Grassley: Medicare Cuts Are Blunt Instrument, Would Threaten Beneficiaries’ Access to Care
Over the past few days, we've been talking about various aspects of the health care reformbills the majority has brought forward so far. Today, I'm going to review the impact thesebills would have on Medicare beneficiaries. First, there's the Senate Finance Committee bill.It cuts Medicare by around $470 billion over 10 years. The House version takes an evenbigger bite out of Medicare. In that bill, Medicare is cut by around $540 billion. That's morethan half a trillion dollars in Medicare cuts.
Cuts of this magnitude are sure to hurt Medicare providers and threaten beneficiary access tocare. Taking a look at the cuts in these reform bills shows why there is genuine concern thathealth care for Medicare beneficiaries will suffer greatly because of health reform. Theproposed legislation permanently cuts all annual Medicare provider payment updates.Permanently. Forever. In addition, some providers like hospitals, home health agencies andhospices would face additional cuts over the next ten years. These permanent cuts aresupposed to reduce Medicare payments to account for increases in productivity by healthcare providers.
Supporters of these productivity adjustments believe that Medicare generally overpaysproviders. This is because today Medicare payments do not take into account productivityincreases that might reduce the cost of providing care to beneficiaries. But this proposal forproductivity adjustments is an extremely blunt instrument that will threaten beneficiaryaccess to care. It is flawed in at least two ways.
First, the productivity measure used to cut provider payments in the bill does not representproductivity for a specific type of provider like nursing homes. I mean you would think thatif Medicare is going to reduce your payments to account for increases in productivity itwould at least be a measure of your productivity. But that's not the case. Instead, thesereform bills would make the payment cuts based on measures of productivity for the entireeconomy. So if the productivity in the economy grows because computer chips and otherproducts are made more efficiently, then health care providers see their payments go down.But there is a second major problem. This other problem is that the productivity adjustmentactually punishes providers for increases in productivity. This policy says that when aprovider is more productive, Medicare takes it all. The provider doesn't even get to keep halfof the financial benefit for that increase in productivity. By confiscating the entireproductivity increase, it removes all the incentive for providers to improve theirproductivity. It's a typical government policy – if you do better, the government wants itsshare. But here, the government takes it all.
So these cuts are sure to impact health care for seniors. But don't just take my word for it.The Chief Actuary at the U.S. Department of Health and Human Services also recentlyidentified this threat to beneficiary access to care. He confirmed this in an October 21memorandum analyzing the House bill.
The House bill and the Senate Finance bill both proposed the same type of permanentMedicare productivity cuts.
Here is what Medicare's own Chief Actuary had to say about these productivity cuts.Referring to these cuts, he wrote that, "the estimated savings . . . may be unrealistic."In his analysis of the House bill, Medicare's own Chief Actuary says, “it is doubtful thatmany could improve their own productivity to the degree achieved by the economy at large.”He goes on to say, “we are not aware of any empirical evidence demonstrating the medicalcommunity’s ability to achieve productivity improvements equal to those of the overalleconomy.” In fact, the Chief Actuary's conclusion is that it would be difficult for providersto even remain profitable over time as Medicare payments fail to keep up with the costs ofcaring for beneficiaries.
Ultimately, here is his conclusion -- that providers who rely on Medicare might end theirparticipation in Medicare, "possibly jeopardizing access to care for beneficiaries."Medicare's Chief Actuary confirms what I've been hearing from providers back in Iowa aboutthese permanent productivity payment cuts. These providers are doing everything they can tobe efficient and innovative. They are doing everything they can to get the biggest bang forevery Medicare buck they get. But achieving the level of productivity assumed in thesereform bills will be getting blood out of a stone.
And these health reform bills will make it even harder for them to keep their doors open.Look at providers like nursing homes and hospices. They provide labor-intensive services.There are few gadgets or processes in these settings that will increase productivity. Nothingin these settings replaces staff being at the bedside and providing care. So it is incorrect toassume these providers will achieve the levels of productivity like the rest of the economy.Let’s look at other providers affected by these productivity adjustments, like ambulances.
The Finance Committee bill would permanently cut payments for ambulance servicesbeginning in 2011. It would do this in spite of the fact that Congress enacts paymentincreases for ambulance services, year after year. In fact, the Senate Finance bill extends theexisting add-on payments for ambulance services for another two years, until 2012. Andthen cuts them.
I have no quarrel with providing additional payments for ambulance services because,without them, many ambulance providers would not survive. But what kind of sleight-ofhandis this? The bill proposes that we vote to cut ambulance payments while we vote toincrease them?
