A Simple Idea

Whatever you think of the Affordable Care Act (ObamaCare) there are two propositions that are hard to argue with: (1) seniors have been singled out and forced to bear a disproportionate share of the cost of a new entitlement for young people and (2) the states are administratively just not ready to implement the new program in time for its January 1, 2014, start date.

So here’s a simple proposal that is also revenue neutral: Delay the scheduled cuts in Medicare spending by five years and pay for that expense by delaying the 2014 start date of ObamaCare by two years.

Over the next 10 years, ObamaCare will reduce Medicare spending by $716 billion. The Obama administration had hoped to achieve these spending reductions through increased efficiency — based on the results of pilot projects and demonstration programs. The problem: the Congressional Budget Office (CBO) has said in three consecutive reports that these projects are not working as planned and are unlikely to save money.

One Simple Idea

Over the past two decades, Medicare’s administrators have conducted two types of demonstration projects. The first, disease management and care coordination, consisted of 34 programs that were designed to save money by reducing hospitalization. Unfortunately, these programs had little or no effect on hospital admissions. In addition, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program in nearly every case.

The second, value-based payment demonstrations consisted of four programs under which Medicare made bundled payments to hospitals and physicians to cover all services connected with heart bypass surgeries. The CBO found that “only one of the four…yielded significant savings for the Medicare program,” and in the one that did result in savings spending only “declined by about 10 percent.”

Even when they work, Medicare pilot programs are often not scalable to every doctor and hospital across the country. One reason: what works for one group of doctors and hospitals may not work for another. This was confirmed by scholars associated with the Brookings Institution when they identified 10 of the best hospital regions in the country and tried to identify common characteristics that could be replicated. There were almost none. A separate study of physicians’ practices found much the same thing. There were simply not enough objective characteristics that the practices had in common to allow an independent party to set up a successful practice by copycat alone.

Absent these efficiencies, the health reform law has a fallback device. The Independent Payment Advisory Board (IPAB) will have the power to reduce doctor and hospital fees to such an extent that access to care for the elderly and disabled will be severely impaired. Medicare actuaries tell us that squeezing the providers in this way will put one-in-seven hospitals out of business in the next eight years, as Medicare fees fall below Medicaid’s. Harvard health economist Joseph Newhouse predicts senior citizens may be forced to seek care at community health centers and in the emergency rooms of safety net hospitals, just as Medicaid recipients do today.

Consider people reaching age 65 this year. Under ObamaCare, the average amount spent on these enrollees over the remainder of their lives will fall by about $36,000 at today’s prices. That sum of money is equivalent to about three years of benefits. For 55 year olds, the spending decrease is about $62,000 — or the equivalent of six years of benefits. For 45 year olds, the loss is more than $105,000, or nine years of benefits.

In terms of the sheer dollars involved, the planned reduction in future Medicare payments is the equivalent of raising the eligibility age for Medicare to age 68 for today’s 65 year olds, to age 71 for 55 year olds and to age 74 for 45 year olds. But rather than keep the system as is and raise the age of eligibility, the reform law tries to achieve equivalent savings by paying less to providers. This will decrease access to care for seniors dramatically, and ultimately create a two-tiered health care system — with the elderly getting second class care.

A five-year delay in Medicare payment cuts can be paid for by pushing back the start date of ObamaCare from 2014 to 2016. The reason: Beginning in 2014, state health insurance exchanges are supposed to be up and running for individuals and families who lack access to employer-provided health coverage and do not qualify for Medicaid. But more than one-third of states (16) have done almost nothing to prepare for the exchanges. Another 20 states have made some progress but not enough. Further, health insurance exchanges will require significant investments in information technology that states simply cannot afford.

The delays contemplated here will give Congress time to replace ObamaCare’s command-and-control approach to health care with reforms that will empower patients, free doctors and allow competition in the marketplace.

In the meantime, delaying the start of these two major provisions will protect seniors, save taxpayers money and allow lawmakers time to enact health reforms that actually work.

Comments (20)

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  1. Webster says:

    Medicare seniors upset about entitlement system for a younger generation? Mildly hypocritical.

    The idea of government programs expecting to save money through efficiency is absurd.

  2. Stan Ingman says:

    John,

    You sound like such a kind person with your proposal.

    Save the poor elders…my own cohort.

    Not sure whose interest you are protecting.

    Industry providers and insurance companies or the elders?

    Deficits cutting is major concern of your side of the political game.

    However, when you see a political advantage, you do not like specific cuts.

    Slowing the inflation in health care has happened for many different reasons. Might have something to do with health care reform.

    Hospital readmission policy shift under reform…seems to have some positive impact on care and costs.

    As a senior I am quite willing to pay more, if inflation and coverage can be controlled and expanded, respectively.

