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Obama Administration Plans to Cut Medicare Advantage Reimbursements

The Obama administration is planning new cuts to Medicare, a federal regulatory filing reveals, cuts that could mean higher premiums or seniors losing their coverage altogether.

  • In a Feb. 15 regulatory filing, the Centers for Medicare and Medicaid Services (CMS) announced the surprised rate cuts of 2.3 percent – meaning it would pay health care providers 2.3 percent less for providing services to patients.
  • The Obama administration already plans to cut the Medicare Advantage program by $200 billion as part of Obamacare. However, the proposed reductions it announced in February are new, and will cut the program in addition to the planned $200 billion in Obamacare cuts, most of which are delayed in 2014.
  • The new cuts are also scheduled to go into effect in 2014, but as a function of the normal rate-setting process for that year, not a political effort to delay financial pain for seniors past an important election, as apparently was the case with the original Medicare cuts that Obama signed.
  • If the Obama administration continues with its proposed new Medicare cuts, some or all of the 14 million seniors who get health care through the MA program could be negatively affected, that is, paying higher premiums or possibly losing coverage.
  • One health insurance provider told its shareholders that the proposed rate cuts could mean the end of Medicare Advantage all together.

The new cuts come in the form of a planned reduction in the reimbursement rates the government pays to insurance companies that operate Medicare Advantage plans, which are services administered by private for-profit or non-profit providers that offer additional services than can be found in traditional Medicare.

CMS said it was cutting payments because it foresaw the overall costs of the Medicare Advantage program shrinking by 3.2 percent, despite the fact that health care costs – the driver of all federal health care program costs – are only rising.

Medicare Advantage is like traditional Medicare except that its plans are administered by insurance companies, who are paid a per-enrollee reimbursement fee by the government. If insurance companies can provide care to seniors at less than what the government pays them for it, they make a profit.

Medicare Advantage provides coverage for approximately 28 percent of all Medicare beneficiaries, offering them higher-quality services and additional benefits, such as vision and dental care, than the traditional government program at slightly higher cost.

In its regulatory announcement, the CMS said it was assuming that reimbursement payments in traditional, government-run Medicare will be cut, and cited that as justification for cutting Medicare Advantage.

However, while those cuts to traditional Medicare have been set into law for more than a decade, Congress has never allowed them to happen, instituting what is known as the Doc Fix every year, to keep reimbursement payments the same.

Senator Marco Rubio (R-Fla.) wrote to the CMS urging them to consider political reality and reverse their planned Medicare Advantage cuts.

“This assumption is highly problematic because – even though it almost certainly will turn out to be wrong – it translates into lower funding to support the health benefits of the 14 million Medicare beneficiaries who are currently enrolled in MA [Medicare Advantage] plans,” Rubio wrote on March 8.

This is because the proposed cut could make the program unprofitable for insurers, who would be forced to either stop offering MA plans or pass the increased costs on to seniors in the form of higher premiums.

“There are going to be some markets that at these rates, if they go the way they’re going, it’s going to be very hard for Medicare Advantage to survive,” Universal American Corp CEO Richard Barasch said in a February 19 conference call with shareholders, the industry publication Health Plan Week reported.

“I think it’s going to be sort of a market-by-market, company-by-company exercise,” Barasch said.

*Modified from a article


Medicare Advantage enrollees could take hit in 2014

The new proposed payment cuts are in addition to the Medicare Advantage cuts and the new health insurance tax included in PPACA.

  • AHIP says that only 4 percent of PPACA’s $200 billion in Medicare Advantage cuts have gone into effect thus far, and the Congressional Budget Office (CBO) projects that, when fully phased in, these cuts alone will result in three million fewer people enrolled in the program. 
  • PPACA’s new health insurance tax starts in 2014; Oliver Wyman had previously estimated that this tax alone will result in seniors facing $220 in higher out-of-pocket costs, reduced benefits next year and $3,500 in additional costs over the next 10 years.

The cuts were proposed last week by Centers for Medicare & Medicaid Services (CMS) to take effect next year. The analysis is by actuaries at Oliver Wyman, prepared for AHIP.

According to the Oliver Wyman report, “Virtually all of the 14.1 million Medicare beneficiaries are likely to be affected by these changes, either through increased premiums, reduced benefits, or plan exits from local markets.”

The potential 2.3 percent reduction in Medicare Advantage payments proposed by an arm of the Department of Health and Human Services (HHS) combined with PPACA’s payment cuts will result in benefit reductions and premium increases of an average $50 to $90 per month for a typical Medicare Advantage beneficiary next year, warned America’s Health Insurance Plans (AHIP).

The cuts would affect 14 million seniors, or roughly 28 percent of all Medicare beneficiaries, the lobbyist group says.

The new analysis prepared for AHIP states that the combined effect of the changes included in PPACA and the new payment cuts will result in an estimated 6.9 percent to 7.8 percent cut to Medicare Advantage plans in 2014, causing the net out of pocket for seniors and those with disabilities to rise, according to AHIP.

