Affordable Care Act Medicare Cuts

, , Comment closed

President Obama said during the debate last night that, regarding the “$716 billion that we were able to save from the Medicare program by no longer overpaying insurance companies by making sure we weren’t overpaying providers,” supposedly Medicare “benefits were not affected at all.”

The president is talking here about the $716 billion that his Affordable Care Act (ACA) cuts from Medicare over the next 10 years, as scored by the Congressional Budget Office (CBO). Those cuts were devoted to financing the new entitlement benefits under the Act, which is how CBO scored the ACA as not increasing the deficit. But now the president is claiming that the same funds are used to extend the financial solvency of Medicare by several years. If that is true, then the Affordable Care Act increases the federal deficit by $700 billion, contrary to the president’s claim that it would not increase the deficit by one dime.

For that $716 billion in Medicare cuts, the president touts $4.5 billion in prescription drug benefits. While the president boasts of $5,000 in such new benefits for the average beneficiary over the next 10 years, consider people reaching age 65 this year. Under the president’s health reform, the average spent on Medicare benefits for these retirees over the remainder of their lives will be cut by about $36,000 at today’s prices. That is the equivalent of delaying the retirement age under Medicare from age 65 to age 68, as this NCPA study found. For today’s 55 year olds, the president’s health reform would cut their Medicare benefits by $62,000 over the remainder of their lives. That is the equivalent of delaying their retirement age from 65 to 71. For today’s 45 year olds, the president’s health reform would cut their Medicare benefits by $105,000 over the remainder of their lives. That is the equivalent of delaying their retirement age from 65 to 74.

With these cuts, Medicare’s Chief Actuary Rick Foster reports that by the end of this decade, Medicare will be paying less to doctors and hospitals for health care for seniors than Medicaid pays for health care for the poor. And Medicare will be falling farther and farther behind Medicaid each year. Ultimately, Medicare payment rates will be one-third of what will be paid by private insurance, and only half of what is paid by Medicaid.

But Medicaid does not pay enough for the poor on the program to get timely, essential health care, particularly the sickest and those in most in need of the best health care. Academic studies show that the poor suffer worse health outcomes as a result, including premature death.

Under the ACA, soon enough seniors will be lined up behind welfare mothers in trying to find doctors who will see them and hospitals that will admit them. These cuts affect seniors already retired today, not just those years into the future.

Foster reports that already two-thirds of hospitals were losing money on Medicare patients, even before these cuts. In a few short years, hospitals that serve seniors in particular will begin closing, and retirees will have increasing difficulty obtaining access to care. As Harvard University health economist Joe Newhouse explains, seniors will likely have to seek care at community health centers and safety net hospitals.

And this does not even count any further cuts that may be adopted by the Independent Payment Advisory Board (IPAB). That Board will be composed of 15 unelected, appointed, Washington bureaucrats with the power to adopt still more Medicare cuts that would become effective even without the approval of Congress, as this NCPA study shows.

President Obama says these cuts just involve “making sure we weren’t overpaying providers.” But with Medicare on track now to pay doctors and hospitals serving seniors on Medicare ultimately only one half of what is paid by Medicaid, what Obama has cut goes far beyond cutting out overpayments. Lower payments to providers means less access, and less access means less health care. One study of the Children’s Health Insurance Program (CHIP) found that simply enrolling children in CHIP did not result in more care. That is, they had the same number of doctors visits, etc. However, increasing the fees that CHIP pays to doctors does result in more care. The converse will be true as well. Although promised benefits won’t change under orthodox Medicare, in the very act of reducing provider fees, the ACA will cause seniors to get less care, severely less care as described above.

Part of Obama’s $716 billion in Medicare cuts reduces the payments to insurance companies serving seniors under Medicare Advantage, where one fourth of all seniors have chosen a private insurer to provide their Medicare coverage because they believe they get better benefits from the private insurer. Obama describes this as well as cutting overcharging by insurance companies. But Obama’s cuts to the compensation for the services and benefits from insurers that seniors have chosen for their Medicare coverage will mean cuts to the benefits seniors receive from those insurers, as the Chief Actuary for Medicare has confirmed.