The Center's work on 'Medicare' Issues


Ryan’s Medicare Proposals: the Latest

April 9, 2014 at 4:42 pm

House Budget Committee Chairman Paul Ryan’s Medicare proposals — summarized in a new CBPP analysis — have evolved since Ryan issued his Roadmap for America’s Future in 2010, but much is still the same in the budget plan he released last week.

The centerpiece of Ryan’s Medicare plan remains premium support — replacing Medicare’s guarantee of health coverage with a flat payment, or voucher, that beneficiaries would use to purchase coverage.  But the details have changed significantly over the years.

  • Ryan now retains a form of traditional fee-for-service Medicare as an option.  His earliest proposals would have phased out traditional Medicare, which would have substantially increased health care costs, since traditional Medicare has lower administrative expenses and payment rates than private insurance plans.
  • Ryan now bases the amount of the premium-support payment on a weighted average of bids by private plans and traditional Medicare.  In last year’s proposal, the payment would have been set below the average bid.
  • Ryan no longer mentions a limit on the annual growth of the premium-support voucher, as did his previous proposals.

Even with these modifications, Ryan’s premium-support proposal would disadvantage beneficiaries in at least two ways.  First, in many regions, traditional Medicare would cost more than the premium-support voucher, and, in these regions, beneficiaries who chose to enroll in traditional Medicare would have to pay higher premiums than under current law.  Second, beneficiaries who enrolled in a private plan would not receive the federally subsidized supplemental benefits that enrollees in private Medicare Advantage plans receive under current law.

Moreover, premium support could cause traditional Medicare to unravel — not because it was less efficient than the private plans, but because it was competing on an unlevel playing field in which private plans captured the healthier beneficiaries and incurred lower costs as a consequence.

The Ryan budget again proposes to raise Medicare’s eligibility age — now 65 — by two months per year, starting in 2024, until it reaches age 67 in 2035.   (Ryan’s Roadmap proposed raising the eligibility age to 69½.)  At the same time, the plan would repeal health reform’s coverage provisions.  Consequently, 65- and 66-year-olds would have neither Medicare nor access to health insurance marketplaces in which they could buy coverage at an affordable price and receive subsidies to help them secure coverage if their incomes are low.  Many would end up uninsured.

Finally, the Ryan budget includes other Medicare proposals from past years — increases in income-tested premiums, a cap on medical malpractice awards, and repeal of the benefit improvements in health reform (including closure of the prescription drug “donut hole”) — as well as a new proposal to increase Medicare cost sharing.  For more details, see our new paper.

Medicare Advantage Overpayments Help Insurers More Than Beneficiaries

April 9, 2014 at 2:29 pm

I noted yesterday that health reform scales back overpayments to private Medicare Advantage plans, thereby lowering premiums for all Medicare beneficiaries and extending the solvency of Medicare’s trust fund.  Insurers, arguing that curbing the overpayments results in direct benefit cuts for enrollees, often imply that they have used the overpayments solely to provide increased benefits.  But findings from a recent National Bureau of Economic Research study challenge this argument.

The study examined certain urban counties in which Medicare Advantage plans received substantial overpayments in the four years before health reform started phasing down the overpayments in 2012.  Here’s what it found:

  • The results of the study suggest that the “additional plan reimbursement for plans in [the counties studied] does not translate into more generous benefits for Medicare Advantage recipients.”
  • Most of the overpayments are not passed through to enrollees: the higher reimbursement “is not accompanied by significant differences in premiums, out-of-pocket costs, or rebates.”
  • The study finds no evidence of improved quality of care as a result of the overpayments.
  • The study suggests that insurers retain about one-fifth of the overpayments as higher profits.   They also use the overpayments to boost advertising spending in order to promote further enrollment in Medicare Advantage.

Despite insurers’ “doom and gloom” warnings that health reform will devastate the program by scaling back the overpayments, Medicare Advantage continues to thrive.  Insurers can still provide additional benefits to attract enrollees by trimming profits and becoming more efficient.

That’s likely why the Congressional Budget Office expects Medicare Advantage enrollment to continue to grow through 2019 and why Wall Street analysts also still have a “positive long-term view of Medicare Advantage.”

