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March 2008

Trustees report analyzed right and left

By Larry Lipman | Wednesday, March 26, 2008, 11:06 AM

Here’s are a pair of analyses from two highly regarded think tanks on the political left and right about what Tuesday’s Medicare and Social Security trustees reports mean.

On the right, David C. John and Robert E. Moffit of the Heritage Foundation, argue that “Social Security and Medicare have promised $42.9 trillion more in benefits to senior and disabled workers than the programs will be able to pay,” and the burden will fall directly on younger generations. Their full analysis can be found here.

On the left, Paul N. Van de Water from the Center on Budget and Policy Priorities argues that Social Security’s financial problem “is relatively small and manageable.” Medicare’s problem stems from increases in health care costs, “not from structural problems with the program.” His full analysis can be found here.

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Lots to say about trustees report

By Larry Lipman | Tuesday, March 25, 2008, 05:51 PM

Lots of people have lots to say about today’s Medicare and Social Security trustees reports. Here are some of the comments:

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Jim Nussle, director, Office of Management and Budget: “The trustees report yet again triggers a funding warning in Medicare - signaling the program is in serious straits as it faces a $36 trillion unfunded obligation. In each of the last three years, the president has proposed responsible steps to slow the growth rate in Medicare - offering a more aggressive proposal each year to reflect the growing magnitude of the problem. In each of those years, the trustees have provided a sober warning. Each year, the president proposed action and Congress proclaimed action was needed. And each year, nothing was done.”

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Rep. Pete Stark, D-Calif., chairman of the House Ways and Means health subcommittee: “While the program faces demographic challenges in the future, those can be dealt with if there is a bipartisan commitment to preserve and improve the program. We should not succumb to alarmist claims that the sky is falling. The most important immediate step we can take to help Medicare’s financial outlook is to eliminate the Medicare Advantage overpayments. This corporate pork fattens insurance company profits while unnecessarily draining program resources. I can’t take seriously the claims of concern from those who protect these excessive payments at the expense of beneficiaries, taxpayers and the program’s future.”

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Rep. Roy Blunt, R-Mo., House Republican whip: “In just over 10 years, Medicare will start spending more than it collects. There are really only two paths to take: raise taxes, kick the can down the road and ignore the problem as the Democrats have advocated; or do what our constituents elected us to do, find a solution. Earlier this year, Republican Leader John Boehner (Ohio) and Democratic Leader Steny Hoyer (Md.) introduced conservative legislation that would make the needed reforms to put Medicare on a path of economic stability. I hope the majority will join us to find a solution for current and future Medicare beneficiaries.”

Robert Greenstein, executive director, Center on Budget and Policy Priorities: Medicare’s coming financial imbalances stem not from the nature of Medicare (or mainly from demographic pressures), but rather from the continuing sharp rise in health care costs throughout the U.S. health care system, in the public and private sectors alike. For the past 30 years, Medicare costs per beneficiary have risen at a nearly identical rate as health care costs per beneficiary systemwide.

Dr. Edward Langston, board chair, American Medical Association : “Findings from the latest Medicare trustees report point to the critical need to reform the broken physician payment system. Cutting Medicare physician payments 41 percent over nine years while practice costs increase is penny-wise and pound foolish. Trying to save Medicare money by slashing physician payments will ruin the physician foundation of Medicare for current and future generations of seniors.”

Barbara B. Kennelly, president/CEO, National Committee to Preserve Social Security and Medicare: “The challenges of skyrocketing healthcare costs are threatening not just seniors in Medicare but Americans nationwide. No doubt, this annual report will have the sky-is-falling crowd calling for ‘entitlement reform’ again while they continue to ignore America’s healthcare crisis and fight to protect billions in insurance industry subsidies which steal years of solvency from the Medicare program.”

David Sloane, senior vice president, AARP: “Today’s report is one more reminder that America’s health care system is in trouble. Skyrocketing health care costs are shortening Medicare’s lifespan, while reasonable steps like expanding health information technology and comparative medical research remain stalled in Congress. Costs to the program and the people it serves continue to climb - most acutely in the form of higher out-of-pocket costs for the people who rely on Medicare.”

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Supreme Court rejects retirement benefits case

By Larry Lipman | Monday, March 24, 2008, 03:06 PM

In an action likely to have enormous impact as the Baby Boom generation retires, the U.S. Supreme Court today refused to consider whether it is unconstitutional for employers to reduce health care benefits for retired workers once they qualify for Medicare.

