More Speaking out on Law’s Downside

One of the cost cutting measures to help pay for the health care reform legislation comes from cuts to Medicare. Now Rick Foster, Chief Actuary of Medicare, has just released his own critique of the newly passed legislation.

Rick Foster is one of the few in DC who is willing to go against the White House’s propaganda and show the actual facts and how they relate to the Act. Under his watch, his office just released a harsh critique of the new health reform law.

For anyone that is aware of what has gone on the past year to pass the health care bill and what the law entails, what he says is hardly surprising. He backs up The Lewin Group and other private health economists that have been saying that ultimately this law will end up hurting more than it will help.

In their report, The Lewin Group mentions reductions in provider reimbursements historically are passed back to private payers in the form of higher charges. There would a change in service reimbursement in Medicare and revises the competitive bidding process. It also reduces Medicare and Medicaid Disproportionate Share Hospital payments.

Foster’s report mentions that paying providers based on productivity sounds ideal but it’s not feasible. It is unlikely that health care providers will only be able to improve to the level expected. Over time, doctors will need to take on more patients to keep up with reimbursement rates. Each patient will receive less time and in turn, a lower quality of care overall, despite the push for better quality of care. We cannot expect physicians to provide the same quality of care when, instead of increasing payment over time, we are decreasing payment for the same coverage.

While increasing how many individuals will receive health care coverage, Foster’s report admonishes the administration for not having the foresight to create an avenue that will create more health care professionals like doctors and nurses to care for extra patients.

Another point brought up is the allocation of the Medicare tax. A 3.8 percent unearned income Medicare tax would apply to all income from individuals earning more than $200,000 per year and couples earning more than $250,000 per year. Despite the name, none of this tax would apply to Medicare. It’s wrong to ask taxpayers to pay for a tax that doesn’t benefit those it should cover.

Here are the salient findings of this report:

• Health care costs will go up, not down. National health expenditures will increase from 17 percent of GDP now to 21 percent under the new law and will be higher than without the legislation. Net federal spending on health care will also increase.

• Health care shortages are "plausible and even probable." Because of the increased demand for health care, "supply constraints might initially interfere with providing the services desired by the additional 34 million insured persons."

• 14 million employees will lose their employer coverage. Employees of small firms are especially at risk (despite small employer tax credit subsidies).

• 2 million employees who lose coverage will have to enroll in Medicaid.

• A Medicaid insurance card is not a guarantee of care. An estimated 18 million people will be added to Medicaid. However, because there is no corresponding increase in the supply of caregivers, "it is reasonable to expect that a significant portion of the increased demand for Medicaid would be difficult to meet, particularly over the first few years."

• One in ten insured workers will see their health benefits taxed. By 2019, more than 10% of insured workers will "be in employer plans with benefit values in excess of the thresholds (before changes to reduce benefits) and this percentage would increase rapidly thereafter."

• Higher taxes will lead to higher premiums. The new taxes on medical devices, prescription drugs, and insurance plans "would generally be passed on through to health consumers in the form of higher drug and device prices and higher insurance premiums."

• There are more than one-half trillion in Medicare cuts. The new health law cuts "$575 billion" from Medicare.

• Medicare cuts would threaten almost one in every seven hospitals. About "15 percent of Part A providers would become unprofitable within the 10-year projection period."

• Overall access to care for seniors would go down. Because of the law's payment reductions, "providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program.

• 7.4 million people will lose access to Medicare Advantage plans. Enrollment in MA plans will be cut in half (from its projected level of 14.8 million under the current law to 7.4 million under the new law).

• False advertising: The new "Medicare Tax" doesn't go to Medicare. "Despite the title of this tax, this provision is unrelated to Medicare; in particular, the revenues generated by the tax on unearned income are not allocated to the Medicare trust funds."

• False advertising: Budgetary double-counting does not improve Medicare's solvency. Medicare cuts "cannot be simultaneously used to finance other federal outlays (such as the coverage expansions) and to extend the [life of the Medicare] trust fund, despite the appearance of this result from the respective accounting conventions."

• The new long-term care insurance plan (CLASS Act) is unsound. The program faces "a significant risk of failure" because the high costs will attract sicker people and lead to low participation.

• The promise to those with pre-existing conditions is unfunded. "By 2011 and 2012 the initial $5 billion in Federal funding for [high risk pools] would be exhausted, resulting in substantial premium increases to sustain the program."

• The law does almost nothing to limit actual fraud and abuse. The fraud provisions in the law will save only about two percent of $47 billion in suspect claims.