Now there is another proposal in the Senate bill that cuts Medicare. And now I'm talkingabout the new Medicare Commission. The pending insolvency of Medicare is a seriousproblem. And Congress needs to stop kicking the can down the road when it comes toshoring up Medicare. We are nearing the end of that road. But this Medicare Commission isfatally flawed. And the risk of unintended consequences that will hurt seniors outweighs anybenefit it might have. Not only will it be harder to find a doctor or hospital that will seeMedicare patients, you can forget President Obama’s promise about “keeping what youhave.”
After all the promises about not cutting Medicare benefits, Congressional Democrats and theWhite House are using the Medicare Commission to take aim at the popular Medicareprescription drug benefit and the Medicare Advantage program. Under the FinanceCommittee bill, this new Medicare Commission would be given explicit authority to cut thefederal subsidy for Medicare prescription drug premiums.
Today, that federal subsidy pays for about 75 percent of the premium for Medicareprescription drug coverage for seniors. But the Finance bill says, cut that subsidy. It saysraise Part D premiums on seniors. That's right. But again, don't take my word for it.On October 13th, during the Finance Committee's health reform markup, the director of theCongressional Budget Office, or CBO, was asked if reducing Part D subsidies would raisepremiums. And here is what Dr. Elmendorf, the Director of CBO said—he said, "yes . . .[reduced subsidies] would raise the costs to beneficiaries."
So this was clear confirmation that if the Medicare Commission cuts payments to theMedicare drug benefit, it will cause Part D premiums for seniors and the disabled to go up.At a time when the country is facing record unemployment and Americans are struggling tokeep up with increasing prescription drug costs, this provision will make these life-savingprescription drugs more expensive for Medicare beneficiaries.
These are the kinds of things that get buried in 2,000 page bills. When the other side doesn'tunderstand why the American people are concerned about these huge bills, this is why.These health reform bills also propose to cut up to $170 billion from the Medicare Advantageprogram for seniors. In my home state of Iowa, these cuts will cause about a 25 percent cutin the amount of money going to extra benefits for 63,000 seniors who are enrolled inMedicare Advantage. That means fewer lower-income Iowans will be getting the eyeglasses,hearing aids, and chronic care management they have come to rely on.
Now some health care providers like hospitals got a special deal. They are exempted fromthe Medicare Commission’s payment cuts. That means other providers and programs – likethe drug benefit for seniors and Medicare Advantage – will be bearing the brunt of thosepayment cuts. The Medicare Commission would also become a permanent program thatCongress would be unable to undo. By making the commission a permanent program, itbecomes part of the baseline in the next decade. It goes on forever. Sort of like theEnergizer Bunny, it will just keep cutting and cutting and cutting.
And if Congress ever wants to shut off those cuts, then it will have to offset the cost ofterminating this commission. That will make it effectively impossible to undo. And thedamage will have been done. These Medicare cuts will also only make things worse forbeneficiaries in rural areas. Seniors in rural areas already face health care access problems.Medicare generally pays rural providers less than the cost of treating beneficiaries. Cuts ofthis magnitude will make it much harder for rural Medicare providers to care forbeneficiaries.
But believe it or not, it only gets worse. My colleagues on the other side of the aisle intend tocreate a government-run health plan. If this government plan pays providers based onMedicare rates, it's only going to make this whole situation that much worse. These Medicarecuts are achieved at the expense of health care access and quality. These Medicare cuts turna blind eye to threats to health care quality and access. There are no fail safes in these bills tokick in automatically if these drastic cuts cause limited provider access or worse quality ofcare. Instead, Congress will have to step in. And the Congressional Budget Office has alsoprojected that these Medicare cuts keep increasing by 10 to 15 percent each year over thenext decade. That's right—the Medicare cuts keep growing 10 to 15 percent each yearbeyond 2019.
And provisions like the productivity adjustments and the Medicare Commission would drivethe increased cuts to the program.
So this will give you an idea of the damage these bills will do to health care. This is anexample of the challenge that Congress will face in the next decade if these bills become law.And this is just what we know about the bills we've seen. Who knows what is being cookedup behind those closed doors right now. Once again, it's time to back this process up. This isheaded in the wrong direction. A bill of this magnitude should be done on a bipartisan basiswith broad support. We can get it done right if we work together. These bills have massiveMedicare cuts. They will do permanent damage to our health care system. Higherprescription drug premiums for seniors. Increased costs. Jeopardized access to care forbeneficiaries. These bills are taking us in the wrong direction.
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