Posts Tagged ‘Urban Institute’

Medicare Times Are a Changing

Monday, January 16th, 2012

Baby boomers may not like it — and whoever wins the White House this year — but the Medicare that our parents knew and love is destined to change. And it’ll be like it or lump it.

With more than 1.5 million baby boomers enrolling in Medicare every year, the program’s future is one of the most crucial economic issues for anyone who currently is 50 or older. Healthcare costs are the most erratic part of retirement expenses, and Medicare remains a great deal for retirees, who often get benefits worth significantly more than the payroll taxes they paid while working.  “People would like to have what they used to have.  What they don’t seem to understand is that it’s already changed,” said Gail Wilensky, a former Medicare administrator. “Medicare as we have known it is not part of our future.”

Consider these numbers.  Medicare’s giant trust fund for inpatient care is expected to run out of money in 2024.  When that happens, the program will collect only enough payroll taxes to pay 90 percent of benefits.  Additionally, researchers estimate that as much as one-fifth and even two-thirds of the more than $500 billion that Medicare now spends every year is spent on treatments and procedures of little or no benefit to patients.

Representative Paul Ryan (R-WI), chairman of the House Finance Committee, is leading the charge on changing Medicare.  Ryan’s current proposals will not impact people now 55 or older would not have to make any changes.  But how would it work?  Would it save taxpayers’ dollars?  Would it shift costs to retirees, who are least able to afford it?   Will Congress ultimately end traditional Medicare?  These questions are still waiting for answers.  “I’m not sure anybody has come up with a formula on this that makes people comfortable,” said health economist Marilyn Moon, who formerly served as a trustee overseeing Medicare finances.

The White House’s preference is to keep the existing structure of Medicare while “twisting the dials” to control spending, said Medicare trustee, economist Robert Reischauer of the Urban Institute think tank.

Ryan’s original approach would have put 100 percent of future retirees into private insurance.  His most recent plan, written with Senator Ron Wyden (D-OR), would keep traditional Medicare as an option, competing with private plans.

Writing for AARP, Ricardo Alonzo Zaldiver says that, “This could mean more Medicare recipients joining private insurance plans (currently, only about 25 percent of Medicare recipients are in private ‘Medicare Advantage” plans, while the other three-quarters participate in the traditional, government-run Medicare program).  A new voucher-for-private-Medicare plan would be available to anyone currently under 55.

“It could also mean keeping the existing Medicare structure but making certain tweaks to control spending.  Under President Obama’s healthcare overhaul, the Independent Payment Advisory Board could force Medicare cuts to service providers if costs rise above certain levels and Congress fails to act.  Obama has said he’ll veto any plan to cut Medicare benefits without raising taxes on the wealthy.  During failed budget negotiations last summer, he indicated a willingness to gradually raise the Medicare eligibility age to 67, revamp co-payments and deductibles in ways that would raise costs for retirees, and cut payments to drug makers.  ‘For the 76 million baby boomers signing up over the next couple of decades, it will pay to be watching.’”  President Obama has promised that he will veto any plan to cut Medicare benefits without raising taxes on the wealthy.

The Chicago Sun-Times offers this sage advice: “Fix Medicare, ignore scare talk.”  According to writer Steve Huntley, “I’ve contributed to Medicare every year of its existence. Yet, it’s a myth that seniors have paid the costs of their Medicare services, as demonstrated by the research of economists Eugene Steuerle and Stephanie Rennane of the Urban Institute think tank.  Their study showed that a two-income couple earning $89,000 a year would pay $114,000 in Medicare taxes during their careers but could expect to receive $355,000 in medical care in retirement. They could get prescriptions, doctor visits and hospital services valued at three times their contribution to Medicare.

“Medicare combined with Medicaid and Social Security add up to an entitlement time bomb –  they’ll consume all tax revenues by 2052, according to a Heritage Foundation analysis –  for the people who’ll be stuck with the bill: working Americans.  In 1950, there were 16 taxpaying workers for each retiree; by the time the baby boomers all retire, there will be two workers for each retiree. Entitlement reform has to happen.”

