Marilyn Werber Serafini, Author at ��ϳԹ�� News

Is A Competitive Health Care Model All It’s Cracked Up To Be?

Julie Appleby — Thu, 20 Sep 2012 12:36:00 +0000

This story was produced in collaboration with

Republican vice presidential nominee Paul Ryan says his proposal to overhaul Medicare would use market competition to tame costs in the government health program relied on by almost 50 million people.

As models, he often cites the health program for federal employees – including members of Congress — and Medicare’s prescription drug program. “It works with federal employees, it works with the prescription drug benefit, and more to the point, it saves Medicare,” Ryan said on “Meet the Press” in April.

Both of those programs get high marks from beneficiaries for the choices they offer. But their track record on cost control is more complicated, raising questions about whether the competitive model is in fact the silver bullet that backers have suggested.

The federal employee health insurance program is often touted as holding down the increase in premium prices more successfully than private workplace plans or government-run programs. But a data analysis done for Kaiser Health News (KHN) and interviews with experts shows it has not held down costs per enrollee as efficiently as Medicare during the past decade.

Average spending in the federal workers’ program grew at 7.1 percent annually per enrollee, higher than the 5.8 percent growth rate for traditional Medicare – excluding the drug program — over the decade ending in 2010, according to data analyzed at KHN’s request. The analysis, based on 10-year averages, was done by Walton Francis, a consultant and principal author for 30 years of the Consumers’ Checkbook Guide to Health Plans for Federal Employees.

In addition, the analysis found that spending growth in the federal workers’ program far exceeded the rate at which Ryan proposes to cap Medicare each year — the increase in the nation’s economic growth plus half a percentage point. Had federal workers’ benefits been indexed to that rate, “there’s no question …. [it would] have constrained spending or increased premium costs of participants,” Francis said.

More significant cost control has been achieved by the Medicare prescription program, which relies on private plans to provide seniors with drug benefits. Since its start in 2006, the program’s spending growth has been 30 percent less than initially projected by the Congressional Budget Office.

The reasons for that are intensely debated, however. Some attribute it to the structure of the program, in which multiple plans compete for enrollees, giving insurers strong incentives to hold down costs. “The cost they’ve come up with is far less than anyone predicted,” GOP presidential nominee Mitt Romney said on “Meet The Press” Sept. 9. “Look, competition works.”

Others point to an increase in the use of less costly generic drugs, and a slowed pipeline of new brand-name drugs, which have held drug spending nationwide at historically low levels.

“The most important factor has been the large number of popular drugs that have gone off patent and become generics,” which are less expensive, said Jack Hoadley, a researcher at Georgetown University’s Health Policy Institute who studies Medicare.

The blockbuster cholesterol-lowering drug, Lipitor, for instance, went off patent in 2011.��

How We Got Here

For most of the last 50 years, health care spending, both by government and private programs, has grown an average of 2.5 percent points faster than GDP each year, according to . Spending has slowed recently, partly because economic difficulties have led people to put off elective medical care.

Medicare now consumes about . With 10,000 baby boomers retiring every day, and both political parties have offered options to curb the cost increases.��

The Democrats’ approach, enacted in the 2010 health law, relies heavily on financial incentives to spur greater efficiencies from providers. The law also reduces annual payment increases to hospitals and other providers, as well as payments to private Medicare Advantage plans. As a backstop, beginning in fiscal 2015, if Medicare spending exceeds 1 percentage point above the nation’s economic growth rate, also called gross domestic product, an expert panel must propose reductions in spending. Premium increases and benefit cuts would be off limits. If Congress fails to enact an alternative, the board’s recommendations would be put in place.

Republicans argue that a more effective approach would be to use market forces to promote more choice and drive down costs – touting examples of competition such as the federal employee health benefit program, known as the FEHB plan, and Medicare’s prescription drug plan, as examples.

To be sure, neither program is directly comparable to Medicare in scope, benefits or enrollees – the FEHB program has more generous benefits and younger beneficiaries, while Medicare Part D deals only with drugs. Perhaps most important, neither indexes spending to economic growth.

Federal Workers’ Plan Is More Generous

FEHB, which covers about 8 million people, allows enrollees to choose among competing private plans, which offer varying premiums and services. For most of them, the government pays 75 percent of the premium up to a specified cap. The cap is based on 72 percent of the average cost of all plans. Beneficiaries who choose more costly plans pay the difference.

The biggest reason for Medicare’s better cost performance over the 10-year period analyzed by KHN is its ability to pay doctors and hospitals less, said Chapin White, senior health researcher at the Center for Studying Health System Change. “There’s a big and growing gap between what Medicare pays on average for hospital and physician services and what private insurers pay,” he said.

If Ryan’s cap – growth in the economy plus half a percentage point — had been in place for FEHB during that period, the increase in spending per enrollee would have been limited to 3.4 percent annually, or less than half the actual 7.1 percent growth rate. KHN used 10-year annual averages rather than year-to-year changes to help adjust for changes in benefits or other annual fluctuations.

Source: Analysis by Walton Francis of data from annual Medicare Board of Trustees Reports, the Green Book, the U.S. Budget Appendix and the OPM annual Insurance Report. Medicare data primarily calendar year; FEHB data primarily fiscal year. Note: Medicare per enrollee costs for individuals; FEHB per enrollee costs for individuals and families combined.

