October 24, 2014

Posts on health care

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Wednesday, June 13, 2012 - 3:36 PM

The Medicare actuaries have just updated their projections for National Health Expenditures (NHE) and the overall picture they illustrate is a welcome one, but likely reflects temporary factors and cannot serve as an excuse for politicans to rest on their laurels.

On the plus side, health care cost inflation has slowed pretty dramatically over the last three years (2009-2011) and is also projected to be slower than normal for 2012 and 2013 -- with those costs staying nearly constant as a percent of GDP throughout the entire time period (around 17.9 percent). Furthermore, while spending is projected to jump in 2014, as the major health insurance provisions of the Affordable Care Act (ACA) extend coverage to approximately 22 million people, over the period 2011-2021 spending is projected to grow at an annual average of 0.9 percent above GDP growth. This is good news because most budget experts consider health care cost growth of 1 percent over GDP the "gold standard" for a tough, but theoretically obtainable, spending target. (Historically, health care costs have risen 2 percentage points faster than GDP.)

The actuaries suggest most of the recent slowdown in health care spending can be attributed to the recession and...

Tuesday, May 22, 2012 - 12:01 PM

In late April, the Medicare Trustees released an annual report on the financial status of the program. In their report, the trustees are required to analyze where Medicare costs are heading based on a strict reading of current law. However, there are numerous reasons to believe that these numbers do not give the full picture. As noted by the trustees, “Medicare’s actual future costs are highly uncertain and are likely to exceed those shown by the current-law projections in this report.”

To illustrate the cost picture more fully, the Medicare actuaries just released their updated 2012 “Illustrated Alternative Scenarios” which examine some of the shortcomings of the official Medicare projections.

 Medicare Cost Projection Percent of GDP 
  2030 2080
2009 (PRE-ACA) Trustees' Official Projection 6.26% 10.69%
2012 TRUSTEES' Official...
Monday, March 19, 2012 - 12:02 PM

There has been a lot of confusion recently about whether the Affordable Care Act (ACA), the health care reform legislation passed in 2010, is now projected to cost substantially more than previously estimated.

The short answer is no -- the costs are still tracking pretty closely to the trajectory projected by the Congressional Budget Office (CBO) in 2010. The main reasons for the recent confusion involve a new estimate from the CBO and the fact that it has been two years since the legislation passed, putting us two years closer to the time it will be fully implemented.

The CBO just updated its cost estimate of one particular part of the ACA, the part dealing with insurance coverage. This part of the legislation will require nearly all Americans to obtain health insurance coverage and creates the exchanges, subsidies, and expanded Medicaid program that will provide the new coverage. Most of these measures fully come online beginning in 2014 and involve new spending that CBO accounts for as the “gross costs” of the insurance provisions. This part of the legislation also brings in new revenue to the government in the form of penalty payments and, starting in 2018, an excise tax on high-cost insurance plans. Once CBO takes these revenues into account, it creates a “net cost” of the coverage provisions.  ...

Monday, March 12, 2012 - 12:14 PM

Last week two committees in the House of Representatives voted to repeal the Independent Payment Advisory Board (IPAB). This is an alarming attempt to undo a key cost-saving enforcement mechanism without putting anything else in its place.

You may recall that the IPAB was created by the Affordable Care Act (ACA – aka “health care reform”) to reduce the growth in Medicare spending through the use of a spending-target system and a fast-track legislative process. 

The Concord Coalition has long supported the IPAB because it provides a crucial backstop to ensure federal health care savings from the ACA. (See here and here).

The ACA imposed cuts to Medicare, raised some taxes and fees, and created a penalty for people who don’t buy insurance. The legislation also created pilot projects and experiments to determine how to help curb the growth of health care costs. The IPAB was designed to ensure that the Medicare cuts -- or others that would achieve the same level of savings -- will go into effect. The IPAB will also make it less likely that parochial political interests will be able to...

Tuesday, December 20, 2011 - 3:13 PM

The demise of the deficit reduction super committee left many people wondering whether the polarized atmosphere in Washington has made it impossible for Republicans and Democrats to reach agreement on the thorniest issues that must be resolved to achieve a fiscal sustainability plan.  

So it was heartening last week to see a bipartisan pair of prominent lawmakers – Sen. Ron Wyden (D-Ore.) and Rep. Paul Ryan (R-Wis.) -- release a joint Medicare reform proposal.

At its core is the concept of “premium support” (Wyden and Ryan call it “coverage support”) in which the federal government would pay a set amount to subsidize Medicare premiums. Beneficiaries could elect to remain in the traditional Medicare program or purchase their health insurance on an “exchange” of approved plans, which would be required to offer “at least as comprehensive a benefit as traditional fee-for-service Medicare.” The plans would also be required to issue policies to all seniors who apply (i.e., guaranteed issue).