    A society of haves and have not is not good for anyone. H. Smith new book “Who Stole the American Dream” seems to have some insight your attention.

    Stan

  3. Webster says:

    I wonder if the exchanges will actually provide those kind of savings..

  4. Jeff says:

    Good idea, even if it’s simple.

  5. Devon Herrick says:

    My own observations are that:

    1) Progressives and public policy advocates (yes, I’m being redundant) want free health care for the elderly and the poor. 2) It takes a lot of money to fund free health care for the elderly and the poor. 3) Progressives and public policy advocates believe the economic principles of supply and demand (i.e. markets) have little to do with the actual provision of medical services to the elderly and the poor. 4) Doctors make a lot of money 5) doctors do not elicit a lot of sympathy when it comes to painful policy decisions about whether to: a) cut doctor fees, b) cut services to the elderly and the poor or c) raise taxes; and finally, 6) Progressives and public policy advocates believe doctors should treat the elderly and the poor for rates far below actual costs because of items #4 and #5.

  6. George Wallaceberg says:

    The mess that is Obamacare will be subject to alternative ideas that far surpass it in practicality.

  7. Vicki says:

    I like your simple idea.

  8. Sharon Velece says:

    Sometimes the simpler the better!

  9. wanda j. jones says:

    John and Friends: The main advantage I can see of delay is to enable a new President to craft a replacement plan that could:
    1) Allow enough time for the industry to build out the kind of ambulatory capacity that could house teams and deal with groups of eligibles, so when the new benefits kicked in there would be enough of the right level of capacity;
    2) Allow enough time to replace the basic bill so it is not a permanent new entitlement;
    3) wait until a new President and staff are in place to advocate to Congress that a bill without extensive new government agency oversight be sold to the public; and
    4) allow the field to formulate specific service codes to facilitate coverage for genomic medicine, with its potential for true cure. Cure is the atom bomb for the worst of today’s medical care, anchored, as it is, in the Seventies.

    Other than that….

    Wanda J. Jones, President
    New Century Healthcare Institute

  10. Alice says:

    If the delay lead to all the changes that you and Thomas Saving discuss then I see the point.

    But if the system isn’t reformed then we’ve just kicked the can down the road again.

  11. Paul Nelson says:

    John,

    I think you should begin to advocate for a Risk Management Plan for our nation’s healthcare industry. We are now soon to complete our nation’s fourth trillion dollar deficit in a row. There is no evidence that Congress will soon have the will to work out a trustworthy plan. The largest share of the deficit is related to our nation’s very inefficient healthcare industry. The current trajectory for it’s cost will increase to 19.6 % of our nation’s GDP by 2022 (Office of the Actuary, Medicare). Any cutbacks to national reimbursement rates could lead to widespred Hospital Emergency Room Disasters from the decrease in the accessibility throughout Primary Health Care. Finally, it is likely that banks could become unwilling to loan hospitals the funds necessary to support their cash flow needs because of the overcrowding. The result will be a run of hospital closures. Then the cost of healthcare to the economy will really be problem.

    Maybe, all of this is just a bit of chicken-little. Just maybe! Currently, we have not invested in the social capital necessary to identify the root-causes for the paradigm paralysis afflicting our nation’s healthcare. The necessary social capital has been described extensively by the professional career of Professor Elinor Ostrom, Nobel Prize winner in 2009 (economics). We first need a plan to fix how the industry performs before we fix the means for its financial support. Remember, our nation’s maternal mortality rate ranks 41st worst among the 43 developed countries of the world (United Nations report 2010).

    Think Risk Management Plan!

    Paul

  12. Alex says:

    The problem I have with the ACA is that it just doesn’t work. States have tried reform like it in the past and it has always done horribly. We have no reason, none, to believe that this will do anything except expand costs, make healthcare harder to receive, and prevent any real change from taking place.

    Insisting that it will work is like insisting that tap-water will cure an infection if you just keep using more of i.

  13. Dave says:

    How much do younger people pay toward subsidizing care for seniors? Shifting some of that back isn’t singling the elderly out. It’s moving things back toward fairness.

    The states that aren’t administratively ready for the provisions of the ACA, largely, aren’t ready because they’ve intentionally dragged their feet for ideological reasons. They shouldn’t be rewarded for that by getting a hoped for reprieve.

    I’ll agree with one thing most of your other commenters are saying. The ACA should be replaced with something we know will work. We’ve got a model for that in quite a lot of other countries, including our neighbor to the north. Take corporate profit out of the delivery of healthcare. It doesn’t have to be single payer the way Canada and the UK are. It could be done through non-profit cooperatives or heavily regulated, non-profit mutual insurance. There should be no publicly traded companies with stock exchange incentives for denying people coverage.

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