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30 Percent of Companies May Drop Employee Health Insurance

Monday, June 13th, 2011

As many as 30 percent of American companies plan to drop employee insurance when the Patient Protection and Affordable Care Act becomes fully effective,  according to a report in the McKinsey Quarterly.

According to the report, “Many of the law’s relevant provisions take effect in 2014.  Our research suggests that when employers become more aware of the new economic and social incentives embedded in the law and of the option to restructure benefits beyond dropping or keeping them, many will make dramatic changes.  The Congressional Budget Office (CBO) has estimated that only about seven percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to subsidized-exchange policies in 2014.  However, our early-2011 survey of more than 1,300 employers across industries, geographies, and employer sizes, as well as other proprietary research, found that reform will provoke a much greater response.”

If this prediction is true, the number of Americans who could see changes to their health insurance would be far more than the nine to 10 million estimated by the CBO.  That means that the cost of subsidizing plans for those people — approximately $19 billion a year, according to the CBO — could grow by more than 30 percent.  If the report’s predictions are correct, many Americans will lose their health insurance.  The study contradicts at least three others predicting that reform will have a negligible effect on employer-sponsored insurance.  A Rand study determined that the number of employees who would lose insurance is “small,” and the Urban Institute believes that the percentage “would not differ significantly.”  “History has shown that reform motivates more businesses to offer insurance,” said an administration healthcare expert. “Health reform in Massachusetts uses a similar structure, with an exchange, a personal responsibility requirement, and an employer responsibility requirement.  And the number of individuals with employer-sponsored insurance in Massachusetts has increased.”

“At least 30 percent of employers would gain economically from dropping coverage, even if they completely compensated employees for the change through other benefit offerings or higher salaries,” the report said.  “Contrary to what employers assume, more than 85 percent of employees would remain at their jobs even if their employers stopped offering (employer-sponsored insurance), although about 60 percent would expect increased compensation.”

According to the McKinsey study,  found that those who are informed about the health-reform measure are more likely to consider an alternative to employer-sponsored plans, with 50 percent to 60 percent in this group expected to make a change.  It also determined that for some, it makes more sense to switch.

“Employers must quickly examine the implications of health care reform on their benefit and workforce strategies, as well as the opportunities and risks that reform generates,” the McKinsey study notes.  “Of course, the type and extent of the changes employers make will vary by industry, collective-bargaining agreements, and other constraints.  Most employers, however, will find value-creating options between the extremes of completely dropping employee health coverage and making no changes to the current offering.  Even employers that intend to provide benefits similar to those they currently offer can take no-regrets moves, like tailoring plans to maximize what their employees will value most about ESI (employer-sponsored insurance) after 2014.  Employers pursuing more radical changes will have to rethink benefit packages for higher-income employees.

“And all employers must continue to keep in mind their employees’ health and wellness needs, even as insurance coverage levels evolve.  To serve employers, insurers must retool their business models to provide more consultative support during the transition and develop innovative approaches to support employers’ new benefit strategies.  For employers and insurers, success after 2014 will require a better understanding of employee and employer segments, and the development of the right capabilities and partnerships to manage the transition.”

According to the report, “Healthcare reform fundamentally alters the social contract inherent in employer-sponsored medical benefits and how employees value health insurance as a form of compensation.  The new law guarantees the right to health insurance regardless of an individual’s medical status.  In doing so, it minimizes the moral obligation employers may feel to cover the sickest employees, who would otherwise be denied coverage in today’s individual health insurance market.  On the other hand, reform preserves the corporate tax advantages associated with offering health benefits — except for high-premium ‘Cadillac’ insurance plans.”

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Some Primary-Care Physicians Adopting Monthly Membership Payment Model

Monday, March 28th, 2011

A growing number of medical practices are avoiding health insurers by charging patients a moderate monthly membership fee. The approach even gets a nod in the Patient Protection and Affordable Care Act (ACA).  One example is Seattle-based Qliance Medical Management, whose three clinics typically charge patients approximately $65 a month for unlimited access to the practice’s 12 physicians and nurse practitioners.  Fees are set according to the level of service and the patient’s age.  Office visits last up as long as an hour; clinics have evening and weekend hours, with e-mail and phone access available.  Normal preventive care and many in-office procedures are covered by the monthly fee; patients pay for lab work and other outside services “at or near” cost, and many medications are discounted.  The average $700 to $800 per patient that Qliance receives yearly in membership fees is as much as three times more than a physician in a standard insurance-based practice might make per patient, said Norm Wu, the company’s president and chief executive.  “So we can have a third the number of patients and get the same revenue per clinician, but with much less overhead,” he said.  The approach lets Qliance channel more money into the care itself — through longer office hours and better diagnostic equipment.

