Collins and Medicare: Bad Deal for Seniors, Americans

Remember how George W. Bush pushed to privatize Social Security? It failed, because people like Social Security, and because they didn’t want their entire retirement to be subject to the whims of the market. The 2008 quickie depression and the failure of Lehman Brothers was a stark reminder that, sometimes private industry doesn’t have all the answers. 

Paul Ryan’s proposed budget famously proposed to cut $716 billion from Medicare and turn it into a voucher system for Americans not yet benefitting from the wildly popular single-payer program for seniors. 

When Chris Collins hammers Kathy Hochul for voting for Obamacare, which “takes” $716 billion from Medicare and subsidies for Medicare supplemental insurance, remember that he supported a plan that would have done something even worse; that would have fundamentally changed what Medicare is for future generations. 

Hochul’s race against Corwin was about Medicare and how the Ryan budget would change it. Hochul won – and the $716 billion was part of that race. Now, Collins thinks he can fool voters into thinking that Obama and Hochul have weakened Medicare – but nothing could be further from the truth. 

That $716 billion from Medicare

The Affordable Care Act did indeed cut Medicare spending by $716 billion

On July 24, the Congressional Budget Office sent a letter to House Speaker John Boehner, detailing the budget impact of repealing the Affordable Care Act. If Congress overturned the law, “spending for Medicare would increase by an estimated $716 billion over that 2013–2022 period.”

As to how the Affordable Care Act actually gets to $716 billion in Medicare savings, that’s a bit more complicated. John McDonough did the best job explaining it in his 2011 book, “Inside National Health Reform.” There, he looked at all the various Medicare cuts Democrats made to pay for the Affordable Care Act.

The majority of the cuts, as you can see in this chart below, come from reductions in how much Medicare reimburses hospitals and private health insurance companies.

But what is the effect of these cuts to seniors and their benefits? Zero. Not a single benefit is cut or reduced in any way. There are no vouchers, no privatization – the $716 billion comes from reducing the cost of the program, not reducing its benefits. Quite the contrary – Obamacare takes that savings and actually adds benefits to Medicare, bringing a new emphasis on preventive care by adding a new annual no-copay wellness visit to the program. From the WaPo’s fact check of last week’s Clinton speech

TRUE: “What the president did was to save money by taking the recommendations of a commission of professionals to cut unwarranted subsidies to providers and insurance companies that were not making people healthier and were not necessary to get the providers to provide the service.”

Clinton appears to be referring to the Medicare Payment Advisory Commission, an independent body that advises Congress on the program and the changes they have recommended for the program. MedPAC has, for example, repeatedly recommended that private Medicare Advantage plans should not be paid more than the traditional fee for service program. That, among other changes, was incorporated into the Affordable Care Act’s changes.

DOUBLE COUNTED: “Instead of raiding Medicare, he used the savings to close the doughnut hole in the Medicare drug program…and to add eight years to the life of the Medicare trust fund so it is solvent till 2024.”

Both of these facts are, independently, true. The health care law did indeed use some of the revenue it generated to pay for seniors who land in the “donut hole,” the gap after normal drug coverage ends and catastrophic coverage kicks in. And it did extend the solvency of the Medicare trust fund by eight more years, until 2024, per a report earlier this year.

But this represents some of the least-liked math in Washington, because it uses a sort of “double counting” of Medicare savings. The Medicare Trust Fund counts the health law’s $716 billion in savings as going back into its coffers. The Congressional Budget Office counts them as paying for provisions in the Affordable Care Act, like closing the donut hole. In reality, it would be very, very hard for a Medicare dollar saved to achieve both these purposes. In fact, it would be impossible.

This accounting isn’t unique to the Affordable Care Act. Budget wonks have regularly used this double counting for Medicare savings generated by Congress. There are some defenders of this accounting method. But it is one of the points that the Affordable Care Act’s Medicare savings regularly gets attacked.

TRUE: “I didn’t know whether to laugh or cry because that $716 billion is exactly, to the dollar, the same amount of Medicare savings that [Ryan] has in his own budget.”

Rep. Paul Ryan’s most recent budget does indeed include the Affordable Care Act’s $716 billion in Medicare savings. Mitt Romney has, however, disavowed those cuts and promised to restore insurers’ and hospitals’ reimbursement rates as part of his plan to repeal the Affordable Care Act.

The question, then, is – why do Romney and Chris Collins want to roll back Obamacare’s strengthening of Medicare? Is it because they’re both independently wealthy and what happens to Medicare has no affect on them in any palpable way? Medicare isn’t just some freebie entitlement – like Social Security, it’s something you and I pay into throughout our working lives (check your FICA on your next paystub). Romney and Chris Collins want to fundamentally change Medicare into a voucher program, but that’s not the promise that was made to me and others who have been paying into the system. In contract law, we pay in relying on the promise of a future no-hassles program  that current seniors enjoy. It’s fundamentally unfair to make it one program for one class of people, and something else for another – frankly, I think it’s violative of the 14th Amendment’s Equal Protection Clause. 

Why do Romney and Chris Collins want to violate the Equal Protection Clause by voucherizing Medicare for one class of Americans, while maintaining it as a single-payer plan for another? 

Oh, and in commenting on the proposed voucherization via $716 billion in cuts from Medicare, Chris Collins told the Batavia Daily News that this doesn’t “go far enough”

Collins said he favors the Tea Party push to reduce the federal government. He praised Rep. Paul Ryan, R-Wisconsin, for ‘starting the conversation’ about reducing entitlement programs. But Collins said Ryan doesn’t go far enough. Ryan believes the budget could be balanced in 30 years, Collins said it needs to be done in 10 years. To delay it longer isn’t fair to young Americans who will have to foot the bill.

