As 'Super Committee' Ponders Medicare Cuts, Actuaries Weigh In

Margaret Dick Tocknell, for HealthLeaders Media , September 14, 2011

The concern with this approach, explained Uccello is that it will amount to nothing more than a cost shift from the government to beneficiaries and will do little to address why healthcare costs are increasing.

3.Expand the Authority of the Independent Payment Advisory Board
IPAB is the controversial board created as part of the Affordable Care Act and charged with recommending ways to control Medicare costs if spending exceeds a targeted growth rate. The targets are based on inflation until 2019, and then on the GDP plus 1%. Its recommendations will be implemented automatically unless Congress passes legislation that produces comparable reductions.

Opinions about IPAB are divided more or less along party lines. Republicans believe the board will ration healthcare, leave seniors out in the cold, and needs to be repealed. Democrats see the IPAB as a backstop or fail safe for controlling Medicare costs and preserving the program for generations to come.

Supporters would like to see IPAB given more power. As it stands right now the board is somewhat restricted in its recommendations—it can't propose to ration health care, raise revenues, increase beneficiary premiums or in any way restrict benefits or modify eligibility criteria. In addition, until 2020 most hospital services are excluded from the scope of payment changes that can be recommended.

Provisions included in various fiscal proposals would expand the scope of the IPAB by eliminating the temporary carve-outs for hospital services, allowing options for cost sharing and benefit design, and giving it authority over all federal healthcare spending. The expansion of scope could be tied to directing IPAB to meet more ambitious spending growth targets.

The added authority could allow IPAB to really explore the healthcare delivery system and help move Medicare toward a more sustainable financial model.

4.Reform the Sustainable Growth Rate System
The SGR system was enacted as part of the Balanced Budget Act of 1997 to limit the growth in spending for Medicare physician services. The system compares actual cumulative spending for Medicare physician services to a specified spending target. In theory if actual spending exceeds the target, then physician payments are reduced. The reality is that Congress usually overrides any cuts. As a result of the cumulative shortfall, physician payment rates are scheduled to be reduced by about 30% in 2012, barring another override from Congress.

One approach would eliminate the SGR, temporarily freeze physician payments, and develop a new physician payment system. The proposal would pay for the elimination of the SGR by other reductions in Medicare and Medicaid spending.

Uccello said that while eliminating the SGR would make providers more willing to see Medicare patients, it would also increase Medicare provider spending, which would need to be offset by other spending reductions. Still, going back to the drawing board would mean a new physician payment system that better aligns payments with the provision of high value care could be developed.

5.Reduce Spending for Prescription Drugs
There are several ways this could be accomplished. Medicare could be required to use its bargaining power to negotiate drug prices under the Part D program or drug rebates could extended to Medicare and Medicaid beneficiaries.

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1 comments on "As 'Super Committee' Ponders Medicare Cuts, Actuaries Weigh In"

Todd (10/7/2011 at 9:19 AM)
Paying for out-of-country care and encouraging Medicare beneficiaries to travel outside the US for surgery to certain lower cost and higher quality locations would be a great idea.




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