The cumulative impact of these changes will reduce Medicare Advantage payments next year by more than eight percent, or approximately $11 billion.  These cuts will result in seniors facing higher out-of-pocket costs, reduced benefits, and fewer health care choices, AHIP stated.

“President Obama is sticking it to seniors yet again by cutting Medicare Advantage funding,” according to Dan Weber, president of the Association of Mature American Citizens (AMAC).

It was announced last week that the CMS will publish new rules for Medicare Advantage programs on April 1. Subsidies will be slashed and access will be severely restricted, according to insurance industry analysts, AMAC stated in a press release Friday.

Medicare Advantage is the part of Medicare through which private health plans provide comprehensive medical coverage to seniors and other Medicare beneficiaries.

Health insurance stocks reacted to the news negatively, according to a report by the Associated Press. The costs per person for Medicare Advantage plans are a bigger drop than many analysts who cover the industry anticipated, the AP report stated.

Conservative bloggers and the health insurance industry are not happy, arguing the payment cuts are funding entitlement programs and leaving seniors happy with their plans strapped.

AHIP contrasted the cuts against the projections for medical cost increases of 3 percent.

“This is the lowest growth rate in the history of the Medicare Advantage program, and it is far below the 2.8 percent increase in payment rates for 2013,” AHIP stated.

“The proposed changes to Medicare Advantage payments are a crushing blow to the millions of seniors and people with disabilities who count on this critically important part of Medicare,” said Karen Ignagni, AHIP president and CEO.

However, CMS is expecting per-capita plan medical costs to fall 3.2 percent, CMS officials said in a 199-page description of the 2014 Medicare plan bidding methods.

Oliver Wyman also projects that individuals with lower incomes and those more likely to need medical services will be particularly adversely impacted by these cuts.

The new report follows a previous analysis by AHIP which found that low-income and minority Medicare beneficiaries continue to rely on the high-quality health care coverage provided by Medicare Advantage plans.

CMS stated recently that since the Affordable Care Act was passed in 2010, Medicare Advantage premiums have fallen by 10 percent and enrollment is expected to increase by an estimated 28 percent through this year. In addition, costs of the defined standard Part D plan will be lower in 2014 than they are in 2013.

“The Affordable Care Act helps us strengthen Medicare Advantage and Part D,” said Jonathan Blum, CMS acting principal deputy administrator and director of the CMS’ Center for Medicare in a statement last week. “We are working to ensure that people with Medicare have affordable access to health and drug plans, while making certain that plans are providing value to Medicare and taxpayers.”

*Modified from a article


Obamacare’s Pressure Points There are at least nine stumbling points in its implementation.

President Obama’s reelection, along with the Supreme Court’s ruling last June on his signature health-care reform, may seem to have guaranteed that the Affordable Care Act (ACA) will remain the law of the land. But that could turn out to be the easy part of Obamacare. Implementing the ACA’s main provisions by January 1, 2014 — the date on which the law is to take full effect — presents a more grueling and protracted set of tests.

The next round of health-care-policy battles will play out not just before Congress but also in state capitals and health-care markets across the country. You could think of these fights as being like a martial-arts battle, in which various “pressure points” are attacked to produce significant pain, serious injury, or even temporary immobilization, not to mention an aversion to future fighting. Let’s take a closer look at the more painful pressure points in the ACA.

1) Health exchanges.

Nearly two-thirds of states still are not fully on board with running their own exchanges to offer the federally subsidized coverage dictated by the ACA. As many as 23 states would rather leave the daunting implementation process entirely in the hands of federal officials. Another ten may enlist as junior apprentices in largely federal-run “partnership” exchanges. But the White House desperately needs state governments to provide infrastructure and local-market experience as well as to take more of the political blame for the implementation fiascos ahead. Many states complain that the rules for exchanges are unclear, costly to administer, coercive, or all of the above. The federal government is supposed to set up exchanges in states that fail to do so, but, later next month, a federal district court in Oklahoma will begin to rule on arguments that directly challenge the authority of the federal government to distribute tax credits in federally run exchanges, which does not appear to be provided for in the text of the ACA.

2) Medicaid expansion.

By one count earlier this month in The New England Journal of Medicine, 17 states have not yet agreed to expand their Medicaid coverage up to the ACA-designated 138 percent of the federal poverty level, A somewhat smaller number of states are officially opposed to the Medicaid expansion, and well under half of all states support it. The Supreme Court ruled that the Medicaid expansion must be optional, not a mandate enforced with penalties to states’ existing Medicaid programs. Many governors and state legislators doubt that the law’s initially generous federal funding will be sustainable within a largely unreformed, but expanded, entitlement program that already is straining their budgets. Existing Medicaid programs already fail to attract enough physicians because of their below-cost reimbursement policies.

3) Individual-mandate enforcement.

