ElderWeb

A RealPlayer webcast is online from the National Academy of Social Insurance 13th Annual conference, January 21, 2001, "The Future of Social Insurance: Incremental Action or Fundamental Reform?" This session examines emergent ideas in Medicare and discusses new conceptions of old problems. Panelists include: Marilyn Moon, Urban Institute; Sheila Burke, Smithsonian Institution and Kennedy School of Government; Mark Schlesinger, Yale University; and Gerard Anderson, Johns Hopkins University. The session is moderated by Robert D. Reischauer from the Urban Institute, and the webcast is posted by the Henry J. Kaiser Family Foundation. Additional conference information will be available soon on the web site of the National Academy of Social Insurance.

The Urban Institute released a report this week in which they analyze the impact of proposed Medicare reforms on Medicare beneficiaries. This paper is the first of a series of papers which will examine the impact of various proposals on beneficiary out-of-pocket spending, the money that beneficiaries pay in premiums, deductibles, and co-payments for the care that they receive. The study's authors point out that most of the debate on Medicare reform has centered around the cost of the program to taxpayers, but little has been said about the impact of proposed changes on the out-of-pocket costs of beneficiaries.

In this first report, in order to establish a baseline for later analysis, they estimated the out-of-pocket costs for beneficiaries 25 years from now if the program remained unchanged. They concluded that out-of-pocket spending for the average beneficiary would rise from $3,142 in 2000 to $5,248 by 2025. At this level, out-of-pocket medical costs would rise from about 22% of total income in 2000 to nearly 30% of total income by 2025. The picture is even worse for those in poor health without other insurance, who would see out of pocket costs, in dollars and as a percentage of income, rise from $4,478 (44%) in 2000 to $7,263 (63%) by 2025. Low-income single women in poor health over age 85 would experience the most severe impact, as their costs rise from $5,969 (52%) in 2000 to $9,378 (72%) by 2025.

The Association of American Physicians and Surgeons (AAPS) has issued a call to its members to opt out of the Medicare program, calling the Medicare program "regulatory Russian roulette."

An AAPS survey of doctors revealed that doctors are afraid to treat tricky cases or take on new patients, and they are spending less time practicing medicine and more complying with more than 110,000 pages of incomprehensible government regulations. The association cites "fraud and abuse" investigations like the one where Medicare sent letters to a doctor's patients sternly warning them that their doctor had broken the law, The case was eventually overturned, but only after the doctor's reputation had been ruined. In another case that was eventually thrown out, Federal officers raided a doctor's office and held his 9-year-old son, staff, and patients at gunpoint while they seized files.

The HHS Inspector General admits that most doctors are honest, but AAPS says that to some prosecutors there is no thing as a honest mistake. "Intent to defraud no longer matters. This Administration has chosen to cast a web so wide that honest doctors are ensnared. The results are ruined lives, both professionally and financially," said Dr. Jane M. Orient, AAPS Executive Director.

Medicare also makes it impossible for doctors to provide free medical care under threat of criminal prosecution. In 1995, AAPS marked the first "Medicare Patient Freedom Day" by treating patients for $1 cash, while refusing to file claims for reimbursement from taxpayers. The government responded by saying it was illegal not to file a claim for payment.

"Medicare is socialized medicine at its worst," concluded Dr. Orient. "It?s time for doctors to stand up for their patients and send government out the door."

The Subcommittee on Health & Environment of the House Commerce Committee held a hearing July 19 to discuss whether the Balanced Budget Act of 1997 (BBA 97), which reduced Medicare provider reimbursement for nursing homes, home health agencies, and Medicare managed care plans, has adversely affect patient access to care.

The subcommittee heard testimony from witnesses representing both government agencies and providers. Some of the strongest statements of the day were made by Mr. William J. Scanlon, Director of the Health Financing and Public Health General Accounting Office (GAO). He strongly discounted the complaints of providers that reduced Medicare reimbursement lead to closure of home health agencies, nursing home bankruptcies, and massive withdrawals of Medicare HMOs from the Medicare+Choice program.

