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ENACT SPECIFIC HEALTH SAVINGS TO OFFSET
THE COSTS OF THE SUSTAINABLE GROWTH RATE FIX
Medicare Savings
Medicaid Savings
Evidence:
United States. White House. "The National Commission on Fiscal Responsibility and Reform." December 2010
Increase government authority and funding to reduce Medicare fraud. The Commission recommends increasing the ability of CMS to combat waste, fraud, and abuse by providing the agency with additional statutory authority and increased resources (through a cap adjustment in the discretionary budget.)
Reform Medicare cost-sharing rules. Currently, Medicare beneficiaries must navigate a hodge-podge of premiums, deductibles, and copays that offer neither spending predictability nor protection from catastrophic financial risk. Because cost-sharing for most medical services is low, the benefit structure encourages over-utilization of health care. In place of the current structure, the Commission recommends establishing a single combined annual deductible of $550 for Part A (hospital) and Part B (medical care), along with 20 percent uniform coinsurance on health spending above the deductible. We would also provide catastrophic protection for seniors by reducing the coinsurance rate to 5 percent after costs exceed $5,500 and capping total cost sharing at $7,500.
Restrict first-dollar coverage in Medicare supplemental insurance. The ability of Medicare cost-sharing to control costs – either under current law or as proposed above – is limited by the purchase of supplemental private insurance plans (Medigap plans) that piggyback on Medicare. Medigap plans cover much of the cost-sharing that could otherwise constrain over-utilization of care and reduce overall spending. This option would prohibit Medigap plans from covering the first $500 of an enrollee’s cost-sharing liabilities and limit coverage to 50 percent of the next $5,000 in Medicare cost-sharing. We also recommend similar treatment of TRICARE for Life, the Medigap policy for military retirees, which would save money both for that program and for Medicare, as well as similar treatment for federal retirees and for private employer-covered retirees.
Reduce excess payments to hospitals for medical education. Medicare provides supplemental funding to hospitals with teaching programs for costs related to residents receiving graduate medical education (GME) and indirect costs (IME). The Commission recommends bringing these payments in line with the costs of medical education by limiting hospitals’ direct GME payments to 120 percent of the national average salary paid to residents in 2010 and updated annually thereafter by chained CPI and by reducing the IME adjustment from 5.5 percent to 2.2 percent, which the Medicare Payment Advisory Commission has estimated would more accurately reflect indirect costs.
Extend Medicaid drug rebate to dual eligibles in Part D. Drug companies are required to provide substantial rebates for prescription drugs purchased by Medicaid beneficiaries. We recommend extending these rebates to Medicaid beneficiaries who are also eligible for Medicare (individuals known as “dual eligibles”) and who receive prescription drug coverage through the Medicare Part D program.
Cut Medicare payments for bad debts. Currently, Medicare reimburses hospitals and other providers for unpaid deductibles and copays owed by beneficiaries. We recommend gradually putting an end to this practice, which is not mirrored in the private sector.
Accelerate home health savings in ACA. The Affordable Care Act included several policies changing reimbursements for home health providers. The Commission recommends accelerating these changes to incorporate productivity adjustment beginning in 2013 and directing the Secretary of Health and Human Services (HHS) to phase in rebasing the home health prospective payment system by 2015 instead of 2017.
Eliminate state gaming of Medicaid tax gimmick. Many states finance a portion of their Medicaid spending by imposing taxes on the very same health care providers who are paid by the Medicaid program, increasing payments to those providers by the same amount and then using that additional “spending” to increase their federal match. We recommend restricting and eventually eliminating this practice.
Place dual eligibles in Medicaid managed care. Approximately nine million low-income seniors and disabled individuals are covered by both Medicaid and Medicare. The divided coverage for dual eligibles results in poor coordination of care for this vulnerable population and higher costs to both federal and state governments. We recommend giving Medicaid full responsibility for providing health coverage to dual eligibles and requiring that they be enrolled in Medicaid managed care programs. Medicare would continue to pay its share of the costs, reimbursing Medicaid. Medicaid has a larger system of managed care than does Medicare, and this would result in better care coordination and administrative simplicity.
Reduce funding for Medicaid administrative costs. We recommend asking states to take responsibility for more of Medicaid’s administrative costs by eliminating Medicaid payments for administrative costs that are duplicative of funds originally included in the Temporary Assistance for Needy Families (TANF) block grants.