To Chris Collins, everything is an entitlement program – even programs you pay for. And he has the nerve to blame Hochul for harming Medicare through a cost-savings that actually expands its benefits. 

Even Kathy Hochul is trying to hedge on Medicare Advantage, saying she doesn’t like the cuts to that program. But why? Reductions in Medicare reimbursement rates to Medicare Advantage plans and hospitals were negotiated with those entities. Hospitals know that with universal coverage, they’ll get more patients whose bills are paid. The Advantage Plans’ reimbursement rates are reduced to eliminate waste that does nothing to enhance patient care. In reference to the chart shown above

The blue section represents reductions in how much Medicare reimburses private, Medicare Advantage plans. That program allows seniors to join a private health insurance, with the federal government footing the bill. The whole idea of Medicare Advantage was to drive down the cost of health insurance for the elderly as private insurance companies competing for seniors’ business.

That’s not what happened. By 2010, the average Medicare Advantage per-patient cost was 117 percent of regular fee-for-service. The Affordable Care Act gives those private plans a haircut and tethers reimbursement levels to the quality of care administered, and patient satisfaction.

The Medicare Advantage cut gets the most attention, but it only accounts for about a third of the Affordable Care Act’s spending reduction. Another big chunk comes from the hospitals. The health law changed how Medicare calculates what they get reimbursed for various services, slightly lowering their rates over time. Hospitals agreed to these cuts because they knew, at the same time, they would likely see an influx of paying patients with the Affordable Care Act’s insurance expansion.

The rest of the Affordable Care Act’s Medicare cuts are a lot smaller. Reductions to Medicare’s Disproportionate Share Payments — extra funds doled out the hospitals that see more uninsured patients — account for 5 percent in savings. Lower payments to home health providers make up another 8.8 percent. About a dozen cuts of this magnitude make up the green section above.

It’s worth noting that there’s one area these cuts don’t touch: Medicare benefits. The Affordable Care Act rolls back payment rates for hospitals and insurers. It does not, however, change the basket of benefits that patients have access to. And, as Ezra pointed out earlier today, the Ryan budget would keep these cuts in place.

By the way – if Chris Collins gets his wish and repeals Obamacare, Medicare Part A will be insolvent by 2016 unless something else is done. As we know, that “something else” is turning it into a complicated voucher program, fundamentally changing the very nature of Medicare. 

When officials talk of Medicare insolvency, they’re talking specifically about the trust fund for Medicare’s hospital insurance, or Medicare Part A, which covers inpatient hospital stays, care at a nursing facility, hospice care and some home health care. The other parts of Medicare, though costs are rising, are “adequately financed” for now, the program’s trustees say.

The Part A fund’s overseers — the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds — said back in 2009, before the Affordable Care Act passed, that the banked money used to make up the difference between income (such as taxes) and expenses for Part A would be depleted in 2017.

But then the Affordable Care Act passed. The trustees reported that the act’s lower expenditures (cutting rates to providers) and increased revenues (a payroll tax hike for wealthier people in 2013) “improves the financial outlook for Medicare substantially.”

The trustees reported in 2010 that health care reform would delay the Part A trust fund’s insolvency until 2029. By 2011, the trustees moved that insolvency estimate back to 2024.

So, to sum up: 

Chris Collins supported the Ryan budget, which also assumed a $716 billion reduction in Medicare expenses. When he attacks Kathy Hochul for this, it flies right back in his face, because he says $716 billion doesn’t go far enough, and would like to voucherize Medicare and reduce other “entitlement” programs. Hochul needs to go on the offensive on this point – the Obama/Hochul cuts expand Medicare benefits and ensure the program’s continued solvency, while Collins’ cuts turn Medicare into something resembling the awful system we have today for most Americans, and threatens the solvency of Part A going past 2016.

Chris Collins, therefore, is a disaster for seniors in NY-27.  

4 comments

  • Good column, Alan–thanks. So will this connect with the NY27 people whose Medicaire Collins hopes to destroy, or will they vote for him and against their own interests?

    And will they stop directing their anxieties toward pumped-up foreign demons? There’s a column in the NYT today that suggests an uncanny similarity between the anxieties of the Chinese people and our own: “Their wishes and worries were candid, heartfelt and startling: people had lost their optimism and were yearning for security and freedom from anxiety. Income is a primary worry for those who have lost their jobs or land. Pensions and social welfare payments are almost nonexistent. People struggle to pay for education. They can’t afford medical treatment; clinics and hospitals require patients to pay cash in advance. A serious illness can spell financial ruin for an entire family” (http://www.nytimes.com/2012/09/10/opinion/what-keeps-the-chinese-up-at-night.html?hp

  • Here’s the problem. 

    I assume that the information is this post is spot on and that Hochul is far better than Collins on medicare. But I think you are preaching to the choir given your readership. 

    I think your time would be better spent getting directly involved in politics again instead of commenting on it. You clearly care.

    • and he should still post…. I’ll be volunteering for Hochul and need all the info I can get.  Good job and thanks.

  • Carly_EngageAmerica

    The Medicare trustees project that under current law,
    Medicare will rack up $26.9 trillion in unfunded obligations over the next 75
    years. In a more likely scenario, that number soars to $36.9 trillion. American
    taxpayers will pay the costs, and seniors will suffer the effects of a program
    that’s going broke.

    President Obama’s health care plan makes things even worse
    for the very seniors Medicare serves. Obamacare cuts $421 billion from Medicare
    in order to pay for other programs that aren’t even for seniors. On top of
    that, a large chunk of the Obamacare cuts come from slashing reimbursement
    rates for doctors, meaning that seniors’ access to health care providers is at
    risk, with 40% of providers in danger of closing their doors by 2050.

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