Lawmakers eye Medicare trims to pay for health overhaul

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WASHINGTON - As Congress moves closer to legislating a major overhaul of the U.S. health care system, lawmakers are counting on squeezing out as much as $500 billion over a decade from Medicare to help pay for its cost.

The sheer size of that dollar amount and uncertainty about what the final bill will look like worries seniors and gives Republicans an issue to exploit in opposing the overhaul.

"Lawmakers want to use Medicare as a piggy bank to pay for their experiment, and seniors are going to suffer for it," said Senate Minority Leader Mitch McConnell (R-Ky.).

Senate Majority Leader Harry Reid (D-Nev.) said that the overhaul lowers costs and improves benefits for seniors, adding, "The only thing it takes out of Medicare is the waste."

Yet in interviews, economists, advocates and care providers offered a more mixed picture of the proposed changes to Medicare, the $468-billion federal health care program for more than 45 million elderly and disabled Americans.

Amid concerns about the fast-rising expenditures on health care, the key House bill cuts $539 billion from Medicare payments over 10 years, according to an analysis by the Kaiser Family Foundation. The Senate Finance Committee bill cuts $460 billion.

Both bills spend some of the savings on other Medicare improvements and the rest on expanding health insurance coverage to the uninsured.

The bills propose to pay for free Medicare yearly checkups and preventive care and for reduced drug costs. And they keep Medicare from going broke, as projected, in 2017.

But some insurers and private health care providers warn that reduced Medicare payments could force them to trim benefits or raise out-of-pocket charges.

"There is nothing in either one of these bills that decreases the level of benefits that people on Medicare now have or increases their costs," said Joe Baker, president of the Medicare Rights Center, based in New York City.

But he conceded he cannot predict how health care providers and insurers will react.

"No one has a crystal ball," he said. "These are private companies that are going to make private business decisions."

This week, the Senate Finance Committee plans to finish work on its bill, and the House soon will seek to come up with its own version.

Here are some of Medicare reductions in current bills. 

Medicare Advantage
The single biggest target for cuts is Medicare Advantage, a popular program in which the government pays insurers to provide Medicare services.

And that prompts the biggest single worry, shared by key Democrats, that the overhaul will actually result in seniors losing some extra benefits that insurers offer, along with basic Medicare services.

The House bill reduces future payments to this program by $156 billion, the Senate bill by $123 billion.

Nationally nearly a quarter of Medicare beneficiaries are enrolled in it, though on Long Island only a fifth of them are.

Medicare Advantage is an attractive target. Studies say insurers are overpaid, getting 14 percent more than Medicare spends delivering the same services. That's an additional $12 billion this year alone.

But insurers insist they are not overpaid, and warn cuts could lead to reduced benefits.

George Stumpf of EmblemHealth, the biggest provider of those plans on Long Island, said cuts could lead to new out-of-pocket charges, such as co-pays, for beneficiaries.

Stumpf said he has talked about his concerns with Sen. Charles Schumer (D-N.Y.) and House delegation members.

Schumer favors the cut, but doesn't want seniors now in the plans to lose benefits. He supports grandfathering them in and putting the reductions into effect for new enrollees. 

Payment reductions
Another prime target are the future expected increases in Medicare payments to hospitals and other care providers.

By paying less than the predicted increase, the House bill would save $196 billion and the Senate bill $182 billion.

Health industry trade groups agreed to the reductions earlier this year, saying they could afford them by working more efficiently and by switching from paper to digital record-keeping.

"We're not cutting into the bone or even into the muscle," said Baker. "We're basically cutting into future updates."

Hospitals, which represent the biggest cost of Medicare, have said they are willing to forgo more than $80 billion in Medicare payment hikes.

Recently, Michael Dowling, president of the North Shore-LIJ Health System, launched a $400 million technological transformation of his hospitals.

Dowling is skeptical overall health care spending will drop in the next decade, but he said he will try to increase productivity to afford lower than expected Medicare payments.

For example, he said would try to reduce patients' hospital stay from 5.5 days to 4.7 days.

"You try to improve your processes," he said, "without compromising quality."

Improving care

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Other savings come for a variety of proposals in the two bills to change the way health care is delivered and paid for by Medicare over time.

One proposal sets up "accountable care organizations" of doctors, nurses and others to reduce costs, at an estimated $4.9 billion savings.

Another would encourage hospitals to reduce patient readmissions soon after release, saving as much as $19 billion.

And both bills take aim at home health care agencies. The House bill cuts payments $34 billion over 10 years, the Kaiser Family Foundation found.

"We've seen an incredible escalation of home health care," Baker said - and reports of fraud in some Florida agencies.

Spending on home care has risen nearly 10 percent a year, a federal study found, and most agencies are making money.

But home care lobbyists insist agencies are losing money.

In New York, there is a moratorium on new certified home care agencies, said Roger Noyes of the Home Care Association of New York State. The number of them has dropped from 145 to 130 since 2000.

Noyes said Medicare cuts, combined with shrinking state Medicaid funds, could result in more agencies closing. 

Past experience
The cuts to Medicare might seem dramatic, said Tricia Neuman, a Medicare expert at the Kaiser Family Foundation, but past experience shows Medicare can afford it.

In 1997, Congress cut 12 percent from Medicare, compared with the House bill's 3 percent cut and Senate bill's 5 percent.

"We didn't see hospital closures," Baker said. "We didn't see people being turned away for Medicare services."

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