When I read the newspapers a few weeks ago, I thought about calling the Ripley's (Believe it or Not) editors. This is the first time I have agreed with statements made by both Nancy Pelosi and President Obama. I know this is shocking -- it even surprised me.
In the wee hours of the morning on Friday, June 25, Congress -- the world's largest invertebrate organism -- once again delayed the implementation of pre-programmed cuts in Medicare they had required of themselves in legislation passed in the late 1997. That law mandates that doctors' Medicare rates be adjusted each year based on a formula tied to the health of the economy.
Almost immediately after that 1997 law was enacted, legislators began to fret about the pressure that would come from doctors, and more importantly from Medicare beneficiaries who are a significant and vocal voting bloc. Characteristically, members of Congress seem more concerned about the results at the ballot box than they are about the pending insolvency of Medicare. Irrespective of party affiliation, our elected representatives have now blocked 10 of these programmed reductions over the last eight years, including four since January of this year.
This time, the process has been delayed so long that The Centers for Medicare and Medicaid Services notified Congress that they would begin processing claims at rates reflecting the 21% cut for dates of service on or after June 1. The usual Congressional brinksmanship and game playing we've come to know and despise was in full force and effect. The House had proposed a bill that included an extension of unemployment benefits and $15 billion for state Medicaid programs. The Senate disagreed and wouldn't play along -- in large measure because the bill couldn't be paid for with offsets; reductions in other programs equal to the cost of this new spending.
After a great deal of back and forth, what resulted was a short-term "fix" lasting just six months. If you wonder why the six-month time period was agreed to, you have only to do the math. This punts the problems down the field until after the November elections. You can construct all of the applicable political scenarios yourself, but delaying the problem puts the December calculation at 23% and the January cut is calculated at 30%.
In this round of kick the can, the Democrats wanted to try a much longer "fix" -- 19 months in all -- but they could not or would not pay for it with cuts in other budget items. The Senate Finance Committee fashioned the six -month "fix" and made it retroactive to June 1, to avoid (or repair, depending on the timing) the claims issue that CMS warned about. Chairman Max Baucus (D-Mont.) and ranking member Charles Grassley (R-Iowa) offset the $6.4 billion cost by tweaking hospital reimbursements and allowing businesses to delay payments into pension funds.
Speaker Pelosi called the measure "totally inadequate" but felt that the House had no choice but to accept the Senate's solution. I agree -- but not for the reasons cited by Mrs. Pelosi. For many Americans, the solution is inadequate because it doesn't solve the underlying Medicare problem. President Obama issued a statement saying that he was "pleased" because without the "fix" some doctors would have stopped accepting Medicare patients. Indeed, due to the sad shape of Medicare, the Mayo Clinic in Arizona ceased treating Medicare patients earlier this year. The president added, "We should also agree, as I've said in the past, that kicking these cuts down the road just isn't an adequate solution to the problem."
System prevents a true "fix"
The president called the current system of temporary measures "untenable." Most Americans agree with that assessment. I know those of us who are close enough to Medicare eligibility to see it in the distance agree.
So does the American Medical Association. The AMA has long lobbied against the Medicare reimbursement formula and argued instead in favor of a total revamping of the system. They are concerned about the underlying problem as well as the uncertainty caused by the current deferral strategy. Lawmakers believe that the cost of reforming the current arrangement would be $210 billion over 10 years. Given the emerging math on the new health care plan, we'd probably be safe to double that estimate.
The AMA issued a statement immediately after the House vote. "The six-month Medicare patch Congress passed today is a very temporary reprieve for seniors and baby boomers that rely on the promise of Medicare. Delaying the problem is not a solution." Indeed. As we've reported in earlier columns, the Medicare Trustees report reads more and more like a Stephen King novel with each passing year. The pending insolvency is well-documented and current economic conditions will only exacerbate the situation and hasten the tipping point.
In his statement, the president also said, "We need to permanently reform the Medicare formula in a way that attacks our fiscal problems without punishing our hard-working doctors or endangering the benefits on which so many of our seniors rely." Mr. President, it isn't that we lack proposed solutions; it is that we have an overabundance of partisan bickering. The current zero sum game played on the Hill just doesn't lend itself to the adoption of solutions.
Paul Ryan (R-Wis.) has offered suggestions which range from privatizing Medicare to raising the eligibility age to means testing. Today's 65 isn't the same 65 that it was in '65 when Medicare was enacted. We are living and working longer, so perhaps this is one avenue to consider. Ryan suggests phasing it in for those who are under age 55 today. Senator Wyden (D-Ore.) has also offered some interesting proposals. There are good ideas on both sides of the aisle but any real progress toward a solution will require leadership that rises above partisanship.
Party winding down
Michael Kinsley writing for Time magazine (Sept. 4, 1995, "The Best Way To Fix Medicare") noted, "... there are basically only three ways to extract the necessary billions out of Medicare. One is to make Medicare beneficiaries pay more. Another is to reduce the quality and/or quantity of care that Medicare delivers. And the third is to deliver the same services more efficiently." As correct as Kinsley may be in his assessment, there is a concern that few have yet voiced.
Today's concerns center on doctors refusing to take Medicare patients due to lower reimbursements occasioned by the cutbacks envisioned in the 1997 legislation. Some believe that Medicare currently negotiates the lowest prices, but that is a misconception. Medicare dictates the prices they pay. Providers choke down the lower reimbursements because they can cost-shift the difference between Medicare's reimbursement and their retail prices to private payers. When the new health care plan constricts or eliminates much (or all) of the private payer marketplace, to whom will costs be shifted? Worrying about a 20% cut in Medicare reimbursements when (at least) some of that lost revenue can be recouped in the private market is one thing. What will the eventuality of those being the only reimbursements do to the medical and hospital community?
If the proposed cutbacks have so frightened the government that they have deferred them every year since 1997, they should be apoplectic over the prospect that doctors and hospitals are beginning to realize: The party may not be over, but it is rapidly winding down. If you don't think the hospitals know this, the carriers will confirm it. It has been evident in the enormous contract increases that have been demanded by hospital systems this year. If the "government as the only payer" scenario plays out, today's Medicare problems will look like a picnic on a sunny day.
One last request while I wait for the Ripley's folks to document this morning's strange events. Stop calling this nonsense a "fix"! Only in government could the act of perpetuating and worsening a problem be called a "fix." I know that government's unofficial motto is often "If it ain't broke -- fix it until it is," but this time, it is literally "broke." Instead of trying to "fix" the symptoms, maybe we can try to fix the problem. That would be one for the Ripley's folks to document.
David A. Saltzman, RHU, DIA, is national marketing director of Chicago-based Disability Resource Group Inc. The South Carolina resident is a past president of NAHU and has been a health, disability, life and employee benefits broker for more than 25 years. Readers may contact him at dsaltzman@drgdi.com.