Washington’ Congressional delegation and Governor Christine Gregoire successfully lobbied to include direct-pay practices in the Affordable Care Act.  One provision in the new law lets insurers sell plans on the state-based insurance exchanges that will start operating in 2014 and will be allowed to “provide coverage through a qualified direct primary-care medical home plan that meets criteria established by the Secretary of Health and Human Services.”  Qliance foresees that direct-pay practices will link to custom “wraparound” health insurance policies, providing specialist care and hospitalization.

A  Washington state law enacted in 2007 encourages “innovative arrangements between patients and providers” such as direct-pay primary-care practices.  The state has 15 other direct-pay practices, according to a 2010 report.  Some are more conventional “concierge” practices, which cater to well-to-do patients, charging as much as $850 a month for personalized, high-touch services.  But the most significant growth is in practices that charge fees between $85 and $135 every month.

The trend is not without its critics, though.  The idea raises many questions, according to policy experts, including how direct-pay primary-care practices can charge monthly fees for preventive care services that will be free under the new law.  Other experts have more basic reservations, although they agree that the current payment model for primary care doesn’t work very well.  “it doesn’t make any sense” to provide primary care outside the health insurance system, said Robert Berenson, a fellow at the Urban Institute. “This is not going to work for a lot of patients who can’t afford the out-of-pocket subscriptions,” he said.

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A CLASS Act

Tuesday, March 1st, 2011

The Obama administration is fending off critics of the CLASS Act, a voluntary insurance program created by the Patient Protection and Affordable Care Act designed to assist individuals who require long-term care and who want to remain in their communities. Health and Human Services Secretary Kathleen Sebelius is looking into revisions to assure that the program is financially self-sustaining.  The Community Living Assistance Services and Support Act (CLASS Act), which HHS will oversee, is envisioned as providing cash benefits to be used for non-medical expenses, such as paying for a home health aide or a family member to provide care, make modifications to the home and provide special transportation needs.

Opponents to the CLASS Act, such as the Heritage Foundation’s Brian Blase, argue that the program won’t support itself and could become a burden to taxpayers.  Blase says the program is “a Ponzi scheme that transfers money from current payees to current beneficiaries.”  Some Republicans are even calling for the law’s repeal.  Sebelius disagrees, noting that her department is looking at options to make certain that doesn’t happen.  She emphasized the importance of attracting healthy, less-costly people to the program to rein in costs and said that her department is “looking at options for indexing premiums so they would rise along with benefits.”  In addition, she wants to “close loopholes” that would let people drop out of the program and then return without paying a penalty.

According to Howard Gleckman, Senior Research Associate at the Urban Institute, “A key goal of national long-term care insurance is to reduce the role of Medicaid, which today pays for more than 40 percent of all personal care for seniors and others with disabilities. While Medicaid provides a critical safety net, it also often forces the disabled into the wrong care, in the wrong place, at the wrong time.  For instance, most benefits go only to those in nursing homes, even though they are often the last place people want to live.  And to qualify, people normally are allowed to keep only a few thousand dollars of financial assets and earn only a few hundred dollars a month.”

To the extent that national long-term care insurance can cut the number of people who go broke and turn to Medicaid for help, both states and the federal government will also be winners.  Fully a third of Medicaid’s budget, or more than $100 billion a year, is spent on long-term care.  The Congressional Budget Office estimates that Medicaid will absorb a stunning one-sixth of all federal tax revenues by 2050, and is putting financial pressure on states to pay nearly 50 percent of its costs.