The FEHB plan is also a more generous program in several ways than what Republicans propose for Medicare — including that the federal contribution to benefits rises in sync with premium increases. Under Ryan’s proposal, that might not be the case. The government contribution toward enrollees’ costs, an annual subsidy, would be based on the cost of the second-lowest priced private insurance plan in a region, or the traditional Medicare program, whichever submitted a lower cost bid. If spending growth exceeded his target of the rate of economic growth plus 0.5 percent, his plan calls for Congress to cap spending.

Conservatives, however, say the Republican proposal for Medicare would work better than the federal worker program at holding down costs because it would be structured differently. The government contribution would not be based on a percentage of the premium.

In the FEHB plan, “the more expensive the plan, the bigger the (government) contribution,” at least until the cap is reached, said James Capretta, a fellow at the conservative Ethics and Policy Center.

In contrast, under the Republican proposal, beneficiaries would be responsible for paying any costs above the stipend, which would be set at the price of the second lowest private plan bid or the cost of traditional Medicare, whichever is lower.

The Romney campaign has been quoted in press reports as saying he doesn’t endorse the cap in the House Republican budget, although he had praised an earlier proposal by Ryan and Sen. Ron Wyden, D-Ore., that indexed growth to GDP plus 1 percent.

Ethan Rome, executive director of the liberal Health Care for America Now advocacy group, contends there are only two ways the proposal would slow spending growth.

“The first is they shift cost from the federal government to seniors … who can’t afford them,” he said. “The second is competition, and there’s no evidence whatsoever that competition will control costs in any real way.”

Conservatives disagree, arguing that competing health plans would have incentive and flexibility to reduce costs.

“They can reduce costs with disease management, different payment mechanisms, care coordination,” said Joseph Antos of the American Enterprise Institute. “They might have higher deductibles, or lower. We do this in the [federal worker plan] all the time. Are we going to get massive savings right away? Not right away, but over time.”

Fluctuations In Spending For Medicare Prescription Plan

Capretta argues that a better comparison to the Republicans’ Medicare proposal is Medicare’s drug program in which private insurers compete for enrollees, and the government covers about 75 percent of the cost of the program and enrollees pay the rest.

Contrary to some early predictions, the program has numerous competing plans. Although premiums for some plan sponsors have gone up, others have avoided significant increases.

Capretta and other conservatives discount the notion that trends such as the switch to cheaper generics, rather than competition, have held down cost growth.

“Would that [generic drug use] have happened without competition” among private insurers? Capretta asked. “Government would have had to mandate it and how could government do that?”

Yet even in the drug program, KHN’s analysis found that cost growth has fluctuated year to year. In two of the past five years, annual spending per enrollee exceeded Ryan’s cap, according to data from the Centers for Medicare and Medicaid Services.

The program’s costs are projected to grow more quickly in the next decade.��In their most recent last April, Medicare’s trustees projected the average annual increase in expenditures per enrollee to be 5.6 percent through 2021, as a result in part of a restored pipeline of new brand name drugs.

Economists say the continued rise in health spending in traditional Medicare, the drug program and the federal workers benefit plan shows how hard it is to slow costs, which are driven by factors ranging from new technologies and drugs to a growing percentage of people with chronic illnesses.

“It’s been really hard to change the cost trend,” says Marsha Gold, a senior fellow at Mathematica Policy Research, who studies Medicare. “Just saying [we’re going to do it] isn’t enough to get it to happen.”

��ϳԹ�� News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about .

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FAQ: Obama v. Ryan On Controlling Federal Medicare Spending

Marilyn Werber Serafini — Wed, 29 Aug 2012 18:00:00 +0000

It may come as a surprise that President Barack Obama and GOP vice presidential nominee Paul Ryan are pushing the same target rate for controlling federal spending on Medicare. Each would set it at half a percentage point higher than the growth rate of the economy – the gross domestic product – after a phase-in period.

Looking at their plans in more detail, however, their approaches to curbing costs are very different. And the practical effects on seniors are also likely to be different.

“There is a consensus, an agreement that Medicare is unsustainable,” Ryan spokesman Conor Sweeney said in the spring after the House approved Ryan’s proposal as part of the budget resolution. “That’s where the agreement is, and it’s where the agreement ends.”

That hasn’t changed. Republican presidential nominee Mitt Romney has embraced the broad outlines of Ryan’s proposal. Like Ryan, he would replace Medicare’s current defined-benefit coverage of all medical costs incurred by a beneficiary with a defined contribution toward premiums for private health insurance or traditional, government-run, Medicare.

While Democrats have criticized Ryan’s Medicare proposals for years, their attacks have become more vociferous since Romney tapped the House Budget Committee chairman as his running mate. Democrats charge that Ryan’s plan would raise out-of-pocket costs for seniors and ultimately destroy traditional Medicare. Republicans have countered with a spirited reprise of their claims from the 2010 congressional elections that Democrats already cut hundreds of billions of dollars out of Medicare as part of that year’s Affordable Care Act.

