Healthcare Business News
Merrill Goozner, Editor of Modern Healthcare

No answers in quick fixes

Rigorous vetting can lead to solutions for concerns over Medicare, Medicaid

By Merrill Goozner
Posted: December 15, 2012 - 12:01 am ET

Anything done in haste isn't likely to stand the test of time, especially when it comes to fundamentally restructuring the nation's signature healthcare programs. Major changes to Medicare and Medicaid made during a last-minute fiscal cliff negotiation will likely come back to haunt Congress and the White House unless all the ramifications have been carefully considered and every affected constituency has had their say, especially providers.

Take one of the leading issues being discussed on Capitol Hill to show that the government is ready to “get tough” on entitlement programs: raising the Medicare eligibility age from 65 to 67. At first blush, there's a lot to recommend this proposal. People are living longer; the Social Security age has already been increased to 67; and the Congressional Budget Office says it would save the federal government $124.8 billion between 2014, when a phase-in could go into effect, and 2021.

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Many providers say they would be major beneficiaries of the move, too. Medicare patients who switch to private insurers would pay higher rates to hospitals and physicians, and the savings would be more than sufficient for the feds to reverse next year's nearly 31% legislated cut in Medicare physician pay. It's classic Washington budget gimmickry. Use 10 years of savings in one part of Medicare to pay for one year's costs in another.

But what are the long-term effects of this significant change in the life expectations of every working American? People between the ages of 65 and 67 would immediately become the most expensive nonelderly people to insure in the private market. That will substantially raise premiums for their employers, who already bear the brunt of cost-shifting to pay for the uninsured. Meanwhile, copays for seniors already in Medicare will go up as the healthiest cohort among the old—those just entering their golden years—wait an additional two years before entering the program.

Moreover, not everyone who reaches 65 has full-time employment that provides coverage, especially in these tough economic times. Many will have to buy coverage from the new health insurance exchanges, where some will be eligible for subsidies either from the federal treasury or Medicaid—at least in those states that expand coverage. For providers, that means a portion of people previously covered by Medicare will now be covered by Medicaid, which pays lower rates. The uninsured will wind up paying next to nothing for their emergency-room care. Bottom line: Raising the Medicare eligibility age isn't cost-saving. It is cost-shifting and a false solution to the problem of rising healthcare costs.

Other quick fixes being considered create similar side effects for other parts of the provider community. For instance, the government may cut payments for graduate medical education, a perennial target of the Medicare Payment Advisory Commission. The CBO says the move could save nearly $70 billion over the next decade. But if teaching hospitals respond by lowering residents' already-low pay and those doctors-in-training take on more debt, it will discourage them from entering primary care. The last thing we need is another incentive for young doctors to enter the high-paying specialties.

The budget problems of the federal government are real. There is a national consensus that entitlement programs need adjusting. The Patient Protection and Affordable Care Act lays out a broad scheme to achieve that goal by making providers become more efficient. The law needs time to see if it can work.

It wasn't so long ago that one of the presidential candidates was running around the country promising to restore more than $700 billion in Medicare cuts, in part because they hadn't been properly vetted during 18 months of deliberations on Capitol Hill over “Obamacare.” What's likely to be said about even more provider cuts—and a hasty decision to raise the Medicare eligibility age—if they are decided in a backroom deal without a single congressional hearing?

Merrill Goozner, Editor

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