Just the Basics: Payroll Taxes

April 9, 2014 at 11:51 am

As Tax Day approaches, we’ve updated several backgrounders that explain how the federal government and states collect and spend tax dollars.  As policymakers and citizens weigh key decisions on how best to shape our future federal government, it’s helpful to examine where the dollars that comprise the budget come from and where they go.

The next in our series of revised “Policy Basics” backgrounders explains federal payroll taxes.

The federal government levies payroll taxes primarily on wages and self-employment income and uses most of the revenue to fund Social Security, Medicare, and other social insurance benefits.  In fiscal year 2013, federal payroll taxes generated $947 billion, or 34 percent of all federal revenues.  (When the Social Security tax was introduced in 1937, it accounted for 11 percent of federal revenues.)

Find out more about who pays payroll taxes and what they fund in our full paper.

Retain Health Reform’s Medicare Advantage Savings

April 8, 2014 at 4:39 pm

The Obama Administration’s announcement yesterday that it will modify some payment policies related to private Medicare Advantage insurers, while implementing health reform’s scheduled reductions in overpayments to Medicare Advantage plans, has prompted critics to demand that it roll back some — or all — of the Medicare Advantage savings that health reform requires.  That would be a mistake.

In issuing its final Medicare Advantage payment policies for 2015, the Centers for Medicare and Medicaid Services (CMS) modified or delayed some planned steps that it periodically takes to improve the accuracy of the Medicare Advantage risk adjustment system, which raises or lowers payments to plans based on their enrollees’ relative health.  Medicare Advantage plans tend to enroll healthier-than-average beneficiaries.  A less accurate risk adjustment system doesn’t do as good a job of accounting for these differences, so the delay in improving the system will result in higher payments to plans in 2015 than would otherwise be the case.

CMS also implemented health reform’s reductions in overpayments to Medicare Advantage plans (as well as other related health reform provisions) scheduled for 2015.  Medicare has historically paid Medicare Advantage plans more per beneficiary than it would cost to cover these beneficiaries in traditional Medicare; health reform curbs (but doesn’t eliminate) these overpayments over time.

In response to yesterday’s announcements, leading Senate and House Republicans immediately called for scaling back or repealing health reform’s Medicare Advantage savings as well, warning of substantial harm to enrollees.  But, as my colleague Paul Van de Water told Congress last month, claims that Medicare enrollees will face much higher costs and lose their choice of plans are highly exaggerated.  Moreover, curbing overpayments is sound policy, lowering premiums for all beneficiaries and extending the solvency of Medicare’s trust fund.

Policymakers should thus reject any attempts to undermine health reform’s Medicare Advantage savings.

Ryan Roundup 2014: Everything You Need to Know About Chairman Ryan’s Latest Budget

April 8, 2014 at 9:52 am

We’ve compiled CBPP’s analyses and blog posts on House Budget Committee Chairman Paul Ryan’s budget.  We’ll update this roundup as we issue additional analyses.

  • Analysis: Ryan Block Grant Proposal Would Cut Medicaid by More Than One-Quarter by 2024 and More After That
    April 4, 2014
    “The Medicaid block grant proposal in the budget plan proposed by House Budget Committee Chairman Paul Ryan on April 1 would cut federal Medicaid (and the Children’s Health Insurance Program, or CHIP) funding by 26 percent by 2024, because the funding would no longer keep pace with health care costs or with expected Medicaid enrollment growth as the population ages….  These cuts would come on top of repealing the health reform law’s Medicaid expansion.”

    Blog Post: Ryan Budget Again Proposes a Medicaid Block Grant, Adding Millions to the Ranks of the Uninsured and Underinsured

  • Blog Post: Ryan Budget Mischaracterizes Housing Vouchers, Then Sets the Stage to Cut Them
    April 4, 2014
    “House Budget Committee Chairman Paul Ryan used a faulty number to argue that ‘Section 8’ Housing Choice Voucher program costs have risen excessively.  His budget documents also float a proposed expansion of the Moving to Work (MTW) demonstration that could lay the groundwork for deep, harmful cuts in the voucher program in years to come.  That program, which helps 2.1 million low-income families rent modest units of their choice in the private market, is just beginning to recover from the loss of 70,000 vouchers due to sequestration budget cuts last year.”