Here are some questions and answers about the Democratic and Republican approaches to moderating spending on the popular program, which covers 47 million seniors and disabled people.

Q. If both Obama and Ryan are proposing a target growth rate of GDP plus half a percentage point for Medicare, shouldn’t federal spending be the same under both scenarios?

There are important differences. Ryan’s plan, which would only affect people currently under age 55, would impose a hard cap on federal spending on the program.

Obama is proposing a softer cap. His proposal follows an effort in the 2010 health law to curb Medicare cost growth by tying the spending target to the Consumer Price Index in early years, and later on to the rate of GDP growth plus 1 percentage point. If federal spending per Medicare beneficiary is rising faster than that – a determination made by the Medicare actuary – then cuts would be triggered. The cuts would come as a percent reduction in Medicare spending, but they wouldn’t necessarily be sufficient to meet the target.

Later, in budget deficit reduction negotiations, Obama proposed to lower the target to the growth of GDP plus half a percentage point.

Q. On the campaign trail, Democrats say that seniors would pay more for coverage under Ryan’s Medicare plan, but Ryan suggests they could choose from one or two plans at no cost. Who’s right?

Seniors currently pick up some of the tab for Medicare, so it is unlikely that the federal government would pay the entire premium of even a lower-cost plan and still come in under Ryan’s spending cap, say both liberal and conservative health care policy experts.

Under Ryan’s so-called premium support proposal, all plans, including traditional Medicare, would submit bids for how much they would charge to cover a beneficiary’s health care costs. All plans would have to provide a minimum set of benefits equal to the value of those in the traditional program, although not necessarily identical in makeup. They could provide additional benefits beyond that minimum. The government would pay the premium for the private plan with the second lowest bid, or for traditional Medicare, whichever is lower. Beneficiaries would get a rebate if they chose the lowest-cost plan, but would have to pay the difference if they chose a plan that set premiums higher than the second-lowest.

Q. Republicans are accusing Democrats of cutting $716 billion from Medicare to finance the health law. Didn’t they used to say $500 billion?

The Congressional Budget Office, using a different time frame to assess the law’s impact, has updated its estimate of reductions from future Medicare spending to $716 billion over 10 years. The Ryan plan calls for the same dollar amount of savings from Medicare, even though it would repeal the health care law. But Ryan says the money would be plowed back into the program.

The reductions in the health law mostly affect hospitals, health insurers, home health and other providers who supported the measure because it extended coverage to 30 million uninsured Americans, raising the number of paying customers. The law also significantly reduced payments to private Medicare health plans.

Q. How would Obama’s plan for Medicare affect beneficiaries?

Obama is a critic of premium support. He would retain Medicare’s defined-benefit structure, meaning that the government will pay whatever it takes to cover a specified set of services.

The health law seeks to hold down costs by promoting changes in the ways providers are organized and paid, to shift from rewarding volume of services to improving quality and patient outcomes.

The health law also created the Independent Payment Advisory Board (IPAB) to come up with proposals to reduce spending if Medicare grows at a higher rate than the target. But the board’s 15 members, who will be appointed by the president subject to confirmation by the Senate, are not allowed to recommend anything that would ration care or change benefits, eligibility or cost sharing for Part A (hospital services) or Part B (physician services). It also couldn’t do anything to change the percentage of premium that seniors pay for prescription drug coverage or the subsidies that low-income individuals get. The expectation is that reductions would come from medical providers, although hospitals are protected at first.

Beginning in fiscal year 2015, if Medicare spending exceeded the target, the board would send its recommendations to Congress. The secretary of Health and Human Services would have to implement those recommendations unless Congress passed alternative cuts. The future of the IPAB is in doubt, however, as Republicans – and some Democrats – have sought to kill it, arguing that the board will end up rationing care and have too much control over Medicare. Obama has yet to nominate panel members.

Some health care analysts argue that reducing payments to medical providers could drive them out of Medicare and create access issues for beneficiaries. Richard Foster, Medicare’s chief actuary, warned in the 2012 Medicare trustees’ report that the health law will eventually lower payments to medical providers so much that “Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result.”

Q. And under Ryan?

Ryan is not specific in his plan about what he’d cut to keep spending below his proposed cap, but he has said that Congress could expand requirements for higher-income beneficiaries to pay more for their coverage. Spokesman Conor Sweeney has said that competition among both public and private health plans would hold down costs, and seniors would be able to choose the health plans best suited to their individual needs. “Seniors want more power and control over their Medicare dollars,” he said. If competition doesn’t keep Medicare spending below Ryan’s target, then automatic cuts would occur.

The nonpartisan Congressional Budget Office estimated that Ryan’s proposal from 2011 would require a typical 65-year-old person to pay thousands of dollars more for Medicare by 2030 than would be the case under its current structure. However, his latest plan, included in the fiscal 2013 House budget resolution, is missing key details, so the CBO has said it is unable to assess its impact on beneficiaries.

Although Ryan would give future seniors the option of remaining in the traditional, government-run Medicare program, it would have to compete with private plans. Critics predict that traditional Medicare could become unaffordable if it attracts the sickest people while private plans lure the healthiest. They also say that beneficiaries might have trouble finding physicians if they abandon the program because their rates are cut.