So, how does Congress fix the CLASS Act?  First, CLASS needs to be an insurance-only program.  http://www.sacbee.com/2011/02/14/3401075/fix-the-class-act-dont-repeal.html Congress should make personal assistance benefits available to working people with disabilities – but through a separate program.  Second, employers should be encouraged to include this insurance in their employee benefit plans.  CLASS will succeed only with significant enrollment, so Congress should add incentives that will encourage employers to interest their employees in the program.  Finally, Congress should create an independent fund to accumulate and invest CLASS premiums.  This would end the budget gimmickry that troubles deficit hawks.  More important, it would assure participants that they are buying real insurance and not just exchanging their premium dollars for government IOUs.

“Someday, perhaps, the United States will make the choice that nearly every other major developed nation in the world has already made.  And that is to create a national, mandatory, long-term care insurance system funded by some mix of taxes and premiums.  Coverage could be provided by private insurers – just as the Medicare Part D drug benefit is today – or it could be run by the government,” according to Gleckman.  “Given our current anti-government, anti-tax climate, this won’t happen any time soon.  But that doesn’t mean our long-term care needs are going away.  It costs more than $200-a-day, on average, to stay in a nursing home.  Home health aides cost $20 per hour.  And after reaching age 65, more than two out of three of us will need some long-term care before we die.  We are woefully unprepared both as families and as a society for these needs, and the problem will only get worse as 77 million baby boomers age.  Medicaid is not the answer.  Neither is repealing CLASS.”

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David Brooks: “Buckle Up for Round 2”

Monday, January 24th, 2011

“The healthcare reform law was signed 10 months ago, and what’s striking now is how vulnerable it looks,” writes columnist David Brooks in the New York Times. “Several threats have emerged – some of them scarcely discussed before passage – that together or alone could seriously endanger the new system.”  According to Brooks, the threats include:

The courts.  “So far, one judge has struck down the individual mandate, the plan’s centerpiece.  Future decisions are likely to break down on partisan lines.  Given the makeup of the Supreme Court, this should concern the law’s defenders,” according to Brooks.

False projections.  Brooks notes that “The new system is based on a series of expert projections on how people will behave.  In the first test case, these projections were absurdly off base.  According to the Medicare actuary, 375,000 people should have already signed up for the new high-risk pools for the uninsured, but only 8,000 have.”

Employee dumping.  Brooks sees this as the potentially most serious threat.  “Companies and unions across America are running the numbers and discovering they would be better off if, after 2014, they induced poorer and sicker employees to move to public insurance exchanges, where the subsidies are much higher,” Brooks said.

Healthcare oligarchy:  Since the March passage of the healthcare law, “there has been a frenzy of mergers and acquisitions, as hospitals, clinics and doctor groups have joined together into bigger and bigger entities,” according to Brooks.  “The downside to this economic concentration is that there could be less competition and cost control.”

Public hostility.  “Complaints are especially high among doctors.  According to a survey by the Physicians Foundation, 60 percent of private-practice doctors say the law will force them to close their practices or to restrict them to certain categories of patients,” Brooks wrote.

“After the trauma of the last two years, many people wish the issue would go away.  But it’s not going away, especially since costs will continue to rise,” Brooks concludes.  “Some Congresses achieve healthcare; members of this Congress or the next one will have healthcare thrust upon them.”

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Lack of Healthcare Insurance = More Deaths

Wednesday, March 10th, 2010

Failure to pass healthcare reform legislation could result in 275,000 premature deaths over the next decade. The real cost of failure to pass healthcare reform legislation could mean that 275,000 Americans nationwide will die unnecessarily over the next 10 years – simply because they lack insurance.  According to a new study by Families USA, “This is only the tip of the iceberg, and the most severe consequence, which is death,” said Kathleen Stoll, director of health policy at Families USA.

The states with the largest populations were found to be the ones where the majority of projected premature deaths would occur.  The top states are California (34,600 early deaths); Texas (31,700); Florida (25,400); and New York (13,900).  Families USA estimates that 68 adults under the age of 65 die every day because they lack healthcare insurance coverage.  Unless a significant change occurs, that figure will climb to 84 by 2019.

