Choosing the Nation's Fiscal Future (2010) / Chapter Skim
Currently Skimming:
5 Options for Medicare and Medicaid
5 Options for Medicare and Medicaid
Pages 75-104
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From page 75... ...
The proposed legislation, if enacted in a form similar to one of its most recent versions, would cover a majority of people who now lack health insurance, and it would raise revenues and increase spending without increasing the deficit over the next 10 years (Congressional Budget Office, 2009f)
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From page 76... ...
CHOOSING THE NATION'S FISCAL FUTURE BOX 5-1 2009 Health Care Reform Legislation As this report went to press, the House of Representatives had passed the Affordable Health Care for America Act, and the Senate had passed the Patient Protection and Affordable Care Act. (For details on the House bill, see Committee for a Responsible Federal Budget, 2009; Congressional Budget Office, 2009d, 2009f.
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From page 77... ...
However, public-sector health care costs cannot be considered in isolation from private-sector costs. The services paid for by Medicare and Medicaid (and other federal health programs)
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From page 78... ...
Rather, the savings from such reductions are intended to be a "bridge" to savings from fundamental and systemic reform. FOUR TRAJECTORIES Given the uncertainty about the long-term budgetary savings that could accrue from the many possible combinations of health reforms described later in this chapter, the committee has sketched four health care spending trajectories that vary in their assumptions about the stringency of direct spending reductions in the near term, while leaving open the possibility that slower-acting redirection of incentives and improvements in information (among other things)
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From page 79... ...
However, even this trajectory assumes that the rate of excess cost growth will gradually fall to zero by 2083, leaving program spending at 15.4 percent of GDP by 2083 (3 percentage points below the baseline)
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From page 80... ...
. Medicare and Medicaid costs per beneficiary have historically risen at about the same rate as that for private insurance (Centers for Medicare and Medicaid Services, 2009c:Table 13; Congressional Budget Office, 2007c:8)
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Reasons for Increasing Spending The causes of the rapid growth of public and private health care spending in the United States are multifaceted and complex. Improvements in medical technology, broadly defined, are clearly important (Congressional Budget Office, 2008h)
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The Congressional Budget Office (CBO) has calculated that aging by itself accounts for 37 percent of the projected growth in federal Medicare and Medicaid spending through 2035 and 21 percent through 2080 (Congressional Budget Office, 2009c)
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From page 83... ...
. As noted in Chapter 1, if current policies remain unchanged and health spending grows as projected, outlays for Medicare and Medicaid as a share of GDP would more than double over the next quarter century, rising from 4.1 percent of GDP in 2008 to 9.9 percent in 2035, and they would continue
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health care system (Congressional Budget Office, 2008d; Fisher et al., 2009a, 2009b)
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From page 85... ...
Policies intended to reduce federal health outlays could reduce insurance coverage and the quality of care, disproportionately affecting the poorest and sickest people in the country. Measures that discourage the provision of services believed to be of limited value to a patient's health may also squeeze out services beneficial to some patients.
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From page 86... ...
A Single-Payer Health Insurance System The most interventionist broad policy option would probably be a government-run single-payer health insurance system. Under this approach, the federal government would establish an insurance entity to offer health insurance and would prohibit private health insurance, except perhaps as a supplement to the publicly provided insurance.
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From page 87... ...
Alternatively, like Medicare, it could set payment rates and contract its operations to private companies (which is handled differently under traditional Medicare, as one model, and Medicare Advantage, as another)
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reply that there already are many private insurance companies and that one more company competing on a truly level playing field would not change the competitive nature of the marketplace. Rural markets are uncompetitive in large part because of the small number of insured consumers (because of sparse populations and also because of the large percentages of uninsured individuals in those areas)
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A similar system, known as the Federal Employees Health Benefits Plan, is available to members of Congress and all federal employees. Under it, the central market-maker (the U.S.
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Eliminating Group Health Insurance An even more market-oriented approach than one like the Federal Employees Health Benefits Plan would eliminate group health insurance so that there would be only an individual insurance market (see, e.g., Cannon, 2009b)
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on market incentives and on government regulation to slow spending and improve health outcomes and the quality of care. This list of options is meant to be representative rather than exhaustive; it would be impossible to describe all of the major proposals for reforming health care and limiting federal health spending.
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From page 92... ...
Examples of system reforms that are primarily concerned with care quality and health outcomes rather than cost, but which may also have indirect implications for slowing spending growth, include comparative effectiveness research, health information technology, disease management, and health promotion. These options merely illustrate some of the plausible approaches and are by no means a comprehensive list of possible reforms.
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From page 93... ...
For Medicaid, vouchers also could be used to help individuals pay the cost of private health insurance instead of paying directly for health services for the low-income population.12 However, the potential for significant savings would be limited because Medicaid already costs less than private insurance for comparable beneficiaries (Hadley and Holahan, 2003; Ku and Broaddus, 2008)
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From page 94... ...
Reductions in Medicare growth could be passed on to patients and employers in the private sector. System Reforms with Direct Implications for Slowing Federal Health Spending Growth Cap the Tax Exclusion for Employer-Sponsored Coverage Health-related tax expenditures are open ended and have been growing at a rate not much slower than that of Medicare and Medicaid spending (and health costs in general)
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From page 95... ...
However, there is reason to be concerned that providers might be penalized for unanticipated spending that is outside of their control and that inaccurate payment rates could distort incentives to provide needed care. Evidence regarding cost savings is also mixed.15 Second, Medicare could promote "accountable care organizations" in conjunction with a cap on reimbursements.
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From page 96... ...
In 2008, payment "benchmarks" for the Medicare Advantage program were, on average, 17 percent higher than projected per capita spending in traditional Medicare (Congressional Budget Office, 2008b:106)
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The Congressional Budget Office (2008b) estimates that raising the Medicare eligibility age by 2 months annually starting in 2014 until the eligibility age reached 67 in 2025 would reduce Medicare spending by $85.6 billion over the next decade.
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, and the budgetary effects of limiting awards from medical malpractice torts may be relatively modest. The Congressional Budget Office (2008b)
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. The Congressional Budget Office (2008b)
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One proposal, sometimes referred to as a patient-centered medical home, would reimburse primary-care providers at a higher rate for improvements such as facilitating better disease management, extending office hours, or adopting health information technology. A medical home
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From page 101... ...
Policies that increase the efficiency of health care delivery might promote the wider use of more effective but more expensive treatments, improving health outcomes without reducing spending. For example, the identification of better treatments through comparative effectiveness research might result in an increase in the number of patients treated -- and, therefore, in higher costs.20 Any savings that result from comparative effectiveness research, moreover, would occur well after the research was funded because of the long lead time required to produce treatment recommendations and for the medical community to put those recommendations into practice.
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From page 102... ...
Better payment approaches also cannot, by themselves, ensure that the resulting trends in federal health spending will be sustainable, and there is considerable uncertainty about the total budgetary savings that would accrue over the long term from the many possible combinations of health system reforms. At least in the near term, some form of health spending cap is more likely to reduce federal spending than any particular reform or combination of reforms.
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assumes that major spending provisions (such as constraints on Medicare payment rates) "are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation" (Congressional Budget Office 2009f:13)
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From page 104... ...
would generate $50.4 billion in additional revenue over the next decade (Congressional Budget Office, 2008b)
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