Q. What’s next for Medicare?

Lawmakers are unlikely to consider legislation that would restructure Medicare in any significant way until a new Congress — and possibly a new president — are seated in 2013. Still, after the elections, Congress may try to pass deficit reduction legislation that would avert automatic 2 percent cuts in Medicare required under last year’s budget agreement. In the meantime, Medicare is proving to be a contentious issue in presidential and congressional campaigns nationwide, as both parties vie for the coveted senior vote. Behind the scenes, stakeholders – from seniors’ advocates to insurance leaders – are working to produce proposals that protect Medicare and their interests.

This article was produced by Kaiser Health News with support from .

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Medicare Takes Center Stage In Close Pennsylvania Races

Marilyn Werber Serafini — Thu, 23 Aug 2012 06:07:09 +0000

This story was produced in collaboration with

As a physician running for Congress in the Philadelphia suburbs, Democrat Manan Trivedi frequently talks about Medicare on the campaign trail. But last week, the dozens of seniors and baby boomers who packed an event wanted to discuss little else.

Guests listen to Dr. Manan Trivedi’s speech during a campaign event in Reading, Pennsylvania (Photo by Lisa Lake/For KHN).

GOP presidential hopeful Mitt Romney’s selection of Wisconsin Republican Paul Ryan as his running mate may have energized the Republican base, but it has also fired up the Democratic faithful who say that Ryan’s proposals to revamp Medicare would end guaranteed health benefits for seniors.

In the week since Romney’s announcement, Medicare has been catapulted from an issue that political strategists said could make a difference in close races to a central component of congressional campaigns nationwide—especially in states like Pennsylvania, Florida, Minnesota and Ohio with large numbers of older voters.

Two-thirds of the 56 most competitive House races are in districts with higher than average numbers of seniors, said David Wasserman, House editor of the Cook Political Report.

“Democrats need to recover among seniors if they have any hope of gaining seats in the House,” he said.

Pennsylvania will be an important test case. It has several close races where Democrats have been hammering Republicans over the Medicare issue, and 18 percent of the state’s population is on Medicare – the same percentage as Florida.

At Trivedi’s event in Exeter, Pa., attendees called out their disapproval when the candidate cited press reports that Republican incumbent Jim Gerlach and Ryan were workout buddies. He also told them that Gerlach had twice voted for Ryan’s legislation to overhaul the health entitlement.

“I’ve heard about how close Jim Gerlach is to Paul Ryan and what that means to Medicare,” one older woman said afterwards. “I’d like to know what can we do to make sure that we don’t have to have that plan?”

Gerlach, too, has gone on the offensive, following advice from national GOP leaders to attack Democrats for supporting the health care law’s reductions in future Medicare spending, and to steer clear of words like privatization.

“My opponent has fallen right in line with ObamaCare, which already gutted over $500 billion from current Medicare recipients,” Gerlach said. “Then, he and his hypocritical Democrat colleagues issue press releases bemoaning Republican efforts to save the program.”

Campaigning As Medicare’s Protectors

The campaign jockeying over Medicare comes at a time when the program represents a huge fiscal challenge to both parties. With almost 50 million beneficiaries — and growing at the rate of 10,000 baby boomers every day — the entitlement program is one of the fastest-growing portions of the federal budget. Both parties acknowledge the need to curb its growth; both have also used the issue for political gain, casting themselves as the program’s protectors against what they portray as rivals’ threats.

Dr. Manan Trivedi arrives at campaign event in Reading, Pennsylvania (Photo by Lisa Lake/For KHN).

Republicans used the issue of Medicare as one of their primary tools to win control of the House in 2010, claiming that Democratic incumbents had voted to reduce Medicare spending by $500 billion over 10 years to fund the health care law. Although Democrats said they were expanding, rather than cutting seniors’ benefits, and that the bulk of the reductions would come from medical providers and insurers, the argument got little political traction.

Likewise, after the House voted to approve versions of Ryan’s proposals to overhaul the program in 2011 and 2012, Democrats began strategizing about how to use those votes to make a comeback.

Even before Romney announced Ryan as his running mate, Democrats had planned to use the issue against House Republicans who had voted for the plan. While Ryan’s proposal does not affect current seniors, it would provide a set amount of money for those under the age of 55 to purchase either a private health plan, or the traditional government-administered program.

Ryan and his supporters say that competition among private plans and the traditional Medicare plan would drive costs down; Democrats say his blueprint would likely shift costs onto future seniors, noting the stipend would cover the cost of one of the lower-priced plans, but might not be enough to pay for the traditional program.

“The selection of Paul Ryan brings his [Medicare] plan into stark relief,” Trivedi said. “I’ve been talking about Paul Ryan and how bad it is for months, but it’s been hard to get anybody to listen. But now, the Romney campaign has brought that front and center and people are listening.”

Both Sides Ramp Up Arguments

In Pennsylvania, the Democratic Congressional Campaign Committee had targeted Republican incumbents Gerlach, Mike Fitzpatrick, Pat Meehan and Tim Murphy in the sixth, seventh, eighth and eighteenth congressional districts, for their support of the Ryan plan.

