MEDI­CARE: Obama leaves in­dus­try guess­ing on health­care changes

Obama’s ad­dress leaves in­dus­try guess­ing on changes to health­care

Modern Healthcare - - NEWS - Jes­sica Zig­mond

Pres­i­dent Barack Obama’s blink-and-you’ll-miss-it men­tion of health­care in his State of the Union ad­dress left in­dus­try lead­ers to spec­u­late how far the ad­min­is­tra­tion will go to­ward re­form­ing Medi­care to re­duce the na­tion’s deficit—and which pro­grams will take the hard­est hit in the process.

Fo­cus­ing his speech on eco­nomic growth, the pres­i­dent said law­mak­ers must be­gin by mak­ing bud­get de­ci­sions that will af­fect the na­tion’s re­cov­ery and added that “the big­gest driver of our debt is the ris­ing cost of health­care for an ag­ing pop­u­la­tion.” He also said those who care about pro­grams such as Medi­care must em­brace a need for mod­est re­forms to keep it alive. But af­ter mak­ing th­ese as­ser­tions, the pres­i­dent of­fered scant de­tails on what re­forms he hopes to achieve, or how deeply he’ll change Medi­care for the sake of deficit re­duc­tion and the pro­gram’s fu­ture.

“It’s very hard to read be­tween the lines when there weren’t many lines,” said Ilisa Halpern Paul, man­ag­ing government re­la­tions di­rec­tor at Drinker, Bid­dle & Reath in Washington.

Those lines came early in the ad­dress, when the pres­i­dent said he’s pre­pared to en­act re­forms that would achieve the same amount of health­care sav­ings at the be­gin­ning of the next decade as those out­lined in the Simp­son-Bowles plan, the late-2010 deficit-re­duc­tion pro­posal from the pres­i­dent’s na­tional fis­cal com­mis­sion led by former Clin­ton ad­min­is­tra­tion chief of staff Ersk­ine Bowles and former Sen. Alan Simp­son (R-Wyo.). Ac­cord­ing to the Cen­ter on Bud­get and Pol­icy Pri­or­i­ties, the Simp­sonBowles plan would shave about $480 bil­lion from Medi­care and Med­i­caid be­tween 2013 and 2022. Mean­while, the Obama ad­min­is­tra­tion es­ti­mates the pres­i­dent’s bud­get would yield about $340 bil­lion in health­care sav­ings over that pe­riod.

“The bot­tom line is that if you think Bowles-Simp­son’s Medi­care sav­ings rep­re­sented a real sav­ings tar­get, the pres­i­dent’s pro­pos­als are in the same ball­park,” said Paul Van de Water, a se­nior fel­low at the Cen­ter on Bud­get and Pol­icy Pri­or­i­ties, a left-of-cen­ter re­search cen­ter. “It’s not fair to ac­cuse the pres­i­dent of not achiev­ing Medi­care cuts. They are about the same in the 10th year.”

But while Obama al­luded to the Simp­son-Bowles plan as a way to sug­gest a tar­get num­ber, he of­fered only hints at how to achieve those bud­get sav­ings. He also cred­ited the Pa­tient Pro­tec­tion and Af­ford­able Care Act with slow­ing the growth of health­care costs, although the CMS ac­tu­ar­ies con­cluded last month that the law’s pro­vi­sions in 2010 and 2011 have had only a min­i­mal ef­fect on health spend­ing growth.

The few specifics came when the pres­i­dent said he wants to “de­crease tax­payer sub­si­dies to pre­scrip­tion drug com­pa­nies and ask more from our wealth­i­est se­niors.” The lat­ter refers to ex­panded means-test­ing in Medi­care, while the former refers to a pro­posal in the pres­i­dent’s bud­get last year that would align Medi­care drug pay­ments with poli­cies in Med­i­caid for low-in­come ben­e­fi­cia­ries.

Cur­rently, drug man­u­fac­tur­ers pay spec­i­fied re­bates for drugs given to Med­i­caid ben­e­fi­cia­ries, while Medi­care Part D plan spon­sors ne­go­ti­ate with man­u­fac­tur­ers for plan-spe­cific re­bates. The pres­i­dent’s pro­posal would re­quire drug man­u­fac­tur­ers to pay the dif­fer­ence be­tween re­bate lev­els they pro­vide Part D plans and Med­i­caid re­bate lev­els. Ac­cord­ing to the non­par­ti­san Con­gres­sional Bud­get Of­fice, that pro­posal could save about $137 bil­lion over 10 years.

That pro­posal drew strong re­sis­tance from the Phar­ma­ceu­ti­cal Re­search and Man­u­fac­tur­ers of Amer­ica, which crit­i­cized the idea in a state­ment a day af­ter Obama gave his speech.

“Part D is now 45% be­low the cost orig­i­nally ex­pected, and last week, while re­duc­ing

Part D’s 10-year pro­jected cost by over $100 bil­lion for the third con­sec­u­tive year, the non­par­ti­san Con­gres­sional Bud­get Of­fice pointed out that Part D is the sin­gle big­gest fac­tor re­spon­si­ble for lower Medi­care spend­ing pro­jec­tions,” Matthew Ben­nett, se­nior vice pres­i­dent at PhRMA, said in the state­ment. “Se­niors’ Part D pre­mi­ums have been flat at $30 per month— less than half the level orig­i­nally pro­jected— for the last three years.”

The lit­tle at­ten­tion the pres­i­dent gave to health­care is an im­por­tant sig­nal about his ap­proach to en­ti­tle­ment re­form. He did not men­tion Med­i­caid, which af­firms com­ments this month from Gene Sper­ling, as­sis­tant to the pres­i­dent for eco­nomic pol­icy, that the pro­gram is off the ta­ble in up­com­ing deficitre­duc­tion ne­go­ti­a­tions.

And for Medi­care, the pres­i­dent men­tioned a few pro­gram cuts, but not any struc­tural re­forms to a pro­gram that was cre­ated more than 45 years ago. Halpern Paul at Drinker, Bid­dle & Reath said real en­ti­tle­ment re­form re­quires a dis­cus­sion cen­tered on pay­ment-sys­tem re­form and align­ing in­cen­tives to­ward value and away from vol­ume, which the pres­i­dent men- tioned just briefly in his speech when he said med­i­cal bills shouldn’t be based on the num­ber of tests or in­pa­tient hospi­tal stays.

“He’s pretty clear there does not need to be sweep­ing re­form,” said Tevi Troy, a se­nior fel­low at the Hud­son In­sti­tute, a right-of-cen­ter Washington think tank and former deputy sec­re­tary of HHS in the Ge­orge W. Bush ad­min­is­tra­tion. “You can’t tinker around the edges. You need real re­forms (to) make sure it’s around for our chil­dren and grand­chil­dren,” he con­tin­ued. “Not an open-ended sys­tem that is a se­ries of prom­ises.”


“The big­gest driver of our debt is the ris­ing cost of health­care for an ag­ing pop­u­la­tion,” Pres­i­dent Barack Obama said last week dur­ing his State of the Union ad­dress.

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