On the problems of the home health industry, he said, "Home health utilization has dropped substantially, well below what would have been required to remain within the BBA-imposed payment limits. We expect the new Medicare payment system for home health services, scheduled for implementation in October, to generally provide agencies a comfortable cushion to deliver necessary services...Between 1997 and 1998, Medicare home health spending fell by nearly 15 percent, while total home health visits dropped an unprecedented 40 percent...Our ongoing work on home health spending shows that these declines continued in 1999 and that the drop in utilization was most pronounced in areas where, pre-BBA, use had grown the most and beneficiary utilization was the highest...These findings suggest that part of the contraction in service delivery since the BBA may be a correction of the excessive use when Medicare did little to control home health spending. However, it may also reflect an inappropriate response to the IPS by home health agencies."

On the problems of the nursing home industry, his comments were "Some corporate (nursing home) chains have declared bankruptcy. The new Medicare payment system for SNF services adequately covers the cost of beneficiaries' services but no longer supports the extensive capital expansions or the ancillary service business that corporate chains relied on to boost revenues...Our published and ongoing work identifies several factors that contributed to the poor financial performance of these corporations. Some corporations invested heavily in the nursing home and ancillary service businesses in the years immediately before the enactment of the PPS, both expanding their acquisitions and upgrading facilities to provide higher-intensity services. Under tighter payment constraints, these debt-laden enterprises are particularly challenged...There are indications that SNF payment rates under the BBA are likely to provide sufficient--or, in some cases, even generous--compensation for services provided to a facility's Medicare beneficiaries. "

On the massive withdrawal of Medicare HMOs from the Medicare+Choice program, he said, "Many (Medicare+Choice) plans are withdrawing from Medicare. The withdrawals are tied to a combination of Medicare program changes and plans' business decisions In addition, our ongoing work shows that payments to plans for their Medicare enrollees continue to exceed the expected fee-for-service costs of these individuals. The significance of this finding is that Medicare managed care, although originally expected to achieve program savings, continues instead to add to program cost...Our published and ongoing work suggests that several factors influenced plans' decisions about whether to participate in Medicare+Choice or to participate only in certain areas. As we reported last year, the 1999 withdrawals represented plans that were recent market entrants, had enrolled few beneficiaries, or faced competitors that had substantially larger market shares, suggesting that plans made business decisions or used business strategies that could be sustained only in an era of more generous Medicare payments...in our ongoing work, when we compared plan payments for enrolled beneficiaries in 1998 with the estimated Medicare fee-for-service costs for these individuals, we found that plans received payments that substantially exceeded what Medicare would have paid for the plans' enrollees had they been covered under the fee-for-service program."

His views are, of course, completely counter to those of industry representatives who are calling for payment increases.

The Medicare Payment Advisory Commission (MedPAC) reported to Congress that Medicare payment reductions authorized by the Balanced Budget Act of 1997 (BBA-1997) have impacted access to post-acute care (including nursing home and home health care) by recipients with the most severe care needs. The MedPAC report notes that discharge planners and other referral sources indicated that placement for patients with significant care needs has been more difficult since payment rates were reduced by BBA-1997. The MedPAC report also noted that 14% of home health agencies have closed since 1997, as further evidence that payment cuts may have been excessive.

The MedPAC report also addressed the large number of terminations in managed care plans from the Medicare Choice+ program. They observed that 407,000 beneficiaries were forced to change their plans in 1999 and 327,000 in 2000, while 50,000 beneficiaries lived in counties with no other managed care alternative in 1999, and 79,000 were in that situation in 2000.

MedPAC concluded that many of these problems exist because the legislation had the conflicting goals of reducing spending and enriching benefits. They noted that many managed care plans are reducing the prescription drug coverage in their plans due to cost pressures, and that these reductions will probably increase in the future as prescription drug prices continue to escalate. They also noted that access to a Medicare managed care plan is most problematic in rural areas.

