Center for American Progress on Fixing Medicare

Today’s Managing Health Care Costs Indicator is $385 Billion

The Center for American Progress, a liberal-leaning think tank, produced a 49 page summary of how to reduce Medicare spending by $385 billion without leaving beneficiaries with dramatically higher out-of-pocket costs.    The group strongly opposes converting Medicare into a voucher program (the initial Paul Ryan GOP House budget), and opposes raising the Medicare eligibility age, pointing out that it’s pretty hard for a sick 65 year old to purchase insurance even in a well-functioning market.  CAP also opposes proposals to slash Medicaid spending on seniors in nursing homes.

I’ve summarized the CAP recommendations below.  Many of these are similar to a plan published in the New England Journal of Medicine last month (and some of the authors are shared).   I’d noted who the “losers” are for each proposed initiative – since decreased Medicare spending does mean less income for someone.

Recommendation	Savings (Billion $ over 10 years)	Loser
Use competitive bidding for commodities, including durable medical equipment, supplies, lab tests, and imaging	$38	Ancillary vendors
Require exchanges to offer tiered insurance plans (to push patients to lower cost higher quality providers)	$10	Hospitals and physicians (who have high prices or low quality)
Use competitive bidding for Medicare Advantage plans	$10	Health Plans
Use competitive bidding for Medicaid plans	None	Health Plans
Require private insurers to make prices transparent, and publicly release claims data	None	High priced hospitals and physicians
Set global health care budgets (including education and training) for states	None
Accelerate move to bundled payments	$10	Providers
Coordinate Federal Employees Health Benefit program reform efforts with Medicare efforts	None
Coordinate care for dual eligible, and share savings with states	None	Providers
Expand ban on physician self-referrals	$1.5	Providers
Promote shared decision-making in Medicare	$3.8	Providers
Lower payment to hospitals with readmissions and complications	None	Hospitals
Lower payment to nursing facilities with high rates of rehospitalization	$1.4	Nursing Homes
Value based payment for ambulatory surgery centers	None	Ambulatory Surgery Centers
Repeal the Sustainable Growth Rate mechanism (that leads to automatic physician pay cuts each year). Incentivize alternatives to fee for service	None stated
Increase Medicare primary care payment by 10%	None	Hospitals (through lower hospitalizations)
Protect low and moderate income beneficiaries from premium increases that could stem from SGR repeal	None stated
Do away with the AMA Relative Update Committee (RUC) on which specialists are overrepresented	None
Reduce Medicare payments to hospitals for graduate medical education (GME)	$28	Hospitals
Require private insurers to pay their fair share for GME	$3.6	Private insurers and employers
Expand use of nonphysician providers	None
Reform Medicare premiums and cost sharing	None
Increase Medicare premiums for high income beneficiaries	$25	Medicare beneficiaries
Extend Medicare drug rebates to the dual eligible	$137.4	Pharmaceutical companies
Maximize use of generics in Medicare Part D	$4.5	Pharmaceutical companies
Require FEBHP to reduce drug costs	$10	Pharmaceutical companies
Prohibit “pay for delay” tactics which prevent timely introduction of generics.	$5	Pharmaceutical companies
Reduce exclusivity period for biologics	$3.4	Pharmaceutical companies
Reduce excessive Medicare payments to home health care companies	$15	Home health care companies
Reduce excessive Medicare payments to skilled nursing facilities	$15	Skilled nursing facilities
Reduce excessive Medicare payments for hospital bad debt	$10	Hospitals
Reduce excessive Medicare payments for end stage renal disease treatment	$3.6	Dialysis centers
Simplify administrative processes	$10	Intermediaries
Better Medicare risk adjustments	$5	Providers
Reduce hospital “disproportionate share” payments for safety net hospitals	$4	Hospitals
Chase third parties that should reimburse Medicaid	$1.8	Private insurers and employers
Decrease Medicare fraud	None
Tort reform to decrease defensive medicine	$5	Providers
Limit tax exclusion for employer-sponsored health insurance	None
Increase cigarette tax and close loopholes	$46	Smokers, providers

A few observations:

1)      Many of the savings claims seem modest, and some initiatives that would surely lower costs are associated with no claimed savings.

2)      Initiatives that would increase Medicare costs (like paying primary care physicians more or eliminating the SGR) are scored as “$0 savings,” rather than being subtracted. The SGR fix would cost between $93 and $194 billion over 10 years according to the Congressional Budget Office

3)      Big losers are the pharmaceutical companies, which would forfeit $160 billion (41% - although drugs represent only 10% of all medical costs)