Television and radio ads aren’t expected until after Labor Day, but the AFL-CIO is starting automated phone calls and public events this week. Union volunteers were planning to hand out fake Medicare vouchers to argue that seniors would not get enough money from the government to cover the cost of coverage.

Meanwhile, Republicans, including Gerlach, are reviving their 2010 arguments that helped shift seniors’ trust on Medicare from Democrats to Republicans. This is the second time that Trivedi has challenged Gerlach, and Gerlach is reprising the arguments that won him 57 percent of the vote in 2010.

“The Democrats complaining about serious efforts by Republicans to actually save Medicare are both a joke and a disgrace,” Gerlach said. “They self-righteously posture like they care about seniors, but they have never put forth a proposal that will save the program.”

The argument is an even easier sell this time around, Gerlach said in an interview, because the Congressional Budget Office recently revised its original estimate about how much the health law would reduce the growth of Medicare spending.

“They’re cutting $716 billion out of Medicare today for existing seniors,” he said. “Our proposal wouldn’t affect existing seniors. Voters get that, and that’s why it’s an easier issue to talk about than it was two years ago.”

The Ryan proposal assumes the same $716 billion in reductions.

Trivedi supporters at the Exeter event acknowledged they understood very little about Ryan’s Medicare proposals – and some of what they said they knew was inaccurate. Regardless, most said that Medicare was extremely important to them and that it was a top voting issue. Before the end of the evening, many had signed up to make phone calls, stuff envelopes, and do what they could to help defeat Gerlach — and Ryan’s Medicare plan.

“I see [Medicare] as a big issue because next year I’m eligible,” said Nancy Daubert of Spring Township in Berks County. “The idea that Ryan would take the safety net away from so many people is appalling. … They say it will cost me $6,300 more. I don’t know where that comes from, but it’s a big concern for me.”

Bellwethers Or Flukes?

Anna Greenberg, a Democratic pollster and senior vice president of Greenberg Quinlan Rosner Research, said the Democratic strategy has already proven successful in special elections in Arizona and New York, where the Democratic candidate claimed that Republicans were trying to privatize Medicare and increase seniors’ costs.

“The Ryan plan is an albatross, and every Republican voted for two Ryan budgets,” she said.

While Greenberg calls those contests bellwethers, Wasserman says they were races in which Republicans held extreme positions on the issue. Republicans beat back a similar effort in a special election in Nevada last year, in part by mounting a strong offense against the health care law – a strategy that Republicans are trying to duplicate in this year’s races.

But Kathy Boockvar, a Pennsylvania Democrat challenging Republican freshman Michael Fitzpatrick, continues to believe the issue will be decisive.

“This is a very significant part of my campaign,” she said in an interview. “I think we’ll pull back some seniors to the left.”

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FAQ: How Paul Ryan Proposes To Change Medicare

Marilyn Werber Serafini — Sat, 11 Aug 2012 15:24:00 +0000

Updated Aug. 13, 2012

Wisconsin Republican Paul Ryan, GOP presidential hopeful Mitt Romney’s choice for vice president, has provoked consternation from Democrats and anxiety among some congressional Republicans with his proposals to reshape Medicare.

Mitt Romney introduces Paul Ryan as his choice for running mate in Norfolk, Va., Saturday (Photo by Win McNamee/Getty Images).

The Republican-controlled House, along party lines, twice approved his proposals to overhaul the popular social insurance program for the elderly and disabled by giving beneficiaries a set amount of money every year to buy coverage from competing health plans. That is a fundamental shift from today’s program, where the federal government must help pay for every doctor visit and medical service that an individual uses.

The proposals were never enacted because of opposition from the Democratic-controlled Senate and President Barack Obama.

This year, Democratic congressional candidates nationwide are making the protection of traditional Medicare a centerpiece of their campaigns, just as Republicans attacked them two years ago for curbing future Medicare spending as part of the 2010 health care law. Now, Democrats are hammering their GOP opponents for voting for Ryan’s proposals.

Here is a guide to some of the issues and questions raised by Ryan’s plan.

Q. What is Ryan’s latest Medicare plan?

Ryan would gradually raise the eligibility age of Medicare from 65 to 67 by 2034, and cap its spending increases at half a percentage point higher than the growth rate of the economy, or the gross domestic product. Ryan’s plan would also change the program for future beneficiaries, those who are currently under the age of 55. When they qualify for Medicare, the government would provide a set amount of money annually to them to purchase either a private health plan, or the traditional government-administered program.

All plans would include a minimum set of benefits equal to the value of those in the traditional program.

The government payment to individuals would be set at the same level as the full cost for the private plan charging the second lowest premium or the premium set by the government for traditional Medicare, whichever is lower. Beneficiaries would have to pay the difference in premium costs if they chose a plan that set rates higher. Beneficiaries who chose the lower cost option would get a rebate for the difference.

Critics’ concern is that costs would rise faster than the size of the annual subsidy, shifting more of the burden onto seniors over time. But Ryan argues that competition among private insurers would spur greater efficiency that would keep costs down.

