Inside Deficit Reduction: What it Means for
Medicare
Karen Davis
President
The Commonwealth Fund
www.commonwealthfund.org
kd@cmwf.org
Alliance for Health Reform
October 11, 2011
32
Federal Revenues and Primary Spending, by Category,
Under CBO’s Alternative Long-Term Budget Scenario
Percent of GDP
Source: Congressional Budget Office, The Long-Term Budget Outlook, June 2010, revised August 2010.
Note: This alternative fiscal scenario adheres closely to current law and follows CBO’s 10-year baseline budget projections through 2020 and extending the
baseline concept through 2035; however this estimate incorporates a number of assumed exceptions to current law as of the August 2010 revision, including: (1)
Medicare physician payment rates continue to grow at the Medicare economic index rather than following the SGR, (2) several policies to restrain spending after
2020 do not go into effect, i.e., IPAB recommendations do not go into effect, (3) health insurance premium subsidy cuts scheduled for 2020 do not take effect,
and (4) the tax relief policies known as the “Bush tax cuts” are extended through 2020 after which individual income taxes are adjusted to keep total revenue
constant as a share of GDP.
3
Growth and Projected Growth in Per Capita Medicare
Spending in Excess of Economic Growth
Excess rate of spending growth (percentage points)
Note: The excess rate of spending growth measures the amount by which health spending per person exceeds GDP
per capita, with adjustment for demographic factors such as the aging of the population.
Source: M. Chernew, D. Goldman, and S. Axeen, “How Much Savings Can We Wring From Medicare,” New England
Journal of Medicine, published online September 21, 2011.
4
Rising Cost of Care is a Shared Concern: Public and Private
Growth In Private Spending per Person Projected to Exceed Medicare, 2009-2019
NHE per capita (5.4% annual growth rate)
Spending per person
Medicare spending per enrollee (2.9% annual growth)
Private insurance spending per covered life (5.4% growth)
16,000
$13,501
14,000
$12,699
$12,177
12,000
$14,734
$13,653
$11,459
$11,048
$12,282
$9,505
10,000
$10,929
$8,666
$8,050
$7,085
8,000
$6,520
$5,790
6,000
$4,948
$4,617
$4,194
4,000
2,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Commonwealth Fund analysis of CMS, Office of the Actuary, National Health Statistics Group, National
Health Expenditures Projections 2009-2019, September 2010.
2019
5
Characteristics of the Medicare Population
Percent of total Medicare population:
Income <200% FPL
($21,780 in 2011)
3+ Chronic Conditions
Cognitive/Mental
Impairment
Fair/Poor Health
Under-65 Disabled
2+ ADL Limitations
Age 85+
Long-term Care Facility
Resident
NOTE: ADL is activity of daily living.
SOURCE: Income data for 2009 from U.S. Census Bureau, Current Population Survey, 2010 Annual Social and Economic
Supplement. All other data from Kaiser Family Foundation analysis of the Centers for Medicare & Medicaid Services Medicare
Current Beneficiary 2008 Access to Care file.
6
Median Out-of-Pocket Health Spending for Medicare
Beneficiaries is on the Rise
OOP Spending as a
Percentage of
Income
SOURCE: Kaiser Family Foundation. “Skin-in-the-Game,” November 2008.
7
Health Care Reform and the Federal Budget Deficit:
What Are the Choices?
•
Cut Benefits
– Cover fewer people, fewer services, or pay for a smaller fraction of
total spending for services (i.e. increased patient cost-sharing or
premiums)
– Restructure current patient out-of-pocket costs to shape better
care choices (value-based insurance design)
•
Trim Payment Rates
– Across the board cuts
– Selective cuts of over-priced services
– Use purchasing leverage to get lower prices; include all-payer
approaches to slow growth prices paid by private plans
•
Ensure the Right Care and Pay Smarter
– Reduce misuse, overuse, and underuse through payment and
delivery system reforms, apply comparative-effectiveness research
– Pay smarter: medical home; bundled payment for acute and postacute episodes; global fee per person with quality bonuses
Source: K. Davis and S. Guterman, Achieving Medicare and Medicaid Savings: Cutting Eligibility and Benefits,
Trimming Payments, or Ensuring the Right Care?, (New York: The Commonwealth Fund, July 2011).
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Panelists
•
Tom Scully
– Senior counsel at Alston & Bird, Washington, DC and former
administrator of the Centers for Medicare & Medicaid Services
•
Mark McClellan
– Director of the Engelberg Center for Health Care Reform and former
administrator of the Centers for Medicare & Medicaid Services
•
Tricia Neuman
– Vice president of the Kaiser Family Foundation and director of its
Medicare Policy Project
•
Marilyn Moon
– Vice president and director of the health program at American
Institutes for Research and former Medicare trustee
•
Joe Antos
– Wilson H. Taylor scholar in health care and retirement policy at the
American Enterprise Institute