The House Budget Committee and the Senate Budget Committee have passed budget resolutions that shoot for the sky with respect to health reform. Their proposals recommit the Republican majorities to patient-centered health reform and show a path forward for the next president. However, they do not harvest some low-hanging fruit offered by President Obama. Failure to do so might doom patient-centered health reform to the forever future.
Obamacare: Both the House and Senate budget resolutions repeal Obamacare. It is important that Congress vote to repeal Obamacare whenever appropriate, so the American people know the so-called Affordable Care Act (still unpopular), will be replaced by the next president. The House budget resolution gets the basics of reforming private health insurance right: “Individuals should be able to own their insurance and have it follow them in and out of jobs throughout their career.”
Medicare: The House budget resolution re-affirms the “premium support” model for Medicare, starting ten years hence. “Premium support” means health plans would compete to offer Medicare benefits. Within a region, Medicare would pay the premium of the average bid. Seniors who want a more expensive plan would pay the difference. One important difference between this and the current Medicare Advantage program is that Fee-For-Service (FFS) Medicare (in which the government fixes payments to doctors and hospitals directly) is not a “competitor” in Medicare Advantage. In the premium support program, if the average premium offered by private plans is lower than what FFS Medicare would pay, seniors who want to stay in FFS Medicare would pay the difference.
It is a very positive reform, which would be significantly improved if the second-lowest bid, not the average bid, were used to determine the premium support. (This was in earlier proposals, circa 2012.)
Medicaid: The House Budget Resolution reforms federal Medicaid funding from open-ended transfers to block grants. This means the federal government transfers a fixed amount of money to each state. The primary reason for the exploding cost of Medicaid is that states have a horribly perverse incentive: For every dollar they spend on this welfare program, the federal government gives them more than one dollar. President Obama has proposed to reduce this incentive another way, which Republicans have not pursued.
The House budget resolution calls these block grants State Flexibility Funds, which is also the term used in the proposed reform to the Supplemental Nutrition Assistance Program (SNAP, or “food stamps) and other federal social transfers. This is consistent with an NCPA proposal to include federal funding for Medicaid with other safety-net programs. If states could apply for State Flexibility Funds that combined funding for different safety-net programs, civil-society organizations would be able to knock down the silos that create barriers to integrating services. Importantly, this recognizes Medicaid as welfare, and not just another category of health insurance.
Low-Hanging Fruit: The House and Senate budget resolutions recognize President Obama’s budget would return us to the path of out-of-control spending, borrowing and taxation. However, there are a few items in President Obama’s budget Republicans should adopt, buying time over the next couple years until more serious reforms can be pursued. Indeed, some of the president’s sensible proposals go as far back as 2011, when he proposed them to the “Super Committee” in negotiations to relieve the budget sequester.
The President’s budget proposes $31 billion in savings over ten years by reducing Medicare’s coverage of bad debts to hospitals and other facilities. Currently, the federal government pays 65 percent of facilities’ bad debts. As far back as 2011, President Obama proposed to reduce this to 30 percent. Doing so would not only reduce the burden on taxpayers, it would force hospitals to be more transparent with respect to communicating prices and payment obligations to Medicare beneficiaries.
The president also proposes to increase deductibles for new Medicare beneficiaries, instituting a home-health deductible and adding a surcharge to Part B premiums for beneficiaries who buy Medigap (Medicare supplemental) plans. These save only $8.5 billion over ten years (p. 109). They are crude tools, but better than doing nothing. The problem with Medigap plans is they fill in beneficiaries’ deductibles and co-pays, making them insensitive to the total cost of the Medicare services they consume. Discouraging beneficiaries from buying such plans will make them more cost conscious.
With respect to prescription drugs in Medicare and Part D, the president’s budget contains many harmful price controls and attacks on intellectual property. However, there is one reform that would be beneficial: Allowing Medicare Part D drug plans to reduce the abuse of prescription drugs by limiting abusers’ to an exclusive pharmacy. This also corresponds with an NCPA proposal.
Although these reforms appear small, failing to adopt them could make further reform more difficult. For example, Medicaid reform has become much harder because of Congress’ failure to adopt President Obama’s proposal to reform “provider taxes”, as proposed in his February 2012 budget.
“Provider taxes” comprise a trick used by hospitals and states to increase their dependence on federal Medicaid money. Hospitals agree to submit to a special “tax” by the state. However, this tax flows into the state Medicaid program, which uses it to get more federal dollars. Therefore, every dollar the hospital is “taxed” actually increases its revenue by more than the tax!
If this abuse had been stopped when President Obama proposed his reforms, the savings would have been $22 billion over ten years. Unfortunately, that is the last we heard of it.
The Republican majorities’ budget resolutions are very good, which we look forward to seeing in legislation signed by the next president in 2017. Until then, Congress should not ignore the low-hanging fruit dangling in front of it.