by Eli Richman | Dec 18, 2018 10:12am
With the federal budget deficit skyrocketing in the wake of the
2017 tax reform law, the Congressional Budget Office (CBO) is scoring dozens of
potential options for reducing spending and raising revenues.
Among the many policies CBO evaluated in its November report (PDF) were several
major changes to Medicare and Medicaid law, such as reducing federal Medicaid
matching rates and raising the Medicare eligibility rate to 67.
Changes of this magnitude would require an act of Congress, so
their prospects in the divided government next year are likely dim. Still,
CBO's detailing of the alternatives provides a window into how future deficit
reduction could impact healthcare coverage in the country.
Here's a summary of eight of the CBO's most impactful
suggestions:
Establish caps on federal
spending for Medicaid
Purely in terms of deficit reduction, the biggest impact the
federal government could make through healthcare policy would be limiting the
growth of Medicaid spending. CBO noted that spending increases in the program
are expected to slow in the coming years, but it will still rise faster than
the growth of GDP.
CBO evaluated two options based on enforcing spending caps in
Medicaid. One alternative, overall caps on spending, would see the federal
government giving each state a block grant for Medicaid. State governments
would be responsible for costs above that grant amount, so they would be
incentivized to curtail costs.
Similarly, a per-enrollee cap would set a limit on the average
spending-per-enrollee states are allowed through Medicaid. States would then
need to make that money fit their unique populations.
All else being equal, a per-enrollee cap would reduce the
deficit more than an overall cap, CBO said. The per-enrollee cap would decrease
the deficit by $703 billion between 2019-2028, while the overall cap would
decrease it by $496 billion over the same period.
Depending on how states respond to caps, they could either
restrict Medicaid coverage or spend more of the state's budget on the program.
Some states will certainly do the former, so setting caps could ultimately hurt
coverage among impoverished communities.
Still, CBO noted the option was more modest than some other
alternatives, which the agency didn't explore in depth.
Reduce federal Medicaid
matching grants
Another major hit to Medicaid's funding sources would come if the
federal government reduced the rates at which it matches state government
funding. CBO noted that the federal government matches many administrative
costs between 70% and 100%. This made the average federal share for
administrative expenses 64% in 2017.
CBO explored three possibilities for bringing that share down:
1.
Bringing the federal share of all administrative spending down
to 50% would reduce spending by $55 billion between 2019 and 2028.
2.
Removing the Federal Medical Assistance Percentage (FMAP) 50%
floor for enrollees not made eligible through the Affordable Care Act.
This would cause FMAP rates to fall below 50% in states with the highest
per capita income, reducing spending by $394 billion over 10 years.
3.
Reducing the federal share of medical expenditures for
ACA-enabled enrollees to the same FMAP formula that applies to other enrollees.
The office estimated this would reduce the deficit by $345 billion.
"For all three alternatives, reducing the share of total
spending by the federal government would shift additional financial
responsibility to states for the cost of Medicaid. Lower federal spending would
require additional spending by states in order for them to maintain the same
eligibility levels, covered services, and provider payment rates in their
Medicaid programs," CBO wrote.
Similar to Medicaid spending caps, shifting more of the costs of
Medicaid onto states could ultimately hurt coverage for beneficiaries. While
every state will respond differently, some states will undoubtedly respond by
restricting coverage—either directly or through programs like work
requirements.
Change the cost-sharing
rules for Medicare and restrict Medigap insurance
While Medicare has cost-sharing rules built in, most enrollees
have some form of supplemental insurance that eliminates their cost-sharing
obligations. This diminishes the impact cost-sharing rules are supposed to
have—namely reducing the amount of unnecessary care.
CBO evaluated two alternatives: First, Medicare could replace
its current cost-sharing formula with a single annual deductible of $750 for
Parts A and B, uniform coinsurance of 20% above that deductible, and an annual
out-of-pocket cap of $7500. The office said this would reduce spending by $44
billion over 10 years.
Another option would be to leave the cost-sharing rules as they
are but restrict Medigap policies from paying portions of enrollees'
deductible and coinsurance. This could save the federal government $72 billion
between 2019 and 2028, though the new rules would only come into effect in
2022.
If Congress made both changes, it would save $116 billion over
the same period.
Increase the premiums for
Parts B and D of Medicare
Increasing premiums for members on Part B and D plans is
probably the most straightforward way to reduce the deficit. Congress would
have two options: increase the basic premiums everyone pays and/or extend the
current freeze on income thresholds through 2028.
The first option would save $389 billion over 10 years, while
the second would only save $40 billion. Congress could also enact both
alternatives and save $418 billion between 2019 and 2028.
Raise the age of
eligibility for Medicare to 67
Interestingly, the controversial option of raising the Medicare eligibility
age doesn't actually produce much savings, according to CBO. That's because
many of those in the 65-67 age bracket would be able to get coverage through
Medicaid or the ACA marketplaces, both of which are on the federal government's
dime anyway.
As a result, if Congress raised the eligibility age by two
months a year, ending at 67, it would only decrease the deficit by $15.4
billion. Even if it took the slightly speedier route of raising it by three
months a year, it would only save $21.8 billion.
Require manufacturers to
pay a minimum rebate on Part D drugs for low-income beneficiaries
CBO noted that Medicare Part D beneficiaries in the Low-Income
Subsidy (LIS) program represented 50% of the total spending for Part D drugs,
even though those in the program only make up 30% of overall
beneficiaries. The office reasoned that if the federal government is paying for
brand-name drugs through this program, the manufacturers of those drugs could
chip in.
At a rebate of 23.1% of a drug's average manufacturer price, CBO
said the government could save $154 billion between 2019 and 2028.
Modify payments to
Medicare Advantage plans for health risk
Medicare Advantage programs are getting more popular by the day,
which is why federal law is requiring CMS to apply across-the-board reductions
in payments to those plans. Through current law, CMS is already set to reduce
payments to all plans by a minimum of 5.9%. CBO proposed raising that to 8%,
which it says would save an additional $47 billion over 10 years.
Alternatively, CMS could change the formula for health risk
scores by using two years' worth of diagnostic data instead of one. CBO said
this would reduce the gap between risk scores in MA plans
versus fee-for-service plans.
Reduce quality bonus payments
to Medicare Advantage plans
One major source of federal funding in MA plans are quality
bonuses, which are additional payments based on an MA plan's average quality
score.
The fed could save some money by reducing these quality
payments. CBO looked at both eliminating benchmark increases tied to
quality scores starting in 2021 and just eliminating double bonuses from these
benchmarks. The former, more comprehensive option would save $94.2 billion over
10 years, the office said, while the latter would only save $18.2 billion.
https://www.fiercehealthcare.com/payer/cbo-scores-outlook-for-a-host-medicare-medicaid-reforms
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