As budget season approaches, premium support is gaining traction as the only viable option to save Medicare. In a recent Politico article, House Minority Whip Steny Hoyer (D–MD) is quoted as saying liberals will use Obamacare’s new provisions to combat a conservative budget that reforms Medicare using premium support.
Hoyer told reporters, “Yes, we need to make Medicare viable. We believe that the health care bill—and very frankly CBO (Congressional Budget Office) believes the health care bill will do something that Medicare very badly needs, and that is to constrain price escalation in health care.” So the left is still claiming that the health care law will help sustain Medicare’s future—but Heritage just published a new Fact Sheet showing the opposite.
Hoyer couldn’t be more wrong. Obamacare will not solve Medicare’s fiscal problem. The health law is already in the budget baseline, yet Medicare still faces trillions in unfunded obligations. Obviously, Obamacare did not solve the problem.
The health law does cut Medicare provider payments to the tune of $575 billion, but this does nothing to increase Medicare’s solvency, because the money will be used to fund other provisions of Obamacare. And then there’s the fact that the cuts probably won’t even take effect; in its 2011 Long-term Budget Outlook, “CBO assumes that several policies designed to restrain federal spending on health care will not be continued. As a result, under that scenario, mandatory federal spending on health care programs would grow faster, reaching about 10 percent of GDP by 2035. Medicare spending would grow to about 7 percent of GDP.” The Medicare Chief Actuary has also expressed his lack of confidence: “[T]he growth rate reductions from productivity adjustments are unlikely to be sustainable on a permanent annual basis.”
The left also points to the law’s delivery and payment system changes in Medicare as the silver bullet to reverse the program’s insolvency. But CBO attributes only meager savings to these programs, and history shows that time and again, similar attempts to use top-down micromanagement to improve efficiency and quality of care in Medicare fee-for-service have failed.
Instead, Obamacare’s tinkering with the current program will essentially end Medicare as we know it by replacing the existing fee-for-service (FFS) payment system, the heart of traditional Medicare, with top-down payment and delivery schemes independent of the consumer choice and competition that would enable them to prove their value. Worse, new layers of bureaucracy and compliance will discourage physicians who are already wrestling with reams of paperwork and will undermine their professional independence in the practice of medicine.
That’s not the only way Obamacare fails to make positive changes in Medicare and instead damages the current program. As detailed in a new Heritage Fact Sheet, Obamacare, with more than 160 provisions affecting Medicare, overhauls traditional Medicare. It puts the open-ended entitlement on a budget (a good idea if done correctly), but centralizes power in its Independent Payment Advisory Board (IPAB), an unelected board that has power to recommend payment cuts that automatically go into effect unless Congress intervenes. The IPAB’s actions are subject to neither administrative nor judicial review. Simply imposing more provider payment cuts will just mean less access to care for seniors, as more providers stop taking Medicare beneficiaries.
There is an alternative that would instead save Medicare. Heritage has a plan to enact structural reform, transforming FFS to premium support. As the Fact Sheet states, “Premium support restructures the financing of Medicare so that the market forces of competition and choice help drive down cost and improve quality. These changes provide Medicare patients with greater transparency and bigger savings for both seniors and taxpayers.”
For a more detailed explanation of Heritage’s Medicare reform proposal, read Saving the American Dream.
Click here to listen to this week’s Heritage in Focus podcast, in which Dr. Bob Moffit discusses his new paper, “Obamacare Ends Medicare As We Know It.”