Q. So seniors could stay in the traditional, government-run Medicare program if they like?

Ryan says that is the case, but Democrats and some critics argue that the plan would so fundamentally alter Medicare that it might no longer be a desirable – or affordable — option. They argue that those with health problems are more likely to choose traditional Medicare as they do now, in part so they can keep their current doctors. And since the sick tend to use more health care services than healthy people, that would drive up premiums and spur healthier people to choose less expensive, private plans.

“The real question is what it would cost,” and whether seniors would pay more out of pocket than they do now, said Jonathan Gruber, an economist at the Massachusetts Institute of Technology. Besides the government-run plan attracting the sickest people, he predicted private plans would lure the healthiest with perks like gym memberships and vision plans. Higher numbers of medical providers could abandon the program if Medicare cut their reimbursement rates to curb costs, he added.

Q. Would the changes apply to current seniors?

Ryan’s plan would apply only to those under age 55. Current Medicare beneficiaries and those nearing eligibility would continue to get Medicare as it exists today.

Q. Would seniors pay more under Ryan’s plan?

The Congressional Budget Office estimated that Ryan’s original proposal for 2012 would require a typical 65-year-old person to pay a lot more for Medicare by 2030. His latest plan is missing key details, however, so the CBO has been limited in its analysis of the impact.

Although Ryan would give future seniors the option of remaining in the traditional, government-run Medicare program, that program would have to compete with private plans.

Q. Ryan’s most recent plan is similar to one he co-authored with a Democrat last year. Does that mean it has bipartisan support?

No. Sen. Ron Wyden, D-Ore., did not endorse Ryan’s Medicare plan in the last House budget resolution. It is similar to a plan that the two wrote together last year, but there is an important difference. The limit on federal spending per beneficiary was not as strict in the plan they wrote together: The two had placed the cap at GDP growth rate plus 1 percent. Also, no other Democrat supported their 2011 proposal.

Q. How do Ryan’s proposals compare to Democratic plans?

President Obama and many Democrats have said they agree the federal government needs to restrain the growth of Medicare spending, but they seek to do it without making direct cuts to benefits. Democrats want to preserve the program’s defined benefit basis, meaning that the government will pay whatever it takes to cover a specified set of services. During budget deficit reduction negotiations in Washington, Obama proposed holding Medicare spending to half a percentage point higher than the growth rate of the economy. Ryan later adopted the same cap.

As part of last year’s budget negotiations, Obama also proposed gradually raising the Medicare eligibility age – if Republicans agreed to revenue raising proposals. They failed to reach agreement, however.

The Democrats’ health law tackles Medicare spending growth, in part, by creating an expert panel, called the Independent Payment Advisory Board (IPAB), which would be responsible for finding ways to reduce spending if Medicare grows at a higher rate than the target. But the board is not allowed to recommend anything that would ration care or that would change benefits, eligibility or cost sharing for Part A (hospital services) or Part B (physician services). It also couldn’t do anything to change the percentage of premium that seniors pay for prescription drug coverage, or the subsidies that low-income individuals get. The expectation is that reductions would come from medical providers, although hospitals are protected at first.

The panel’s future may be in question, however, as Republicans – and some Democrats – have sought to kill it, arguing unelected officials would have too much control over Medicare and might ration care despite the prohibition. Obama has yet to nominate the panel’s 15 members, who must be confirmed by the Senate.

Some health care analysts also argue that reducing payments to medical providers could lead them to stop accepting new Medicare patients. Richard Foster, Medicare’s chief actuary, warned in the 2012 Medicare trustees’ report that the health law will eventually lower payments to medical providers so much that “Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result.”

Q. If both Obama and Ryan are proposing a target rate of GDP growth plus half a percentage point for Medicare, wouldn’t federal spending be the same under both scenarios?

There are important differences. Ryan’s plan is a hard cap on federal spending. He would automatically lower Medicare spending so that it is below the trigger level.

Obama is proposing a target that might not bring federal spending down to that level. If federal spending per Medicare beneficiary rises faster than GDP plus a half percent – a determination made by the Medicare actuary – then the expert panel must recommend cuts to Congress, which would go into effect unless lawmakers passed an alternative cost-cutting plan. The cuts would come as a percent reduction in Medicare spending, and wouldn’t necessarily be sufficient to meet the target.

Q. Republicans have claimed Democrats cut $500 billion from Medicare to finance the health law. How does the Ryan plan address that?

The Ryan plan calls for those same reductions even though it would repeal the health law. In the health law, those reductions, over a 10-year period, mostly affect hospitals, health insurers, home health, and other providers who supported the health care measure because it extended coverage to 30 million uninsured Americans, raising the number of paying customers. The law also significantly reduced payments to private Medicare health plans.

The CBO has updated the estimate of reductions from future Medicare spending to about $700 billion.

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2013 Medicare Drug Plan Premiums Will Be Similar To This Year — On Average

Marilyn Werber Serafini — Tue, 07 Aug 2012 14:04:12 +0000

UPDATED 1:55 p.m. Aug. 7

Premiums for private will be about the same in 2013 as they have been over the past two years, according to the Department of Health and Human Services.

Based on drug and health plan bids, for an individual next year will be about $30 for basic prescription drug coverage. That’s close to what it was in both 2011 and 2012.

That is the average premium, however, and won’t necessarily be available to everyone. In some regions, individuals will have their choice of lower-cost plans, but in others the price could be more than twice that average.