The level of support would be determined through a competitive bidding process similar to the one currently used to set premiums for the Medicare prescription drug benefit (Part D). There would be a cap on out-of-pocket expenses (catastrophic coverage), and the coverage support “would be adjusted to provide additional...

Monday, June 13, 2011 - 10:33 AM

A shorter version of this column is featured on CNNMoney.com.

It is often said that the most expensive piece of medical equipment is the doctor’s pen. Unfortunately, after more than two years of intense debate about health care costs in Washington, politicians still seem stuck debating who should pay for the pen instead of focusing on how to make the pen less expensive.

Republicans want private insurers to make health care payments along with substantially higher cost-sharing by individuals. Democrats and the President want retirees to continue in a system where the government is the predominant payer.

However, in either vision of the world, the primary decisions driving the costs of medical care will be made based on what the doctor says to a patient in an office visit or laying on a hospital bed. This is destined to be the case for as long as doctors train and build up extraordinary expertise. 

This is why the Independent Payment Advisory Board (IPAB), created by the 2010 Affordable Care Act (ACA), is so important in the effort to control costs. The IPAB will be made up of 15 experts, some suggested by congressional leaders and all confirmed by the Senate, appointed to represent the major...

Tuesday, May 17, 2011 - 8:48 AM

Anyone wondering why Social Security and Medicare should be “on the table” in budget negotiations need look no further than the 2011 Trustees’ Report issued on May 13.

As is usually the case, media accounts of the trustees’ report tended to focus on trust fund balances rather than on the cash balances and growing costs of the two programs. Viewed from a trust fund perspective, the financial condition of Social Security and Medicare may appear troubling but of no immediate concern. Social Security’s combined trust funds are projected to remain solvent until 2036 and the Medicare HI trust fund [Part A] is solvent until 2024. The Medicare SMI trust funds [Parts B and D] are permanently solvent, but only because they have an automatic draw on general revenues.

So why worry about these programs now? Why not wait another 10 years before making changes in Medicare and 20 years or more for Social Security?

One reason is that both programs are straining the federal budget now because they are paying out more than they are taking in from dedicated resources, including payroll taxes, taxation of...

Thursday, December 16, 2010 - 4:55 PM

The legal term severable normally gets little notice outside the world of constitutional law -- yet now it has become a big buzzword amongst health care analysts and federal budget wonks. The reason has to do with the numerous legal challenges to the Accountable Care Act's individual mandate to purchase health insurance. 

A U.S. District Court Judge in the Eastern District of Virginia recently declared the mandate unconstitutional. He also declared it severable from the rest of the health care reform legislation. This means that even though he found that one provision is unconstitutional, he held that the rest of the legislative package is constitutional and can continue on its path to full implementation. If the courts ultimately agree with this judge's interpretation, the budgetary results could become disastrous without congressional action.

While we have discussed the primacy of the individual mandate in making health care reform work (here and here,) it makes sense to revisit the issue of...

Monday, September 13, 2010 - 2:56 PM

The Center for Medicare and Medicaid Services recently updated its estimate of National Health Spending. This unusual mid-year update, delivered in an article in Health Affairs, reflects changes due to the passage of the health care reform law in March, along with a few smaller legislative changes since then.

The overall picture is that within the 2009-2019 time period, projected total national health care spending will slightly increase relative to where it would have been without passage of reform. Annual spending growth will average 0.2 percent higher over the projection period. As a nation, we will go from spending 17.3 percent of GDP on health care in 2009 to 19.3 percent of GDP in 2019, a figure 0.3 percent of GDP higher than it would have been without health care reform.

Within these small overall changes, however, there will be major differences in the number of insured and the payers for health insurance. By 2019, approximately 32.5 million more individuals will have health insurance, which will mean coverage of 92.7 percent of the population (compared to 83 percent prior to passage of the legislation). Within that, Medicaid and the Children’s Health Insurance Program (CHIP) enrollment will be one-third...

Tuesday, August 10, 2010 - 2:45 PM

Good news comes and goes rather quickly in the 2010 Medicare Trustees’ Report. It begins with the optimistic news that Medicare’s finances have improved substantially as a result of this year’s health care reform bill, the Affordable Care Act (ACA). However, the report then goes on to explain in great detail why this apparently good news is probably not as good as it sounds.

According to the trustees, “actual future Medicare expenditures are likely to exceed the intermediate projections  shown in this report, possibly by quite large amounts.” A separate memo prepared by the Center for Medicare and Medicaid Services (CMS) Office of the Actuary bluntly states that “the projections in the report do not represent the ‘best estimate’ of actual future Medicare expenditures.”

For those seeking solutions to our nation’s long-term structural deficit, understanding the complex message of the trustees’ report is crucial. Despite the buoyant headlines, the trustees warn, “The financial projections in this report indicate a need for additional steps to address Medicare’s remaining financial challenges.”

On paper, Medicare’s finances have indeed improved. The ACA reduced future non-physician Medicare provider reimbursements and added dedicated...