The National Academy of Elder Law Attorneys has published a white paper stating their position on long term care reform. In this paper, they say they believe there must be a comprehensive reform of our long-term health care system to insure access to quality and cost efficient long-term health care for all Americans. The purpose of the white paper is to identify the key components to the long-term care system, analyze the problems that exist within its current structure and make recommendations for government representatives to consider in their policy-making efforts.

They propose that long term care be financed by a system of Social Insurance to be called "Medicare Part D." In this program, each beneficiary would be entitled to a pool of money (they suggest $200,000) to be used as needed, not just for nursing homes but for any type of long term care. In their program, Medicare would pay 80% of the cost of care, after a significant deductible has been paid by the individual (they suggest $10,000). After the pool of money is exhausted, the beneficiary would pay for additional services needed either privately or through private insurance. The current Medicaid program would be retained for those unable to afford the deductibles or to purchase private insurance.

They propose that this benefit be financed with an additional payroll deduction, in the same way that Medicare Part A benefits are currently financed.

The Annual Reports of the Board of Trustees of the Medicare Trust Funds have issued their annual report for 2000. Two years ago the Health Insurance (HI) Medicare Trust Fund was predicted to be insolvent by 2008, and last year's report moved that back to 2015, but this year's report indicates the fund has an additional eight years of life, and won't be insolvent until 2023. (The HI program is also known as Part A of the Medicare program.) HCFA and the White House have issued glowing press releases about the improvement since last year's report, and there are indication that this improvement will spur efforts to add prescription drug coverage to Medicare.

But the report includes some gloomy warnings. It states "Even with these important improvements, however, the HI program remains substantially out of financial balance in the long range...To correct the remaining financial imbalance under the intermediate assumptions, the 2.90 percent payroll tax (for employees and employers combined) would have to be immediately increased to 4.11 percent, or expenditures would have to be reduced by a corresponding amount (or some combination of such changes)...The magnitude of the failure is considerable, even with the improved financial outlook in this year's report."

In an interesting line deep in the trustee's report on the Supplemental Medical Insurance program (SMI or Medicare Part B), the trustees state their projections are based on an assumption that costs per beneficiary, which have been increasing faster than per capita GDP since the inception of the program, will gradually decline and stabilize in the future. The report states, "This assumption may seem at odds with historical experience... However, if the historical trend were to continue for another 75 years, it would result in an SMI program so large as a percent of GDP that it would be implausible given other demands on those resources." In other words, the predictions do NOT mirror the historical trends of the last 35 years, because it seems implausible that costs could continue to rise at historical rates.

It is interesting to compare that to a report, "The Medicare Monster," written by historians Steven Hayward and Erik Peterson. In this report, Hayward and Peterson reflect on cost predictions made at the origination of the Medicare program in 1965 and compare those predictions to the actual costs later incurred. They noted that the House Ways and Means Committee at that time also predicted that costs would not mirror historical trends. The committee report said, "It is inconceivable that hospital prices would rise indefinitely at a rate faster than earnings because eventually individuals?even currently employed workers, let alone older persons?could not afford to go to a hospital under such cost circumstances." In fact, that is exactly what happened!

HCFA's Office of the Inspector General (HHS/OIG) has found that Medicare carriers paid over $20 million in 1997 for services dated after the death of the beneficiary. About $12 million was paid before the date of the beneficiary was entered into the system, but $8 million was paid even though the information in the system already indicated that the beneficiary was deceased. The majority of these claims were for durable medical equipment (DME). The OIG concluded that the Medicare contractors had insufficient procedures in place to track and monitor payments to deceased beneficiaries. The OIG recommended that post-payment review procedures be implemented by contractors, since payments made immediately subsequent to the death of the beneficiary may be processed before the date of death is entered into the system. The OIG also recommended that HCFA policy require an automatic edit process in payment systems which would deny all payments for service dates subsequent to the date of death.