The court’s action let stand a ruling by the federal Equal Employment Opportunity Commission which said employers could treat retirees differently by age.

AARP had challenged the ruling, arguing that the commission’s rules violated laws against age discrimination. But the commission argued that the law included an exemption that allowed employers to structure their retirement benefits to take into account Medicare coverage of those 65 and older.

The EEOC rule, which took effect in December, was a response to a 3rd U.S. Circuit Court of Appeals ruling in 2000 that said the age discrimination law required employers to spend the same amount on health insurance benefits for retirees eligible for Medicare as they did on younger retirees.

The commission’s ruling had the support of labor unions that predicted employers would reduce or eliminate retiree health benefits if the companies could not take Medicare into account when structuring benefits.

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Mayo Clinic head says Congress should get out of Medicare

By Larry Lipman | Friday, March 21, 2008, 05:38 PM

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Congress has politicized and controlled Medicare to such an extent that its payment policies are backward, Dr. Denis Cortese, president and CEO of the Mayo Clinic, told a National Press Club audience Friday.

Medicare, governed by Congress, “pays the most dollars to the regions of the country that provide the worst outcomes, the worst safety, the worst service, and the worst integrated, coordinated care,” Cortese said. “I think that’s backwards.”

Medicare should pay fees based on results, not compliance with process measures, he said.

“Paying for process is not going to guarantee that we’re getting the outcomes. We have got to measure the outcomes,” he said.

“Right now, sometimes the more mistakes we make on patients, the more we make. We don’t make the accurate diagnosis the first time, well we get paid for the next round of tests and things. It’s a little backward from the patients’ viewpoint.

“We ought to be rewarding folks for getting it right the first time.”

Cortese said Medicare has been doing “just the opposite” of paying for value and that Congress “interferes with its ability to do what it needs to do.”

Instead of a Medicare program directed by Congress, Cortese said it should be governed by a quasi-independent agency along a model similar to the Federal Reserve system or the Securities and Exchange Commission.

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Medicare says competitive bids will save a billion

By Larry Lipman | Thursday, March 20, 2008, 06:25 PM

Medicare officials announced Thursday they expect to save about $1 billion next year by using competitive bids to purchase medical equipment and supplies in 10 geographic regions around the country.

“It’s clear that we have been paying too much for medical equipment and supplies and that competition can serve as one tool to help improve Medicare’s long-term funding situation,” said Kerry Weems, acting administrator of the federal Centers for Medicare and Medicaid Services.

“At the same time, it will help lower prices for beneficiaries who have to pay for these items,” Weems said.

Medicare released the first estimates of how the competitive bidding process will affect prices for 10 categories of durable medical equipment and supplies such as oxygen concentrators, power wheel chair and diabetes testing strips.

Overall, the agency said it expects to see average savings of 26 percent in the 10 regions. The new prices only will apply to beneficiaries with a permanent residence — as listed by Social Security — in one of the regions. They are scheduled to take effect July 1.

In May, the agency is scheduled to announce which companies submitted winning bids to sell the supplies through Medicare.

The federal government has been pushing for a competitive bidding system for medical equipment and supplies for several years, claiming that Medicare is paying far more than retail prices.

Durable medical equipment suppliers have argued that the competitive bidding process will drive small companies out of the market and will result in a reduction in the quality of equipment and services.

Weems said 6,300 bid packets were sent out to suppliers in the 10 regions, of which almost two-thirds went to small businesses — those with gross revenues of $3.5 million a year or less.

Here are some examples of the average savings Medicare expects for some of the more common equipment and supplies:

  • Oxygen concentrators — Medicare now pays roughly $200 a month to rent the concentrators, which convert room air to 90 percent-pure oxygen and which retail for about $600 to $800. Under the competitive bidding program, payments will be reduced to about $141 per month, a savings of about 29 percent. The average beneficiary would save about $12 a month.
  • Hospital beds — Medicare now pays about $140 per month for three months to rent in-home hospital-style electric beds. Under the competitive bidding program, payment amounts will be reduced to about $99 per month, a savings of about 29 percent. The average beneficiary would save about $8 a month.
  • Diabetic testing supplies — Medicare now pays about $83 a month for diabetic testing supplies. Under the competitive bidding program, payments would be reduced about 43 percent to about $48 per month. The average beneficiary would save about $7 a month.

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