“Some folks won’t have access to plans at this price,” said Joe Baker, president of the Medicare Rights Center, a consumer advocacy group. “The bigger issue is that seniors have too much choice, or too much non-meaningful choice.” Seniors, he said, “tend to go for lower premiums, which look more affordable, but they can be surprised when their drug isn’t in the formulary.”

In addition, it is difficult to weigh the value of a prescription drug plan until information is available about other cost-sharing requirements. For example, a drug plan might charge a low premium, but higher co-payments.

That information is not yet available.

Still, HHS encourages Medicare beneficiaries to available to them each open season on the Medicare website to make sure they are enrolled in the plan that suits them best. Beneficiaries can make those choices during the plans’ open season, which runs from Oct. 15 through Dec. 7.

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Bill Frist To GOP Governors: Get Cracking On Exchanges

Marilyn Werber Serafini — Wed, 18 Jul 2012 16:27:20 +0000

A former GOP power player is urging Republicans to rethink their rejection of the health law and to implement state insurance exchanges – and to do it now.

Judging The Health Law

Bill Frist, a former Republican Senate majority leader and heart transplant surgeon, that state officials should not pass up the opportunity to build the insurance exchanges that are right for them. (Under the law, if a state that doesn’t create its own exchange, the federal government will parachute in to do the job).

“Originally a Republican idea, the state insurance exchanges mandated under the Affordable Care Act (ACA) will offer a menu of private insurance plans to pick and choose from, all with a required set of minimum benefits, to those without employer-sponsored health insurance,” wrote Frist, who is also a member of The Kaiser Family Foundation board. (KHN is an editorially independent project of the foundation.) “These exchanges are expected to bring health insurance to an additional 16 million Americans. Unlike the Medicaid expansion, these Americans will gain private insurance, and can choose the plan that’s right for them.”

have taken the first steps to set up exchanges, basically online insurance marketplaces. The health law has received withering criticism from many Republican governors, and some have refused to establish exchanges. Some were waiting for a decision on the law from the Supreme Court, and are Still others are holding out hope that Republicans will win big in November and repeal the entire law.

But Frist, who isn’t a fan of the law’s insurance mandate, believes state-based exchanges are a good idea.

“State exchanges are the solution,” he wrote. “They represent the federalist ideal of states as ‘laboratories for democracy.’ We are seeing 50 states each designing a model that is right for them, empowered to take into account their individual cultures, politics, economies, and demographics. While much planning has yet to be done, we are already seeing a huge range in state models. I love the diversity and the innovation.”

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How The SCOTUS Medicaid Ruling Could Save Money

Marilyn Werber Serafini — Wed, 11 Jul 2012 12:29:00 +0000

This story was produced in collaboration with .

The Supreme Court ruling on the health care law could have an unexpected effect — saving the federal government money, say some budget experts.

The exact amount of savings is still unknown, because it depends on how many states decide not to expand their Medicaid programs, now that the court has said that they have a choice in the matter. Washington would save because it will provide the lion’s share of funding for the jointly-run program for the poor and disabled.

Already, Republican governors in about a dozen states are threatening not to move forward with the expansion, including Texas, Florida, Mississippi, South Carolina, Louisiana and Wisconsin. Some, like Texas and Florida, have given a firm “no” to the expansion, while others – like Wisconsin – have hinted there’s a bit of wiggle room.

The details won’t become clear until the nonpartisan Congressional Budget Office weighs in the week of July 23 with estimates of how the court’s ruling will affect federal spending. In the meantime, the Republican-controlled House has scheduled a vote to repeal the entire law on Wednesday. The bill is expected to pass the House easily, but it won’t go any further since Democrats control the Senate and White House.

Deficit reduction – and the role of the health law in that – is expected to be a political issue for the foreseeable future. Congress early next year must negotiate a budget deficit reduction deal or face automatic federal spending cuts of as much as $1.2 trillion on everything from Medicare to defense.��

Here’s how the court’s decision may affect federal spending:

If a state declines the expansion, only about one-fifth of the people who would have qualified for Medicaid will be eligible instead for federal premium and cost-sharing subsidies, according to Genevieve Kenney, senior fellow at the Urban Institute. (The law makes people up to 138 percent of the federal poverty line eligible for Medicaid; those between 100 percent and 138 percent could alternatively receive subsidies.) The subsidies cost more, but the federal government would provide them to far fewer people, .

In 2016, for example, the per-person cost of providing Medicaid would be about $5,400, according to . The average cost of providing subsidies instead would be more, the data show. It’s about $5,210 for an average adult, but this low-income population is not average. These enrollees will get more in the way of subsidies, because they will qualify for the maximum amount of subsidies, raising the pricetag higher than what it would be if they got Medicaid.

In Florida, for example, 1.3 million people would be newly eligible for Medicaid if it expands its program, according to the institute. But, if the state declines, as Republican Gov. Rick Scott wants to do, the federal government would instead pay out subsidies for private insurance to about 300,000 of those people.

To be sure, the cost data is rough, and the eventual outcome would vary from state to state. Some conservatives project that the federal government’s costs would rise. The Heritage Foundation and the American Action Forum are among groups that have come up with estimates, one of which projects that the federal government could spend up to $100 billion more per year.