The mandate that, beginning next year, requires almost everyone to purchase coverage meeting federal standards remains highly unpopular. Moreover, the tax penalties to enforce it are quite small compared with the premium costs of the required coverage. Many young and healthy individuals will therefore have a strong incentive to remain uninsured. Various exemptions (including those for the relative “unaffordability” of the premiums relative to one’s household income) will limit further the possibility of requiring coverage.

4) “Minimum” health-benefits coverage.

The ACA’s bureaucratic file drawers are full of “essential” benefits and services that all health plans must offer, with four tiers of actuarial value (the share of covered benefits actually paid by an insurance plan).Then add income-based subsidies — to reduce premium costs as well as to lower other cost-sharing expenses. But don’t forget medical-loss ratio floors that limit the value of administrative services that insurers can provide, as well as their return on capital. The ACA also imposes adjusted community rating (effectively forcing lower-risk customers to pay more, so that higher-risk expensive ones can pay less); and guaranteed-issue requirements (allowing customers with costly preexisting conditions to insist on private insurance coverage whenever they want it). All of these ACA requirements affecting most forms of fully insured coverage (technically speaking, neither self-insured nor “grandfathered”) mean that those premiums will spike higher (particularly for healthier young adults in the individual market) and could outrun the budgetary limits of taxpayer subsidies.

5) Who picks up the check?

Realistically assessing the fiscal effects of Obamacare doesn’t show only that we’re running out of room on Uncle Sam’s credit card. In addition, higher health-benefits costs will continue to suppress private-sector wage and job growth as well as prevent public investment in other priorities. Average workers and patients will ultimately bear the cost of the ACA’s new taxes, even though they are nominally aimed at health-care providers and higher-income individuals.

6) Health-care-provider capacity.

The ACA will be much better at stimulating demand for health-care services than increasing their supply. A Congressional Research Service report last month noted current shortages of physicians and cautioned that the ACA may compound the problem by increasing the demand for health-care services. There are a handful of incentives in the law to increase the supply of health-care providers, but they are short-term, discretionary, and yet to be implemented. The ACA’s reimbursement and regulatory disincentives to enter or remain in medical practice, on the other hand, will be permanent.

7) “Pilot” error.

A host of projects under the ACA that are meant to demonstrate innovations in health-care delivery systems have yet to get off the ground or show consistently positive (let alone reproducible) results. Some of these pilot programs look like health-policy kamikaze missions. The more-likely method of restraining health-care spending will be the old stand-by of formulaic, across-the-board reimbursement cuts for doctors, hospitals, and makers of medical products.

8) Transparency without real prices.

Two sets of the ACA’s stated policy objectives appear to be at war with each other. The bill’s jargon of bundled payments, population-based capitation, complex cross-subsidies, risk adjustments, and pay-for-compliance incentives indicate that bureaucrats are really in charge. Such “trust us, we know what’s good for you” approaches threaten to undermine other gestures in the law to make health-care information more transparent, consumers cost-conscious, and providers accountable to patients rather than public payers.

9) Standardization vs. customization.

The ACA embodies the progressive preference for rule by (politically favored) experts. , It treats health care as a manufacturing process with uniform standards based on “best evidence” and top-down quality assurance. Monopsony purchasing and economies of scale reign supreme. Different patients are to be treated as identical cogs on an assembly line. This type of politically driven health care is inherently centralizing and static. Competitive markets, on the other hand, are open to dynamic, bottom-up innovation, product differentiation, and improvements in customer service.

These pressure points, all serious vulnerabilities, suggest that the ACA’s implementation process will be politically precarious and economically painful. However, it will also present new opportunities to retrace our steps and consider a different path.

*Modified from a National Review Online article.


Medicare Coverage: Separating Fact from Fiction

Medicare is one of the most popular federal programs in the country and its future is playing a starring role on the campaign trail.

More than 1.5 million baby boomers become part of Medicare a year to help cover the rising costs of health care, but the fate of the program is uncertain as the budget deficit continues to widen and partisan fighting continues in Washington. In fact, a recent survey published by eHealthInsurance revealed that 90% of baby boomers say the election makes them feel less secure about the future of Medicare.

Ross Blair, CEO of PlanPrescriber a part of, discussed the reality of the fate of this program, what boomers need to know about Medicare benefits and changes. Here’s what he had to say:

  • Boomer: Does Medicare work like regular health insurance?

Blair: No. Medicare is different from major medical health insurance in a couple of ways. It includes four different parts:

Parts A and B are often referred to as “Original Medicare.” Part A covers hospital-related care and Part B covers your medical/outpatient care. Depending on your current coverage, Original Medicare may have more gaps than standard health insurance plans. For example, prescription drugs are not covered under Original Medicare, and Parts A and B can have significant out-of-pocket costs, including deductibles and coinsurance for most Part B services. Also, Original Medicare does not have a hard cap on annual out-of-pocket costs.

