives no explanation for the delay and no indication of when CMS may actually issue the guidelines. The irony, of course, is that this is the same administration that wanted to enact the Sunshine provision in the first place.

On November 1, Senator Grassley responded in a statement, “The administrator’s response doesn’t tell us anything new. There’s no explanation for the delay and no indication of when to expect completion. It’s an inadequate response any way you look at it.”

The Pharmaceutical Research and Manufacturers of America (PhRMA) and other groups have advanced a proposal that the initial reporting period, scheduled to begin January 1, 2012, should be delayed for the same amount of time that the rule is; e.g., if the rule is 6 months late, the first reporting period would not be January 1- December 31, 2012 but July 1- December 31, 2012; they would leave in place the requirement that the first actual report from pharma and device companies to HHS would be due the 1st quarter of 2013, but would shorten the time period to be covered in that first report. CMS has not commented on the PhRMA request.

The PhRMA proposal sounds only fair. After all, the longer CMS waits to publish the rules, the more time companies will need to comply, i.e., “minimizing [the] burden.”