  • Analysis: Ryan Budget Would Slash SNAP by $137 Billion Over Ten Years: Low-Income Households in All States Would Feel Sharp Effects
    April 4, 2014
    “House Budget Committee Chairman Paul Ryan’s budget plan includes cuts in the Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamp Program) of $137 billion — 18 percent — over the next ten years (2015-2024),  which would necessitate ending food assistance for millions of low-income families, cutting benefits for millions of such households, or some combination of the two.  Chairman Ryan proposed similarly deep SNAP cuts in each of his last three budgets.”

    Blog Post: Ryan’s SNAP Cuts Would Hit Millions of Low-Income Americans

  • Analysis: Medicare in Ryan’s 2015 Budget
    April 8, 2014
    “The Medicare proposals in the 2015 budget resolution from House Budget Committee Chairman Paul Ryan (R-WI) are much the same as those in Ryan’s previous budgets. Once again, Chairman Ryan proposes to replace Medicare’s guarantee of health coverage with a premium-support voucher and raise the age of eligibility for Medicare from 65 to 67. Together, these changes would shift costs to Medicare beneficiaries and (with the simultaneous repeal of health reform) leave many 65- and 66-year-olds without health coverage.”Blog Post: Ryan’s Medicare Proposals: the Latest
  • Analysis: Ryan Plan Gets 69 Percent of Its Budget Cuts From Programs for People With Low or Moderate Incomes
    April 8, 2014
    “House Budget Committee Chairman Paul Ryan’s new budget cuts $3.3 trillion over ten years (2015-2024) from programs that serve people of limited means. That’s 69 percent of its $4.8 trillion in total non-defense budget cuts. Not much has changed on this front from Chairman Ryan’s budget plan of a year ago, or the year before that. Then, too, Chairman Ryan proposed very deep cuts, the bulk of which were in programs that serve low- and moderate-income Americans.The deficit reduction plan that Fiscal Commission co-chairs Erskine Bowles and Alan Simpson issued in late 2010 established as a basic principle that deficit reduction should not increase poverty or widen inequality. The Ryan plan charts a radically different course, imposing its most severe cuts on people on the lower rungs of the income ladder.”

    Blog Post: Ryan Budget Gets 69 Percent of Its Cuts From Low-Income Programs [Updated]

  • Blog Post: Obama, Ryan Miles Apart on Non-Defense Discretionary Funding
    April 8, 2014
    “One especially stark difference between the recent budgets from President Obama and House Budget Committee Chairman Paul Ryan is in non-defense discretionary (NDD) funding, the budget category that includes key investments in the economy, such as education and basic research; support for low-income families, such as Head Start and housing assistance; and essential services that Americans expect, such as veterans’ medical care and food safety inspections.  Obama and Ryan are roughly $1 trillion apart on total NDD funding over the next decade.”
  • Blog Post: Ryan Budget a Path to Adversity for Millions — and Maybe for the Economy Too
    April 9, 2014
    In his latest US News & World Report post, CBPP Chief Economist Chad Stone reprises analysis showing that House Budget Committee Chairman Paul Ryan’s “Path to Prosperity” budget is, in fact, as CBPP President Robert Greenstein described it, a path to adversity for tens of millions of Americans.  He then discusses why it also could be a path to adversity for the economy as a whole.
  • Blog Post: Chairman Ryan’s Response to the Center’s Analysis Doesn’t Hold Water
    April 10, 2014
    “House Budget Committee Chairman Paul Ryan took exception to our finding that 69 percent of the non-defense spending cuts in his new budget come from programs for people with low and moderate incomes.  But he makes no attempt to refute our calculations, and his response both defies logic and conflicts with his own budget and even his own words.”
  • Blog Post: Chairman Ryan’s Obfuscation: Part 2
    April 10, 2014
    “In his attempt to deflect our finding that 69 percent of his budget cuts come from programs targeted on Americans of limited means, Ryan says that Medicaid would receive over $3 trillion during the coming decade under his budget and that its costs would grow in all years after 2016.  [This blog post explains] what his too-clever-by-half response conceals.”
  • Statement: Robert Greenstein, President, On the House Passage of Chairman Ryan’s Budget Plan
    April 11, 2014
    “House Budget Committee Chairman Paul Ryan’s “Path to Prosperity” budget, which the House has now passed, is anything but that for most families and individuals.  Affluent Americans would do quite well, but for tens of millions of others, the Ryan plan — which gets 69 percent of its cuts from programs that serve people of limited means — is a path to more adversity.”