RE­FORM:

Medi­care, Med­i­caid may dou­ble? Provider cuts likely

Modern Healthcare - - NEWS - Jes­sica Zig­mond

Lat­est bud­get, re­form pro­jec­tions just add to anx­i­ety

Up­dated bud­get pro­jec­tions and health re­form law es­ti­mates from the non­par­ti­san Con­gres­sional Bud­get Of­fice gave al­ready-anx­ious providers more to worry about, eco­nomic an­a­lysts said last week.

Sand­wiched be­tween the pres­i­dent’s fis­cal 2013 bud­get in Fe­bru­ary and the House Re­pub­li­can bud­get blue­print that’s ex­pected this week, the CBO on March 13 re­leased up­dated base­line pro­jec­tions that es­ti­mate the cost of Medi­care will nearly dou­ble to $1.06 tril­lion in 2022 from $565.3 bil­lion in year 2011.

The es­ti­mates in­clude a $7 bil­lion re­duc­tion in pro­jected Medi­care spend­ing be­tween 2013 and 2022 be­cause of a $107 bil­lion re­duc­tion in pro­jected spend­ing for pre­scrip­tion-drug ben­e­fits un­der Medi­care part D. That re­flects an “in­crease in the num­ber of high-vol­ume drugs with generic sub­sti­tutes avail­able and changes in drug uti­liza­tion,” largely off­set by in­creases in pro­jected spend­ing for ben­e­fits in parts A and D.

Med­i­caid, mean­while, is ex­pected to rise to $622 bil­lion in 2022 from $275 bil­lion in 2011. Over­all, the re­port noted that the in­creases in fed­eral health­care pro­grams will in­cur about $93 bil­lion more than the $1.1 tril­lion in debt for 2012 that the CBO es­ti­mated in Jan­uary.

“They project Med­i­caid out­lays to go up $143 bil­lion,” said Tom Miller, res­i­dent fel­low at the Amer­i­can En­ter­prise In­sti­tute, a think tank in Washington. “The rea­son why Med­i­caid is up is be­cause of a more pes­simistic out­look: There are go­ing to be more low-in­come peo­ple and

less peo­ple get­ting em­ployer cov­er­age.”

As a re­sult, hos­pi­tals “can’t be too pos­i­tive” by hav­ing more of their pa­tients be­ing cov­ered by Med­i­caid than be­fore, he said.

Days af­ter re­leas­ing pro­jec­tions, the Cbo—along with the non­par­ti­san con­gres­sional Joint Com­mit­tee on Tax­a­tion—of­fered es­ti­mates on the ef­fects of the Pa­tient Pro­tec­tion and Af­ford­able Care Act on peo­ple with em­ployer-based health in­sur­ance. The agen­cies es­ti­mated that 3 mil­lion to 5 mil­lion fewer peo­ple each year will ob­tain cov­er­age from their em­ployer from 2019 through 2022. Ear­lier, the CBO and JCT had es­ti­mated the num­ber of peo­ple re­ceiv­ing cov­er­age through their em­ployer would be about 3 mil­lion lower in 2019 un­der pre­vi­ous law.

The re­port also laid out four mod­els that re­flected al­ter­na­tive as­sump­tions about em­ploy­ers’ be­hav­ior. In one sce­nario, the two agen­cies es­ti­mated that the Af­ford­able Care Act would re­duce em­ploy­ment-based in­sur­ance cov­er­age in 2019 by 20 mil­lion peo­ple, com­pared with 5 mil­lion in the base­line pro­jec­tions.

The pivot point will come in 2014, when a new mar­ket emerges that could change de­pend­ing on how peo­ple re­act to it, Miller said.

James Capretta, a fel­low at the Ethics and Public Pol­icy In­sti­tute in Washington, said a new mar­ket could lead to “sort­ing” from em­ploy­ers to make the most of tax sub­si­dies. Then low-wage work­ers would end up with cov­er­age in the ex­changes, while higher-wage earn­ers would stay in tax-de­ferred plans from their em­ploy­ers.

For providers, the loom­ing cloud in the bud­get-con­scious en­vi­ron­ment is a fa­mil­iar one: The threat of more cuts in re­im­burse­ment.

“The guar­an­teed way to hit a bud­get tar­get is provider pay­ment re­duc­tions,” Capretta said. “On pa­per, us­ing Cbo-type es­ti­mates, if you’re try­ing to save a few hun­dred bil­lion in health spend­ing, the surest, eas­i­est way to get there is provider cuts.”

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