White House Trial-Balloons Medicare Cost Increases

1:33 pm in Uncategorized by TomThumb


Is the Obama administration getting ready to increase costs for medicare beneficiaries?

In the New York Times, anonymous sources representing the White House offered the following trial-balloons:

But administration officials say the 1988 law affected current beneficiaries, while Mr. Obama would apply any changes only to people becoming eligible for Medicare after 2016. So far, the changes the president has proposed do not go as far as a single deductible and a cap on catastrophic costs. Instead, Mr. Obama has called for increasing the Part B deductible, which has risen much less than medical costs. He also proposed that beneficiaries pay something for home health care, which is among Medicare’s fastest-growing and most fraud-prone expenses; people just released from the hospital would be exempted. Third, Mr. Obama proposed a 15 percent surcharge on Medigap plans that cover all or nearly all of a beneficiary’s initial annual expenses. Economists say that such coverage leaves beneficiaries insensitive to costs, increasing Medicare’s spending and the premiums beneficiaries pay.”

We have seen these recommendations before in 2011, but with more description of why these changes were considered.

1.     Increasing Cost-sharing for home health care. In September of 2011, Obama had offered to make changes to cost-sharing:

“Starting in 2017, Mr. Obama would require certain new beneficiaries to pay co-payments for home health care, which is now exempt from such charges. The co-payment would be $100 per episode, defined as a series of five or more home health visits not preceded by a stay in a hospital or a skilled nursing home.”

2.     Increasing Deductibles for Part B Medicare services. From an article in the NYTs Sept. 19th, 2011:

“The proposal would require new beneficiaries to pay higher deductibles before Medicare coverage of doctors’ services and other outpatient care kicks in. The deductible, now $162 a year, is already adjusted for inflation. Mr. Obama would increase it further by $25 in 2017, 2019 and 2021″.

3.     A fifteen per cent surcharge on Medigap plans. In the article from the NYTs (Sept. 19th, 2011) Obama offered the following explanation for this increase in cost:

In addition, the White House would increase Medicare premiums by about 30 percent for new beneficiaries who buy generous private insurance to help fill gaps in Medicare. Many beneficiaries choose these private Medigap policies because they want the financial security they get from the extra insurance. But the White House said this protection “gives individuals less incentive to consider the costs of health care and thus raises Medicare costs.”

4.     Waiting until 2016 to implement the changes. Both in 2011 and now in 2013, delay until 2016 or later was recommended.

5.     Both documents demonstrate an opinion that medical care is overused.  In the latest article, seniors on Medigap insurance were described as insensitive to cost of care. In the 2011 article, seniors having Medigap insurance were described as having less incentive to consider the costs of healthcare and as being the cause of rising Medicare costs. No mention of the rising cost of healthcare, hospital services, inflation. No mention was made of the failure to regulate and make medical prices conform reasonably in relation to their actual costs. Doctors prescribe tests, not patients!

At least the current trial balloon did not include all of the other cuts to Medicare related services which describe the current Senior Protection Plan produced by Center for American Progress. Apparently this administration is determined to shrink Medicare by making it so expensive that patients will not desire to use it.

6.     Here is one new recommendation which was not in the news in 2011: Unidentified participants in meetings with President Obama, claim that he also endorsed a merger of deductibles for part A and part B:

In particular, participants say, the president told House Republicans that he was open to combining Medicare’s coverage for hospitals and doctor services. That would create a single deductible that could increase out-of-pocket costs for many future beneficiaries, but also could pay for a cap on their total expenses and reduce the need to buy Medigap supplementary insurance.” 

Since it is difficult to know whether or not this latter merger of deductibles was part of the deliberate leak prior to the presentation of the budget in April, it is probably only worth saying that this will definitely increase costs for those whose primary need are doctors visits (paid for in Part B). This is consistent with the entire group of ‘reforms’ which seem focused on shifting the burden of paying for Medicare services onto beneficiaries. Here are the current deductibles:

The deductible for Part A hospital care is relatively high ($1,184 this year), while that for Part B doctor care is relatively low ($147). Patients also have co-payments for many services.

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