Part C (Medicare Advantage) is private insurance that people can elect to buy, which replaces Parts A, B and D. Most Medicare Advantage plans include the Medicare Part D prescription drug benefit and will limit a person’s out-of-pocket costs (excluding premiums and drug costs) at $6,700 or less. Additional benefits: Some plans include additional benefits like dental and vision coverage.•

Part D (prescription drug coverage) is provided by the government, but it must be purchased from private insurance companies. There are three things to remember about Medicare Part D

You can get it two ways: You can have it packaged into a Medicare Advantage plan or you can buy a “stand-alone” prescription drug plan from a private insurance company.

It does not work like traditional insurance: The Part D benefit, unlike private insurance, has a coverage gap and a catastrophic limit.
Not all drugs are covered: Plans must cover a minimum of two drugs for each Medicare- approved treatment. Some plans cover more, some only cover the minimum. The prices plans charge for covered drugs changes as well.

  • Boomer: Is Medicare free?

Blair: No. The various Medicare Parts have different costs. Part A is free for people who paid payroll taxes for at least 10 years or have filed jointly with a spouse who paid payroll taxes for at least 10 years. Otherwise, the beneficiary pays a monthly premium of up to $451 based on the payroll taxes paid.

In 2012, the base premium for Part B is $99.90 per month for most Medicare beneficiaries. In some cases, the monthly premium may be higher.

In 2013, the average price of a Part C plan will be $60.09, on top of the standard Part B premium. About 32% of all Medicare Advantage plans are available with a $0 premium, which means the beneficiary gets Medicare Advantage for the same price they pay for Part B.

Next year boomers can expect the average price for a Part D plan to be $30.

  • Boomer: Can one enroll in Medicare any time after 65 without getting penalized?

Blair: No. Most people have seven months. You can enroll in the three months before your 65th birthday, the month of your 65th birthday and the three months after. If you miss the deadline you can be charged a late enrollment penalty.

Right now we’re in Medicare’s open enrollment period which runs from Oct. 15th to Dec. 7, and now is the time when an enrollee can review and, if necessary, change their coverage. When we researched prescription drug coverage benefits last year, we found that only 5% of Medicare beneficiaries were in the prescription drug plan with the lowest total out-of-pocket costs. When people reviewed their coverage during last year’s open enrollment season they on average more than $600 a year.

  • Boomer: Does Medicare cover everything?

Blair: No. Original Medicare does not cover prescription drugs–you have to buy a subsidized private plan (Part C or D) for that coverage. Also, original Medicare does not limit or cap your out-of-pocket cost.

However, all Medicare Advantage plans cap your out-of-pocket expenses as do most Medicare Supplement plans. Original Medicare may pay for certain vision and dental services in an emergency, but routine care and check-ups are not covered. Historically, Medicare Supplement plans haven’t offered this coverage either, but a few supplement plans in select states have begun to include benefits like dental insurance.

Many Medicare Advantage plans include coverage for dental and vision care, but not all of them. If these benefits are important to you, make sure your Medicare Advantage plan provides the coverage. And, if the plan does not, research “stand-alone” dental and vision insurance plans on the individual insurance market.

  • Boomer: Do you believe baby boomers understand what the affordable care act is to them?

Blair: Health insurance and Medicare can be confusing and if you throw in the changes that come along with the health reform–it can make anyone’s head spin. We spend a lot of time talking to baby boomers, including those who run businesses and it is clear many people have questions about the changes that have been implemented, as well as those that are coming down the pike.

In a recent survey we conducted, only 10% of baby boomers said they were “very familiar” with the Affordable Care Act (health care reform). When we delved deeper, research showed that there were a lot of misconceptions about Medicare, what it covers and how it works. The same holds true for small business owners. According to our research, less than one-third understand how the taxes and mandates to buy health insurance work for small employers with 50 employees or less. Nearly 80% sof small employers did not know how a health insurance exchange is supposed to work, or what it can do for them. As you can see, baby boomers are unclear about how their benefits are affected now and in the future, by reform. However, we highly recommend that they take the time to research and read about the ACA’s impact on Medicare. They can start by visiting and

*Modified from a Fox Business News Article


Medi-Cal compensation inadequate, doctors say, as enrollment boom looms

When Dr. Jerold Kaplan made a home visit last year to a man with a foot wound, he billed Medi-Cal — the state’s health care program for the poor and disabled — what he thought was a modest $90.

His payment: $8.96. The Berkeley wound surgeon received a bit more for his home visit to a quadriplegic last year: $13.44. Medi-Cal told him it cut both payments in half because of late paperwork. But even at the full rate, he would have received no more than $27 for a house call — barely enough to cover gas.

As California gears up for a major expansion of Medi-Cal under national health reform, such compensation is leading to a critical concern:

  • Will enough physicians be willing to see the influx of new patients?

Many doctors now refuse to accept Medi-Cal patients or sharply limit the number they see because of what they describe as extremely low reimbursement rates. As a result, patients report difficulty getting timely care, a problem the expansion could worsen.

“Medi-Cal has gotten so ridiculous in its reimbursement there are a lot of doctors that aren’t interested in working for it,” Kaplan said. Now covering 7.7 million Californians, Medi-Cal is the state’s version of the federal Medicaid program.

