Medicare reform remains high on policy agenda

August 1, 2012

Policymakers examine Medicare reform proposals in an attempt to control spending.

Analysts are examining how the Patient Protection and Affordable Care Act (PPACA) curbs Medicare spending by some $400 billion over 10 years through system reforms, rate cuts to plans and providers and revenue increases. Medicare now covers almost 50 million people, 13 million through private Medicare Advantage (MA) plans.

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Policy makers thus are examining a range of reforms that could make Medicare more sustainable, even though none of the proposals are very popular among seniors or the public at large; even half of Republicans prefer to "keep Medicare as is," noted Juliette Cubanski, associate director of the Kaiser Family Foundation Program on Medicare Policy, at a seminar last month.

The problem is that many reforms largely shift costs to individuals, payers and states, Cubanski explained.

This includes proposals to raise the eligibility age for Medicare from 65 to 67, boost premiums on Medicare Part B, expand high-income-related premiums, and increase copayments for home healthcare, Part B services and other programs.

More substantial changes would combine Part A and Part B deductibles or eliminate Medigap first dollar coverage to curb unnecessary care. And there's considerable interest in integrating Medicare and Medicaid coverage of high-cost dual eligibles.

A more radical proposal is to shift Medicare to a "premium support" program, moving from a defined-benefit package to defined contribution from the federal government. Equally controversial is the prospect that the Independent Payment Advisory Board (IPAB) authorized by PPACA will make flat cuts in Medicare spending. IPAB is at the top of the Republican hit list, and analysts on all sides are doubtful that the board will ever become operational.

Although the role of MA plans expands under many initiatives, lower rates also are likely. So far, PPACA-authorized MA rate cuts have been offset by bonuses under a more generous MA star-rating scheme, but that is scheduled to end in another year.

Changes in benchmarks and rates over five years impose "a very big hit" on the average MA plan, but the plans will survive, said consultant John Gorman, at the seminar. He believes they must master risk adjustment and the star-rating system.

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.