TOPICS > Health

Medicare Set for Big Cuts Under Overhaul Plans

September 28, 2009 at 12:00 AM EDT
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Depending on which, if any, health care reform plan passes through Congress, Medicare faces cuts as high as $500 billion. But what would cuts entail? Gwen Ifill reports.

JIM LEHRER: And still to come on the NewsHour tonight: going for the Olympics; closing a prison; and remembering a man of words.

That follows our look at proposals to cut Medicare costs. Gwen Ifill has that story.

GWEN IFILL: Medicare would be a lucrative source of hundreds of billions of dollars in cuts or savings over the next decade. The House bill calls for shaving more than $500 billion off the program’s expected growth. That would mean lowering payments to hospitals, nursing homes, and other providers. The Senate version, now in committee, would reduce the program by more than $400 billion.

But in both cases, Medicare Advantage, a supplemental plan that pays private health insurers more than traditional Medicare, would be trimmed. Nearly 1 in 4 seniors are in Medicare Advantage.

Such proposals are causing plenty of anxiety for beneficiaries and providers. We look at this key sticking point now with Joseph Baker of the Medicare Rights Center and advocacy group and Gail Wilensky, a former administrator of the federal Medicare program. She is now a senior fellow at Project HOPE, which supports international health education.

Gail Wilensky, one man’s or one woman’s cuts are another’s savings. Which is this?

GAIL WILENSKY: It’s both. To pretend that you can take the kind of money out of Medicare Advantage that is being discussed and not impact the benefits that people who are used to receiving these benefits will receive is just not fair to the seniors.

What we don’t know is whether we’ll see the kind of disruption we saw almost a decade ago when there was a significant reduction in what was then called Medicare Plus Choice. In that case, 900,000 seniors who had been enjoying plans found themselves without the plans that they had been used to.

We don’t know what this reduction might produce, but as the Congressional Budget Office head, Doug Elmendorf, indicated last Friday, there will be a reduction in benefits for people who’ve been on these plans.

GWEN IFILL: What kinds of benefits are you talking about that they wouldn’t get under regular Medicare?

GAIL WILENSKY: Well, regular Medicare is very siloed health care. You have physicians and hospitals and drug benefits, but there’s no interaction. And for many seniors who have multiple chronic diseases, one of the important advantages that Medicare Advantage has been able to provide is disease management and coordination among their physicians, particularly for people who have a lot of complex diseases. Plus, they get extra benefits frequently, like dental or vision, and very little in the way of premiums.

These are, for the most part, minorities and/or very low-income, but not quite low enough to be on Medicaid. I think the numbers that the government has put out is that half of the people on Medicare Advantage are with incomes at $20,000 or less, so these are relatively low-income seniors who have been used to having these extra benefits.

Cuts versus savings

GWEN IFILL: Joe Baker, OK, let's address two of the things she talked about, overall the idea of cuts versus savings, and then specifically this Medicare Advantage program, which would be targeted in either piece of legislation.

JOE BAKER, Medicare Rights Center: Of course. It doesn't matter what you call them, cuts or savings. It's definitely money being taken out of the Medicare program.

But I think there's an untold story here, and that is the money that's being invested back into the Medicare program, as well as into health insurance and other programs for people under age 65.

One of the things that both bills do, both the House and the Senate bill, is for the first time whatever savings they're taking are reinvested in the health care system. And since seniors are disproportionate users of the health care system, bolstering the health care system in whatever way I think will help them.

I mean, with regard to Medicare Advantage, I think it's a very mixed record with Medicare Advantage or Medicare Plus Choice or Medicare HMOs, whatever we're calling it this year. The bottom line is that it was started -- a program was started in order to save the government and seniors money.

So we originally started out paying 95 percent of the original Medicare government-run program costs to treat someone. Now we're paying 114 percent, or 14 percent more, and we still have a mixed quality record. We still have many plans that charge consumers money, premiums themselves.

And as for care coordination, a lot of what we're seeing in reports coming out is that quality is no better or certainly not significantly better for the amount of money we're spending. So there's a real equity argument. Why are we spending this incredible amount of money for a quarter of the Medicare population, when the other three-quarters is not getting the same similar type of subsidy?

What the Senate plan would do is encourage a medical home model, which would get a lot of that same care coordination that HMOs supposedly do. It would happen through doctors' offices. Doctors' offices would be paid more to do that. And the wonderful thing is it would be available to many people on Medicare, not just those who are in a health plan, as it ramps up.

