Analysis: Medicare law OK but not reform

By ELLEN BECK, United Press International

WASHINGTON, Dec. 10 (UPI) -- Seniors are better off with the new Medicare prescription drug law, but it probably will not be the long-term financial fix its Republican proponents had hoped to deliver.

Republicans -- especially those in the conservative wing of the party -- wanted to rein in Medicare expenditures as 76-million baby boomers head toward senior status, but after a summer and fall filled with contentiously partisan negotiations, it didn't quite work out.


The drug benefit in the $395-billion, 10-year program still is good news for millions of low-to-moderate-income seniors, who currently get no help paying for prescription drugs. For the very lowest-income seniors, it will be a tremendous help, with only a $1 or $2 co-pay per prescription. For others, it will pay, perhaps, up to one-half of their drug costs.

Still, it has its drawbacks. For some seniors it provides no help and there is a large coverage gap, during which seniors must pay all drug costs.


It is widely expected Congress will be prodded by seniors, provoked by special interests or otherwise motivated to amend, correct, tinker or outright ditch parts of the law.

Douglas Holtz-Eakin, director of the Congressional Budget Office, told a Heritage Foundation event if drug costs keep rising at about 3 percent, or if Congress makes the drug benefit more generous, the total costs could rise to over $1 trillion and possibly up to $2 trillion from 2014 to 2023 -- when boomer retirement is in full swing.

He said one wild card in the law is the sheer difficulty of looking into the future and getting a handle on the overall costs of the bill. "This is a bill with not very well-known outyear costs and not very well-known outyear benefits," he added.

Medicare's Part A Hospital Insurance Trust Fund, which pays for inpatient hospital care for almost 42-million beneficiaries, is predicted to go broke by 2026. Nothing in the bill changes the income tax levy that feeds the trust fund or program eligibility -- both ways to reduce costs.

Part B Medicare, which pays for out-patient services, is funded through general taxes, with seniors paying premiums and deductibles. The new law increases that cost-sharing and forces higher income seniors to pay more, but since the income test will affect only about 3 percent of seniors, it is not considered major financial reform.


The new law introduces preferred provider organizations to Medicare, but there there is doubt whether these plans will enter rural areas, where there are no Medicare managed care plans now. Billions of dollars are in the bill to entice these plans, along with risk corridors to help insulate them against high-utilization losses, but it's not known whether insurers will try the new Medicare Advantage program only to pull out in a few years, after the perks are gone -- déjà vu Medicare+Choice.

The major point of controversy in the bill was a Republican desire to have private plans and traditional Medicare compete in 2010. If plan bids were lower than fee-for-service Medicare costs, seniors in the traditional program would pay more, creating a financial incentive for seniors to move to what could be less-expensive managed care plans that offer better benefits.

The new law downsized this plan to a demonstration project, but there is no guarantee private plans will enter enough areas to compete with traditional Medicare. Also, HMOs now in Medicare+Choice often are paid at or above what traditional Medicare costs and PPOs generally are considered to be more expensive to run than HMOs.

"It is my conclusion this is not reform and it is business as usual," said Jeff Lemieux of the non-partisan policy center, "I don't see transformation in this bill."


Howard Burde, chairman of the Health Law Practice Group for the law firm Blank Rome, told United Press International there are parts of the law that are tremendous improvements and great public policy but added, "So will it save money? No."

Among the bright spots are provisions requiring Medicare to tackle seriously the issue of chronic care by paying for disease management programs -- which potentially could save money.

"We think that good policy and service on chronic care is essential to making Medicare a sustainable system," said Steve Brown, chief executive officer of the Health Hero Network in Mountain View, Calif., which develops technology that allows healthcare providers to help chronically ill seniors monitor their conditions, such as congestive heart failure or diabetes.

A demonstration project done in 2002 by the Sunshine Network of the Veterans Health Administration in Florida found using a care coordinator and technology to monitor chronically ill patients resulted in a 40-percent reduction in emergency room visits and 63-percent fewer hospital admissions.

Brown told UPI even small incremental improvements in chronic care could have a huge impact on the Medicare program over time.

"Even with enormous potential of disease management and chronic care and consumer directed care -- this is going to cost a bundle," Burde said.



Ellen Beck covers healthcare policy for UPI Science News. E-mail [email protected]

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