It is expected to grow by 900,000 children with the state’s recent elimination of the Healthy Families program, which provided low-cost insurance for children and teens. The state will enroll an additional 1.5 million or more adults when national health reforms take effect in 2014. All told, Medi-Cal could balloon by 30 percent, financed largely by an additional $9 billion a year in federal money beginning in 2014.

Many consumer advocates strongly support the expansion and argue that it will greatly benefit the state by giving preventive care to those who are uninsured, helping them avoid more serious — and more costly — illnesses. “It’s going to be a huge boon to not just the newly covered Californians, but to our health care system as a whole,” said Anthony Wright, executive director of Health Access California. But Wright agreed work needs to be done to make sure the program is ready.

  • California has one of the lowest Medicaid reimbursement rates in the nation, ranking 47th of 50 states. And it could drop further.

In a budget move, state lawmakers last year approved a 10 percent pay cut for Medi-Cal providers. But the cut is on hold pending a ruling on a lawsuit doctors filed.

  • While patients generally laud the program, 23 percent of adults report difficulty in finding a primary care doctor who will accept Medi-Cal, and 34 percent have had trouble finding a specialist, according to a 2011 survey by the California HealthCare Foundation.”If they can get established with a physician at all, they have to wait much longer for an appointment and as a result, they are going to the emergency room for routine care and that clogs up the ER,” said Dr. William Lewis, a Los Gatos ear, nose and throat doctor and past president of the Santa Clara County Medical Association.

“That is clearly going to get worse if you’re adding people without adding doctors.”

Medi-Cal pays Lewis $15 to $20 for an office visit, compared with the $50 he gets from Medicare and $60 to $70 from a private insurer.

The Medi-Cal rates are so low, Lewis said, he doesn’t bother billing for it because it’s not worth the hassle. He just eats the cost. Lewis typically declines to see new Medi-Cal patients unless it is a follow-up visit with someone he treated in a hospital emergency room. “You cannot run a practice seeing Medi-Cal patients,” he said. “You can’t pay your employees and pay for your overhead and keep your doors open.”

Statistics on the number of physicians who accept Medi-Cal are hard to come by. The state has nearly 80,000 doctors enrolled as Medi-Cal providers, a number that has held fairly steady over the past five years, said Norman Williams, spokesman for the state Department of Health Care Services.

But critics counter that many of those physicians see only a patient or two, or have closed their practice to new Medi-Cal patients. Under the national health reform law, Medi-Cal payments for primary care doctors will rise to Medicare levels in 2013 and 2014, Williams noted. That will mean a significant pay boost in California and should help ensure there will be enough doctors to see patients, he said.

But the boost will not apply to specialists, and many primary care doctors may be reluctant to accept new patients fearing the rates will drop back in 2015, said Dr. Ted Mazer, an officer with the California Medical Association and a San Diego-based ear, nose and throat surgeon.

The state will monitor Medi-Cal patients’ access to doctors, and if problems develop, “we’ll take immediate action,” Williams said. Some fear that the doctors, clinics and hospitals that see Medi-Cal patients now will be inundated once the expansion occurs.

When San Mateo mom Macrina Mota’s daughter injured her foot playing soccer last year, the two spent 13 hours in an emergency room to treat a sprained foot. “They’re just overbooked; they’re overloaded,” Mota said.

Other Medi-Cal recipients encounter different barriers. New mother De Jornae Thomas, of Oakland, said having Medi-Cal has helped ensure that her 2-month-old son, Josiah, has the medical attention he needs. But because Medi-Cal requires her to pay a cost-sharing fee, she avoids checkups for herself. “I haven’t been to the doctor in awhile for myself, outside of my pregnancy,” she said.

East Oakland pediatrician Brian Blaisch is on the front lines of the debate, with nearly 90 percent of his 1,500 patients on Medi-Cal. Despite his commitment to such families, Blaisch now only occasionally accepts new Medi-Cal patients and moonlights at two hospitals to make ends meet, which makes for 60-hour workweeks. He said he has maxed out loans on his home to keep his practice afloat.

Still, Blaisch strongly supports the Medi-Cal expansion but said the state may need to expand community clinics and offer financial incentives to encourage more doctors to see Medi-Cal patients. “For me, it’s just a mission,” he said. “This is what I grew up thinking I was going to do.”

*Modified from a article


ObamaCare Will Reignite Health Inflation

Investors Business Daily Editorial


Health Reform: The New York Times just discovered that the nation’s health care system was on the mend before ObamaCare took effect. Too bad it didn’t tell its readers how Obama’s “reforms” will destroy this progress.

The Sunday Times article — “In Hopeful Sign, Health Spending Is Flattening Out” — didn’t break any new ground. The numbers the reporter used have been around since January. But it was a tacit admission by the paper that the health care system was not in a state of crisis before ObamaCare.

Quite the opposite, in fact. As the story notes, annual increases in health spending had been trending downward for years, to the point where they climbed less than 4% in 2009 and 2010.