GWEN IFILL: Well, let me direct that -- let me direct that question to Gail Wilensky. He's talking about a trade-off here, not only a trade-off within the Medicare Advantage program, but in general, for instance, prescription drugs or pre-existing conditions, things that people who are in the Medicare program could still benefit from, even if they're losing other things.

Physicians to face fee reductions

GAIL WILENSKY: Most of the benefit of health care reform, after all, right now, is going for the people who don't have health insurance. That's important. We've got to figure out a way to get insurance to the 15 percent of our population that doesn't have it. And most of those insurance rules are not going to help the people on Medicare, the pre-existing conditions. Those are not Medicare issues.

So most of these savings, the Medicare Advantage and the other Medicare savings, are going to expand coverage. Now, there is some help for seniors mainly going in to help fill up what's called the donut hole, that space where you don't have drug coverage. Now, of course, many of the people that are on the Medicare Advantage have the coverage throughout.

One of the things that we need to be careful when we talk about what doctors are going to be able to do, neither the House nor the Senate bill do anything to fix the huge problem we face for physicians under Medicare. After 2010, physicians are going to face a 25 percent reduction in fees. Now, the House bill doesn't take this on; the Senate bill doesn't take this on. That's $230 billion. It is a huge problem.

So it's hard to pretend like doctors are going to be able to do much of anything if we don't fix their big problem under Medicare.

GWEN IFILL: Well, Joe Baker, let's talk. Those are other participants. We talk about beneficiaries. We talk about health care providers in terms of hospitals, but what about physicians? Would they suffer under these kinds of cuts?

JOE BAKER: Well, I think, certainly, I think under the Senate bill, Gail is correct. I think the House bill does look in the out-years and try to scale back some of these payment decreases to physicians. And also, there are a number of pieces in the House bill that provide bonus payments to physicians for taking on additional responsibility, whether it's evaluation and management type services, which are the type of service that include preventive care, as well as coordination of care.

And I think this establishment of a medical home model, as well as an accountable care organization, another acronym coming down the pike, that is there to have doctors provide the coordination amongst a number of providers that they should be doing and that they need to be paid to do.

You know, the AMA and other physician groups have been generally supportive of both bills because of the additional payments that doctors will receive. That doesn't mean that there won't be future battles around reimbursement, not only for physicians, but as well for hospitals and nursing homes and home health care. But overall, physicians are making out fairly well amongst the provider groups.

GWEN IFILL: OK, pardon me. And, Gail Wilensky, in part -- in spite of this, more than half of seniors in the most recent polls say that they fear that any of these health care reform programs are going to take something away from them. Are they right?

Unintended consequences to Medicare

GAIL WILENSKY: They're right to be concerned. It's a lot of money. The last time we saw a big change in terms of Medicare payments was the Balanced Budget Act in 1997. There was a disruption. There was a disruption to the hospitals, in fact, so much that Congress had two follow-on give-back bills where they put some money back into the system.

The biggest concern they should have is when the Congress makes changes -- and this is clearly one of the biggest they've ever contemplated -- the unintended consequences are very hard to discern. That's my concern about Medicare Advantage is, let's not take the money down so quickly that you throw a lot of people out of plans.

GWEN IFILL: Joe Baker, are seniors right to be concerned?

JOE BAKER: Well, I think we always need to be concerned, we need to be involved, we need to be part of the debate. And seniors are definitely out there, and that's a good thing.

I think a couple things. As Gail said, this is going to happen over time. The Medicare Advantage savings that are intended are going to happen over a number of years. The savings to hospitals and other reimbursement rates are going to happen over a number of years. There's always time to ratchet back or recalibrate.

And I would say, if we're talking about the Balanced Budget Act back in '97, I think we have two important differences here in these bills. One is that the savings or cuts, the money from the cuts, if we want to call it that, is going to be reinvested in the health care system, as I said before, not in deficit reduction. It's not going to flow outside the health care system, and that's important.

And I would say secondly that a Kaiser Family Foundation study shows that the Balanced Budget Act cuts in '97 were about 12 percent of baseline Medicare spending. The Senate bill looks like it's about 5 percent, so we're talking about a smaller amount of savings than we were in 1997 and that might also mean that Congress doesn't have to come back and change this.

But if it does, it certainly has the opportunity to do so, if, as Gail says, these unintended consequences show themselves.

GWEN IFILL: Joe Baker, Gail Wilensky, thank you both very much.

JIM LEHRER: You can sample how insured Americans feel about the costs of health care reform by reading a "Patchwork Nation" blog on our Web site,