Heritage’s Drew Gonshorowski calculates that the federal government will spend between $34 and $90 billion more over 10 years. While he believes that the subsidies will cost more than Medicaid, he argues that the same number of people will get subsidies as would have received Medicaid.

He predicts that CBO’s forthcoming report will bear that out. CBO scoring estimates in the past “find that less enrollment in Medicaid combined with more enrollment in exchanges results in more spending,” Gonshorowski wrote in a July 6.

Politically, if even one state declines the Medicaid expansion, it would not be welcome news to President Barack Obama and to Democrats, who are counting on Medicaid to expand health insurance coverage to an estimated 17 million people.

People between 100 percent and 138 percent of the federal poverty level (currently $11,170 to $15,415 in annual income for an individual) would instead get the federal subsidies. But most adults below the poverty level would likely remain uninsured. That could amount to 11 million adults, the Urban Institute says.

As congressional and presidential campaigns kick into high gear, both parties are using the court decision to make their case against the other. Democrats point out that Republicans proposing to leave the federal Medicaid money on the table are stranding the poorest of the poor without insurance. Some Republican governors counter that budget-squeezed states can’t afford their share of the cost, and they are vocal in their opposition to complying with the health law in any way.

As part of the law, the federal government will cover the full cost of newly eligible people for the first few years, then scale back until it picks up 90 percent of the cost after 2019. That’s significantly more than the federal government pays for existing Medicaid enrollees.

Florida’s governor said in a news release July 1 that Florida will “opt out of spending approximately $1.9 billion more taxpayer dollars required to implement a massive entitlement expansion of the Medicaid program. … The burden increasingly shifts to Florida taxpayers in future years. Medicaid, which has been growing for years at three-and-a-half times as fast as Florida’s general revenue, will soon grow even faster under ObamaCare, and education funding will be adversely impaired if we do not control the growth in Medicaid spending.”

The partisan rhetoric, though, won’t greatly affect the elections, either at the national or state level, according to Robert Blendon, professor of health policy and political analysis at Harvard. Some of the most vocal opponents of the health law either aren’t up for reelection or are trying to please voters who dislike the health law, he said.

“Core voters for [Texas Republican Gov. Rick Perry] want him to oppose this bill [and] the president is not going to carry Texas. The people who vote against him don’t want the law to go forward,” Blendon said.

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CBO To Release New Budget Numbers for Health Law Week of July 23

Marilyn Werber Serafini — Mon, 09 Jul 2012 16:29:00 +0000

The Congressional Budget Office will release its estimate of the federal budgetary impact of the Supreme Court health law ruling the week of July 23, according to a by CBO Director Doug Elmendorf.

“Because such updated projections are the base against which CBO will estimate the budgetary effects of changes in the ACA, CBO cannot provide estimates of the effects of such changes—including the effects of repealing the ACA—until that assessment is completed during the week of July 23rd,” he wrote.

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Some Employers Waiting Until After Elections To Prepare For Health Law

Marilyn Werber Serafini — Mon, 09 Jul 2012 16:22:13 +0000

For one in six employers, the Supreme Court’s health law decision wasn’t enough to convince them to prepare for big changes set to take effect in 2014, according to Mercer, an employer consultant. Mercer surveyed 4,000 employers after the court’s ruling, and found that 16 percent still intended to wait until after the November election to make plans for how to comply with the law.

Mitt Romney, the presumptive GOP presidential nominee, has vowed to repeal the law if elected. He could succeed if Republicans continue to control the House and win 60 votes in the Senate, but political observers aren’t predicting that outcome.

That may be why most employers had either begun preparations already (44 percent) or said they will now start (40 percent).

Mercer, for its part, is advising employers to get moving. “Although the law still faces a contentious political outlook, employers should stay on track in their efforts to comply with the law as enacted or else they may face penalties,” according to its news release.

Mercer will offer more details from its survey on July 12.

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How Many Will Remain Uninsured if States Don’t Expand Medicaid?

Marilyn Werber Serafini — Thu, 05 Jul 2012 21:28:59 +0000

Since the Supreme Court ruled that states won’t be required under the health law to expand Medicaid, Washington has been buzzing with estimates about the numbers of poor people who could be left uninsured. But the numbers so far have been inflated, because they included both those who would become eligible for the first time and those who already are eligible for Medicaid – and will still qualify – even if their state passes on the Medicaid expansion.

Today, the Urban Institute released with state breakdowns that looks only at those likely to be left uninsured if a state chooses not to expand Medicaid. According to the institute, 11.5 million of 15.1 million adults who are potentially eligible for Medicaid under the health law wouldn’t qualify either for that coverage or for federal subsidies to purchase private insurance through state online insurance marketplaces without an expansion.

Florida’s Republican Gov. Rick Scott said in a news release July 1 that his state won’t expand its Medicaid program, and governors or state officials in at least seven other Republican-led states, including Texas, Louisiana and Wisconsin, have said they likely won’t.

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Is A Competitive Health Care Model All It’s Cracked Up To Be?

Marilyn Werber Serafini — Thu, 20 Sep 2012 12:36:00 +0000