Tag Archives: Entitlement Reform

News

Is Medicare in a debt crisis? Does Medicare need to be reformed?

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Medicare is a social program that pays for the health care and prescription drugs of seniors. Forbes magazine explains the basic facts of the Medicare funding situation.

First, the facts:

Often lost in the campaign rhetoric and obscured by the opinionated news dominating the television and print media are the following background facts about Medicare, America’s most burdensome entitlement program given both the demographics and the growth expected in health care costs:

• Medicare is a taxpayer funded, government-run insurance program that is financially unsustainable in its current form. By all estimates, Medicare is spiraling into bankruptcy, with an unfunded liability of almost $38 trillion and a hospital insurance trust fund that will become insolvent in 2024, according to the 2012 Medicare Trustees Report.

• Medicare was already the single insurance program most likely to reject a claim, compared to all of the eight comparable private insurance plans studied in the AMA 2008 National Health Insurance Report Card. This rejection rate was double that of the private insurers’ average – those very same insurance companies vilified by President Obama as denying coverage to Americans.

• An increasing proportion of doctors are already not accepting Medicare patients. A 2008 report by the Medicare Payment Advisory Commission, an independent federal panel, said that 29 percent of its beneficiaries who were looking for a primary care doctor had a problem finding one. A 2008 survey by the Texas Medical Association that found that only 58 percent of the state’s doctors accepted new Medicare patients, and only 38 percent of primary care doctors did, a number shrinking due to government- decreed payment that is lower than cost. In the 2008 HSC national tracking survey, more than 20 percent of primary care doctors accepted no new Medicare patients (only 4.5 percent accepted no new privately insured patients) and about 40 percent of primary care doctors and 20 percent of specialists refused most new Medicare patients.

The rest of the article compares the Obama and Ryan plans for reforming Medicare.

Here’s a snippet:

President Obama’s plan for Medicare will not simply reduce access to doctors. According to the Medicare Trustees, Medicare payment reductions under the new law will cause hospitals, nursing facilities, and home health agencies to operate at a loss – 15 percent lose money by 2019, 25 percent by 2030, and 40 percent by 2050. The Trustees Report concluded the obvious – health care providers “would have to withdraw from serving Medicare beneficiaries, or shift substantial portions of Medicare costs to their non-Medicare, non-Medicaid payers.” Can American families with private insurance who already pay almost $1,800 per year – extra – for the underpayment by Medicare and Medicaid, subsidizing public insurance by more than $88 billion dollars per year, afford to add even more because of the president’s law?

Signed into law by President Obama is another nefarious method of reducing Medicare payments. A wholly unaccountable, government appointed 15-member Independent Payment Advisory Board, the IPAB, does not just “recommend” changes to reimbursements. It has unprecedented power to reduce (but not to increase) payments to doctors that the Secretary of Health and Human Services is required to implement. To be sure, the IPAB acts independently of the people, immune from Congressional oversight, and even beyond control of the judiciary – ensured in language within the law that isolates it from repeal.

The Paul Ryan plan changes nothing about Medicare for Americans 55 and older. Those who are younger than 55 will be given the option of choosing a private plan and then paying for it with a voucher provided by the government.

Commentary

Entitlements programs are going bankrupt: how can we fix them?

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From the American Enterprise Institute, a post that explains in brief how to reform each of the three largest entitlement programs so that they will not go bankrupt by the time today’s younger workers need them.

Here are the programs:

  1. Social Security (a social program to redistribute wealth from current workers to current retirees)
  2. Medicaid (a social program to provide health care to low income/low wealth Americans)
  3. Medicare (a social program to provide health care and prescription drugs to older Americans)

And here’s one of the solutions (for Social Security):

Social Security is the easiest entitlement program to reform and can be done without raising taxes.

  • The age should be gradually raised to 70 by 2065.
  • Benefits should be indexed to price inflation, not wage inflation, as the program’s purpose is to keep the elderly out of poverty.
  • Benefits should gradually be reduced for earners with high incomes. The system should be a way to keep individuals out of poverty, not create a dependent upper- and middle-class.

Together these three reforms would ensure Social Security stays solvent. The entire system, however, could be easily replaced with a new program designed to keep seniors out of poverty and empower them throughout their retirement. People should be given the incentive to work longer by eliminating the Social Security payroll tax for individuals over 62, and a basic income supplement should be provided to impoverished senior citizens. Workers should then be given ownership of their retirement savings by enrolling all workers 55 and younger into a retirement savings account funded by 5 percent of the worker’s earnings (2.5 percent from the individual and 2.5 percent from the employer). These simple reforms would create a system that  actually provides a safety net for needy citizens — all for 60 percent of what the U.S. currently spends on Social Security.