This isn’t the only good news. The Times story doesn’t mention it, but premium increases had also been moderating over the past several years. While some of the slowdown was due to the recession, the Times notes that it “was sharper than health economists expected,” and quotes a former Obama health adviser as saying that “I think there’s much more going on.”

So what is that “much more”? To its credit, the Times also makes clear that the slowdown was due in large part to the recent trend in the private sector toward more high-deductible insurance plans. By 2011, the share of workers enrolled in high-deductible plans had risen to 13% from just 3% five years earlier.

This is a reversal of the trend over the past several decades, which had seen out-of-pocket spending for health care steadily decrease, as government programs and generous health benefits increasingly shielded consumers from the direct cost of care. While almost half of health spending was paid out-of-pocket in 1960, the figure had dropped to just 11% by 2010.

Not surprisingly, as consumers paid less and less out of pocket, demand for health care became virtually unlimited, pushing up spending and inflation. But it wasn’t until recently that businesses — after trying everything else — started bringing consumers back into the cost picture with “consumer directed” health plans.

These higher-deductible plans cut health spending, as consumers suddenly realized that health care costs money. A 2011 Rand Corp. study found health spending for families with a deductible of $500 per person or more dropped an average 14%

But the real story here isn’t these recent gains in getting health spending under control. It’s how ObamaCare will poison the patient just as it was starting to recover.

ObamaCare’s coverage mandates, its limits on co-pays and deductibles, its attack on Medical Savings Account plans, its vast expansion of Medicaid and its massive subsidies all will shield consumers from even more of the direct cost of care.

Medicare’s chief actuary, Richard Foster, told Congress in March that “out-of-pocket spending would be reduced significantly” by ObamaCare — and by that he meant $237 billion in a decade.

And, not surprisingly, that is going to drive up health spending. Foster predicts, in fact, that after staying relatively low for years, national health spending will shoot up by more than 8% in 2014, when ObamaCare fully takes effect. Over the next decade, he said, ObamaCare will add more than $300 billion to the U.S. health tab.

Anyone who thinks ObamaCare will fix the nation’s health system has it backwards. The system was getting healthier before ObamaCare, and will continue to improve only if that misbegotten law is repealed.



Medicare’s Dirty Little Secret It’s already insolvent.

It’s something everyone knows, but no one wants to talk about: Medicare’s cash position makes Enron’s business model look downright reputable.

Medicare is bleeding cash — a fact disguised by creative accounting. According to Monday’s release of the 2012 Trustees Report, in 2011 Medicare took in $260.8 billion in payroll taxes and beneficiary premiums, but spent $549.1 billion in medical services. That means last year Medicare ran a $288.3 billion cash shortfall.

And 2011 wasn’t the exception; it was the norm. Since President Lyndon Baines Johnson secured passage of Medicare legislation in 1965, the program has run cash deficits every year except 1966 and 1974.

Advocates of the status quo argue that Medicare receives “general revenue transfers,” but that’s government-speak for raiding the Treasury to spend other tax revenues. It’s the dramatic use of general-revenue transfers that has hidden Medicare’s true insolvency from the public and masked Medicare’s contribution to the national debt.

The annual release of the Medicare Trustees report offers a fleeting moment for adult conversations among policymakers about the program’s long-term trajectory. We must take advantage of this year’s moment and come to a bipartisan understanding that the Medicare program needs structural reform and not just nibbling around the edges.

To illustrate why structural reform is needed, consider what it would have taken to have had a positive Medicare cash-flow balance in 2011:

For Medicare Part A (hospitals), the cash deficit was $61 billion. To balance this deficit, payroll taxes on employers and workers would have to have been increased by 31 percent.

For Medicare Part B (physicians), the cash shortfall was $168 billion. To balance this deficit, seniors’ physician premiums would need to increase by 392 percent, meaning the annual physician premium cost to seniors would have risen from $1,198 to $4,687 — an increase of $3,499.

For Medicare Part D (drugs), the cash shortfall was over $59 billion. To balance this deficit, seniors’ premiums for prescription drugs would need to increase by 871 percent, meaning the annual drug-premium cost to seniors would rise from $372 to $3,250 — an increase of $2,878.

It is plain that these sharp increases are not viable. Nonetheless, President Obama steadfastly defends Medicare’s existing financing structure. In his address to AP reporters last month, the president called alternative (and bipartisan) approaches such as premium support to be “thinly veiled social Darwinism.” Since only the fittest will survive the future collapse of Medicare, President Obama should think hard before making such accusations.

Since taking office, President Obama has overseen a Medicare cash-flow deficit of more than $869 billion. This includes $570.7 billion in red ink accumulated since the passage of the president’s signature health-care law, which siphoned off $732 billion in Medicare funding over the next ten years. By the end of 2012, the trustees project that the Obama administration will have overseen a $1.2 trillion Medicare cash shortfall.

Left unchanged, Medicare costs will continue to escalate, leading to annual shortfalls and a projected cash-flow deficit of over $450 billion in 2020. These shortfalls lie at the heart of past and future deficits. Between 2001 and 2010, cumulative Medicare cash-flow deficits totaled $1.5 trillion, or almost 28.5 percent of the total federal debt accumulated in the hands of the public during the past decade.

