President Obama’s plan to cut $248 billion from Medicare over the next decade as part of his deficit reduction plan has drawn heat from all sides.
Republicans denounced it as too little. Advocates for older Americans denounced it as too harsh on beneficiaries. The best way to understand the proposal is as a good starting point that can be modified in either direction — to increase savings or to protect vulnerable beneficiaries — as the battle over deficit reduction and entitlement reform moves forward.
Republican leaders, who infuriated older Americans when the House voted to turn Medicare into a voucher program, are still pushing for deep cuts. They accused the president of “punting on entitlement reform.” It is true that he would trim only 4 percent from a projected $6.3 trillion in net Medicare spending over the next decade. But as we said, that is a starting point for a wider debate.
As for the concerns of older Americans, some 90 percent of Mr. Obama’s Medicare savings would come from reducing payments to drug companies and to health care providers. Only $24 billion would come from charging the beneficiaries more, and that would not happen until 2017.
The biggest added cost to beneficiaries — raising $20 billion over 10 years — would be an increase in the premiums that higher-income enrollees pay for coverage of doctors’ services and prescription drugs. Currently, individuals earning more than $85,000 a year pay more in steps that increase as income rises. Starting in 2017, the premiums would be raised, and a gradually increasing number of people would have to pay them, eventually reaching middle-class enrollees. With Medicare in trouble, it makes sense to make the better-off pay more.
Also starting in 2017, new enrollees who buy private Medigap policies that cover virtually all of the cost-sharing required for doctors’ services and outpatient care would have to pay a surcharge to Medicare that might amount to $300 or more. Those fees would raise $2.5 billion over 10 years. The more important goal is to push beneficiaries away from so-called first-dollar coverage and make them think twice before getting a test or a procedure or deciding to visit the doctor.
New enrollees would also have to pay a higher deductible before Medicare would start covering doctors’ and outpatient services. And certain new enrollees would be charged a $100 co-payment for home care, just as they face co-payments for other medical services.
There are ways President Obama could get bigger savings from Medicare, perhaps by accelerating the start date for the new charges on beneficiaries or making them apply to all enrollees. That would have to be done carefully to avoid undue harm. Mr. Obama has already wisely pledged to veto any cuts to Medicare benefits that are not part of a package that raises serious revenues from the wealthiest Americans and the biggest corporations.
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(Link last retrieved December 15, 2011)