Research exploring the connection between a lack of health insurance and an increased risk of death has found that the uninsured are more likely to avoid screenings and preventive care.  As a result, their medical problems tend to be diagnosed later when they are advanced and difficult to treat.  “The bottom line is that if you don’t get a disease picked up early and you don’t get necessary treatment, you’re more likely to die,” said Stan Dorn, a senior fellow at the Urban Institute and author of an earlier study of premature deaths.

Healthcare experts warn that the Families USA’s study’s premature death estimate errs on the side of caution, although the report calculated that a lack of insurance increases mortality rates by 25 percent.  More recent research found that people who do not have healthcare research are 40 percent more likely to die early.

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What If There Is No Healthcare Reform?

Wednesday, February 17th, 2010

If healthcare reform fails, costs will rise to 19.3 percent of the GDP by 2019. The rationale for healthcare reform is simple – cover most of the population and rein in rising costs.  But what happens if healthcare reform isn’t enacted?  The answer is not good.

“Failure to enact health reform will result in increasing numbers of people without health insurance because fewer employers will offer it and many employees will not be able to pay the cost of plans that are available,” says Stephen Zuckerman, a health economist at the Urban Institute think tank in Washington, D.C.  “For people not offered employer coverage, many will not be able to get coverage due to pre-existing conditions that insurers won’t cover or because premiums won’t be affordable.  Even people with coverage will find costs becoming a greater financial burden.”

The numbers are startling.  Americans paid $2.5 trillion for healthcare in 2009, equal to 17.3 percent of the nation’s GDP.  As the economy starts to grow again, so will healthcare costs.  The federal Centers for Medicare and Medicaid Services (CMS) estimates that without reform, healthcare will rise to 19.3 percent of the GDP by 2019.  According to Urban Institute statistics, if healthcare reform is not enacted, the number of Americans without insurance will climb to 57 million or 20.1 percent of the population – and that is the best-case scenario.

The 16.5 percent of Americans now covered by Medicaid and the Children’s Health Insurance Program will rise to 18.3 percent.  Medicare and Medicaid spending will cost approximately $725 billion in 2010, 50 percent more than Congress appropriates for all other domestic agencies.  By 2014, the cost is projected to be $950 billion.

Inaction will only increase the budget deficit.  Peter Orszag, the White House budget director, warns that “The fiscal course that we’re on, out in 2020 and 2030 and 2040, is unsustainable and needs to be addressed.  If we don’t address rising healthcare costs, there’s nothing else that we’re going to be able to do that will alter that basic fact.”

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Mayo Clinic Saying “No” to Medicare Patients

Tuesday, January 26th, 2010

Low reimbursements make Mayo Clinic turn away Medicare recipients. A Glendale, AZ, family clinic operated by the non-profit Mayo Clinic is no longer accepting Medicare patients, saying government payments are too low.  The more than 3,000 Medicare-eligible patients who use the facility will be forced to pay cash or find a physician at another location.  The decision, which doesn’t impact other Mayo facilities in Arizona, Minnesota and Florida, is a two-year pilot project, according to spokesman Michael Yardley.

Mayo’s move may lead additional family physicians to drop Medicare patients, according to Lori Heim, president of the National Association of Family Physicians.  “Many physicians have said, ‘I simply cannot afford to keep taking care of Medicare patients,’” Heim said.  “If you truly know your business costs and you are losing money, it doesn’t make sense to do more of it.”

Mayo’s Yardley defended his organization, noting that “We firmly believe that Medicare needs to be reformed.  It has been true for many years that Medicare payments no longer reflect the increasing cost of providing services for patients.”  Nationally, physicians were reimbursed approximately 20 percent less for treating Medicare patients vs. privately insured patients in 2007.  That payment gap has not changed over the last 10 years, says a report from the Medicare Payment Advisory Commission, a group that advises Congress on Medicare.  At the end of 2008, approximately 45 million Americans were covered by Medicare, according to statistics from the Centers for Medicare & Medicaid Services.  Although 92 percent of family physicians participate in Medicare, just 73 percent are accepting new patients under the program.

Medicare patients who opt to stay with their physician at Mayo’s Glendale clinic will pay $1,500 annually for a physical and three additional visits.  Additionally, they will pay a $250 annual administrative fee.

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