Going forward, the situation is even worse. By 2020, the cumulative cash-flow deficits of $6.3 trillion will constitute 41 percent of the nation’s total debt accumulation. Including interest costs, accumulated Medicare spending will be responsible for over 43 percent of public debt.

A sensible solution would be to offer Medicare beneficiaries the option of a defined-contribution program — as proposed by House Republicans and Mitt Romney. Seniors would be budgeted an annual contribution, which could be adjusted to reflect costs associated with their health status and financial wherewithal. For the federal budget, the result is a capped exposure to Medicare — one that would adjust to reflect the number of seniors and inflation.

That would be great news for the nation’s spending outlook. It would be even better news for the exploding debt and the threat it carries to the nation’s economic health. Most importantly, it would secure Medicare for future generations.

— Douglas Holtz-Eakin is the president of the American Action Forum and previously served as the director of the Congressional Budget Office. Jim Nussle is a former chairman of the House Budget Committee and previously served as the director of the Office of Management and Budget.


Obama’s $8.3 Billion Re-Election Slush Fund

Investor’s Business Daily Editorial

Medicare: Backers like to say the more people know about ObamaCare, the more they’ll like it. So why is the administration spending $8.3 billion to hide a key provision from millions of seniors until after the election?

That’s precisely what administration officials are doing right now as a way to mask the effect of ObamaCare’s deep cuts to the popular Medicare Advantage program.

Championed by Republicans in 1997, Medicare Advantage offers seniors an escape valve from the creaky, government-run Medicare insurance program.

The idea was that private insurance companies could better manage costs than the government’s own top-down insurance plan, and give enrollees more and better benefits while still saving taxpayers money.

Medicare Advantage has proved popular with seniors, 12 million of whom have enrolled. But the left loathes it, arguing that Medicare overpays insurance companies, thereby ripping off taxpayers to enrich this industry.

Obama himself long complained about Medicare Advantage while running for office and while pitching ObamaCare.

In his 2009 health care speech to Congress, he said Medicare Advantage offered “unwarranted subsidies” that “do everything to pad (insurance company) profits and nothing to improve your care.” And he repeatedly vowed to “eliminate” these subsidies.

ObamaCare delivered — targeting Medicare Advantage for $145 billion in spending cuts over the next 10 years, equal to almost 30% of ObamaCare’s planned Medicare cuts.

Whatever merits to the claim that Medicare Advantage overpays insurers — there’s some evidence that this does happen — the fact is that ObamaCare’s payment cuts will, if left in place, drive many out of the Medicare Advantage business.

Medicare’s own actuary reported that ObamaCare would eventually force more than 7 million seniors off their private plans and back onto traditional Medicare as insurers flee the market.

Obama may not care that this violates his endlessly repeated promise that “if you like your health plan you can keep it.”

But somewhere along the way, someone in his administration realized that millions of seniors would soon catch on that he was lying — and that this would happen just before the November election, when seniors make their annual Medicare Advantage selections.

Not wanting to confront angry voters who’ve seen their health care choice eliminated by ObamaCare, the administration apparently decided instead to paper over these spending cuts, pumping $8.3 billion back into the program through “bonuses” to Medicare Advantage plans.

The administration’s lame excuse is that this is simply a “demonstration project” to see how the bonus money can be used to encourage the private plans to improve quality.

But the attempt to disguise its real purpose was so inept that it didn’t take the Government Accountability Office long to uncover the scam.

Among the glaring problems with this “experiment”:

• It’s seven times larger than any demonstration project Medicare has ever attempted.

• Almost all the bonus money is front-loaded. In fact, in the first year, the extra bonuses will fill in more than 70% of ObamaCare’s scheduled Medicare Advantage cuts. That will, conveniently, keep Medicare Advantage plans up and running through the election.

• For all the money, the so-called experiment was so poorly designed that it won’t produce any credible results.

The entire project is so transparently political that the normally reserved GAO urged the Health and Human Services Department to cancel it altogether.

Canceling is just the beginning. The bigger question lawmakers must answer is this: Can it really be legal for a Cabinet agency to spend $8.3 billion in taxpayer money simply to help Obama get re-elected?





Oct. 24; If you’re a senior on Medicare or an adult child responsible for a senior on Medicare here’s something you should know: The annual “open enrollment” period for joining or changing prescription drug or private health plans is already under way.

“It’s much earlier this year. It started on Oct. 15, and it’s going to stop on Dec. 7,” says Nancy Metcalf, a senior editor and health expert at Consumer Reports. “So you have your window right now.”

Metcalf says the dates were moved up in part so plans could get all their paperwork done and put new membership cards in patients’ hands by Jan. 1, when plan changes take effect.

But the new dates are only one of several changes Metcalf says Medicare enrollees need to be aware of for next year. Consumer Reports has a free guide to some of them.