Click through for the other two problems and solutions.

News

Paul Ryan questions Chief Actuaries of Medicare, Medicaid and Social Security

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I found all of this stuff on the House Budget Committee web site.

Medicare and Medicaid

Paul Ryan interviews Richard Foster, Chief Actuary of the Centers for Medicare and Medicaid Services.

Excerpt of transcript:

HBC CHAIRMAN RYAN: As you may know, I’ve been working across the aisle with a member of the Oregon delegation from the Senate on a premium support plan that uses competitive bidding to help determine the contribution. Competitive bidding we’ve seen has worked well in Medicare Part D and Medicare Advantage.  I’d like to get your thoughts on choice and competition as it relates to these previous successful reform plans. Given what we’ve seen in these aspects of Medicare, do you believe that competitive bidding is a process that can be successfully applied Medicare-wide?

CMS CHIEF ACTUARY FOSTER: Yes, I think it can. Obviously, it would represent a large change from the status quo, but I think it could work. We’ve seen the signs of this – you mentioned the Part D prescription drug program, for example, where the different drug plans compete against each other on the quality of their benefit package and the premium level. And we’ve seen – every year since Part D started – a migration of beneficiaries to more efficient plans with lower premiums. So that can help. We’ve also seen for durable medical equipment that competitive bidding, in this particular area of Fee-For-Service Medicare, reduced prices that we had to pay by 40 percent.

RYAN: By forty percent?

FOSTER: Forty percent, that’s right.

RYAN: Those are the kinds of cost savings we’re going to have to achieve if want to make good on the promise of the Medicare guarantee.  This should not be a partisan issue. Competitive bidding is something Alice Rivlin has been a champion of, Ron Wyden has been talking about, the Bipartisan Policy Center, and more. There is a lot of data out there that competitive bidding when applied Medicare-wide can achieve the benefit of keeping these benefits going while attacking the root cause of cost growth.

It sounds to me like there is a real crisis, that Ryan has a plan to solve it, and that the person who is the most aware of the finances of these two entitlements agrees with Ryan.

Social Security

Paul Ryan interviews Stephen Goss, Chief Actuary of the Social Security Administration.

Excerpt of transcript:

HBC CHAIRMAN RYAN:  If we do [nothing], then we have an across-the-board cut of about 23 percent that occurs in benefits. Is that correct?

SSA CHIEF ACTUARY GOSS: Exactly… The Commissioner standing at that time would simply have 77 cents available for every dollar of scheduled benefits, and would not be permitted to spend more than that. We do not have borrowing authority. So a decision would have to be made about who would get the money. We could have an across-the-board 23% cut immediately, or a Commissioner could say, ‘Well we’re not going to pay the March benefits in March. We’ll wait until April – wait until more revenues come in to allow full payment a month late.’ After a few months we would perhaps then have to start paying benefits twomonths late. So this would be a way that it could be handled. Of course, if people have to pay rent on time, that would be a difficulty. There’s no easy way out on this… We hope and pray that Congress would indeed act well before we ever hit the Trust Fund reserve exhaustion.

RYAN: Given that we have this abrupt 23% cut that occurs in law – current law – is it not wise so start reforming now, sooner, so that the distribution of the change is spread more broadly and evenly across income cohorts? Let me ask it this way: does that abrupt 23% cut hit current senior cohorts? A person who is turning 62, or 65 today – that affects them as well, correct?

GOSS: It certainly would. They would be at an older age at that time but clearly it would affect them. That is assuming that we wait and do absolutely nothing until that point.

RYAN: So if one provides reforms soon, could you not prevent these kinds of effects from hitting those current cohorts? Could you not phase reforms in gradually that prevent that 23% cut from happening so it doesn’t affect people who are currently in or near retirement? Could you structure reforms that prevent that from happening if you act sooner?

GOSS: Absolutely. We have a number of proposals – including yours Chairman Ryan – and many other proposals that would take exactly that approach. Our trustees and everybody who speaks on this has opined extensively about the value of acting sooner rather than later, so that we can have gradual changes phased in and we have more options if we act relatively soon.

In 2006, Nancy Pelosi was asked when she would be willing to fix these entitlement programs. Her reply? “Never. Is never good enough for you?“. Democrats hate children – they want to pile debt upon debt onto future generations, who will not even have mothers and fathers to take care of them. First they smash the family with no-fault divorce and same-sex marriage. Then they run up trillions and trillions of dollars in debt handing out bailouts and green energy grants to their election fundraisers. It’s sick.