A key change she says consumers should be aware of during the open season is a new “star-based” quality rating, particularly for health plans. “You want 4 to 5 stars,” Metcalf says. And the reason that matters is that “those plans are getting more money from Medicare. They’re basically getting bonuses for being good.”

And more money, in this case, means more benefits, she says, because “one of the deals is the extra money has to go toward benefits to the members, not into the pockets of the plans.”

But no matter how many stars a plan has, last year’s health law is guaranteeing certain new benefits to everyone enrolled in the private Medicare plans known as Medicare Advantage.

In 2011, everyone in traditional Medicare was guaranteed a series of free preventive benefits, including an annual wellness exam and screenings for things like cancer and heart disease. Starting in 2012, those benefits will have to be offered by Medicare Advantage plans, as well.

Next year will also see a further constriction of the notorious “doughnut hole” gap in Medicare prescription drug coverage, where people continue to pay premiums but essentially get no benefits. In 2012, people who reach the gap will automatically get a 50 percent discount on their brand-name prescription drugs, and a 14 percent discount on generic medications.

Metcalf says even if you spend a lot on drugs and will hit that gap, the Medicare plan finder website can help you budget. If you enter both the drugs you take and the drugstores you plan to use, she says, “you get this amazing spreadsheet that will tell you month by month how much out of pocket you’re going to pay, and then exactly when you’re going to hit the doughnut hole.”

By 2020 the gap is scheduled to phase out altogether.



Associated Press –

July 28: Washington – The “golden years” may lose some luster for many baby boomers worried about the financial pressures that come with age. Many of the nation’s 77 million boomers are worried about being able to pay their medical bills as they get older, a new poll finds. The concern is so deep that it outpaces worries about facing a major illness or disease, dying, or losing the ability to do favorite activities.

Another major concern among the boomers: losing their financial independence.

The struggling economy, a longer life expectancy, ever-increasing health care costs and challenges facing Social Security are putting added pressure on the boomers, those born between 1946 and 1964.

According to the Associated poll, 43 percent of boomers polled said they were “very” or “extremely” worried about being able to pay for their medical costs, including long-term care. Almost the same number, 41 percent, said losing their financial independence was a big concern.

The oldest boomers are turning 65 this year, but it’s the younger ones like Krall who might be feeling more apprehension. “Boomers are not all created equal,” says Olivia Mitchell, professor at the Wharton School of the University of Pennsylvania and executive director of the Pension Research Council.

Many older boomers still have a defined benefit pension plan, probably some decent retiree medical insurance and Social Security, said Mitchell, a boomer herself who has studied pensions and retirement extensively.

“The youngest boomers the people who were born in the 60s face more uncertainty about their pensions, their Social Security, their housing and their medical care,” Mitchell said.

Her advice: “Push your retirement back two or three or five years if you can.

As long as you are still working then you’re not drawing down on your nest egg,” Mitchell said in an AP interview. “What most people don’t realize is how expensive it is to live in retirement.”

Many people in their late 60s, and some into their 70s, are still working.

According to the Bureau of Labor Statistics, 29.1 percent of people aged 65 to 69 worked at least part-time last year. And almost 7 percent of people aged 75 or older were employed in 2010.

One significant cost facing new retirees is health care. A study by Fidelity Investments estimated that a 65-year-old couple retiring this year with Medicare coverage would need $230,000, on average, to cover medical expenses in retirement. The estimate factors in the federal program’s premiums, co-payments and deductibles, as well as out-of-pocket prescription costs.

The projection does not factor in long-term care, such as the cost of living in a nursing home something most boomers in the Associated poll haven’t planned for yet. But a care center that we always recommend is the Skylark Senior Care center.

Some 83 percent of boomers polled said they do not have long-term care insurance, a private policy that helps pay for nursing homes or in-home care costs not covered by Medicare.

“The problem with it is that as you get older, the cost goes up,” said Plotkin. “At a certain point, it might not be worth it.”

Costs for long-term care insurance can range from $1,000 to $8,000 a year, depending on age, health conditions, policy term and other factors.

“It’s a tough sell,” says Paul Fronstin, director of health research and education at the nonprofit Employee Benefit Research Institute. “Even someone in their 60s might look at it and say it’s going to be 20 years before I need long-term care, so why buy it now.”

Boomers also didn’t fare so well in other later-life planning, such as legal wills and health care proxies.

Forty-percent of the boomers polled said they had a legal will to spell out how their possessions should be distributed after death.

Fewer boomers 34 percent had health care proxies and living wills. The living will allows people to document their wishes concerning medical treatment, and the proxy is a medical power of attorney that allows for the appointment of a trusted person to make medical decisions in case an individual is unable to do so.

The poll was conducted from June 3-12 by Knowledge Networks of Palo Alto, Calif., and involved online interviews with 1,416 adults, including 1,078 baby boomers born between 1946 and 1964. The margin of sampling error for results from the full sample is plus or minus 4.4 percentage points; for the boomers, it is plus or minus 3.3 percentage points.
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