GOP outlines proposal for replacing Obamacare

July 18, 2016

The 2016 Medicare trustees’ recent report that the Medicare trust fund will reach insolvency by 2028 is providing fodder for congressional Republicans who are pushing a plan to replace Obamacare, including numerous proposals that would dramatically change Medicare.

Bob GattyWashington-The 2016 Medicare trustees’ recent report that the Medicare trust fund will reach insolvency by 2028 is providing fodder for congressional Republicans who are pushing a plan to replace Obamacare, including numerous proposals that would dramatically change Medicare.

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The 2028 date prediction is 2 years earlier than previously outlined in two previous reports, but is 2 years later than the timeline released by the Congressional Budget Office in January, which estimated insolvency in 2026. Decreased payroll taxes and a slower-than-expected decrease in inpatient utilization resulted in moving the date up from 2030, according to Andy Slavitt, acting administrator of the Centers for Medicare & Medicaid Services (CMS).

Medicare spending growth projected at 6.9%

Per-enrollee Medicare spending growth has averaged 1.4% over the last 5 years, slower than GDP per capita growth of 2.9% and overall health expenditures per capita growth of 3.4%. However, total Medicare spending growth is projected at 6.9% average annual rate over the next decade, driven by continued growth of the over-65 population.

The Medicare trustees noted that the cost of prescription drugs paid by Medicare continues to outpace growth in other Medicare costs and overall health expenditures. Medicare Part D spending per enrollee is estimated to increase by an average of 5.8 % annually through 2025, nearly 50% higher than the estimated increase in GDP per capita during that period.

The trustees’ report did not account for possible action by a yet-to-be-appointed Independent Payment Advisory Board (IPAB), established by Obamacare, that could force provider payment and other policy changes if Medicare spending rises beyond targets. Trustees said the trigger point for the IPAB could be reached in 2017.

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Physicians’ groups, including the AUA, have beseeched Congress to eliminate the IPAB, charging that it would be composed of unelected individuals whose decisions would directly affect their members, but would be very difficult to overturn. The IPAB provision was included in the Affordable Care Act (Obamacare) as a means of addressing Medicare’s worsening financial health by containing costs.

Next: "The clock is ticking"

 

The 37-page Obamacare replacement plan announced by House Speaker Paul Ryan (R-WI) includes a provision to eliminate the IPAB, even though House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Health Subcommittee Chairman Joe Pitts (R-PA) issued a joint statement warning that “the clock is ticking” on Medicare’s solvency and that “failing to act is not an option.”

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“We continue to look toward bipartisan solutions that will ensure our children and grandchildren will be able to rely on Medicare when they are older,” the statement said.

Available at www.better.gop, the plan pulls together many previous GOP proposals that have been made as Republicans have sought more than 50 times to overturn Obamacare. Ryan said it is not intended to be a complete, detailed Obamacare replacement plan, but a starting point for discussion. As this was written, Republican presidential nominee Donald Trump had not reacted to it, although he has pledged to kill Obamacare.

The most dramatic change in the GOP proposal would be to give beneficiaries, beginning in 2024, a choice of private plans competing alongside traditional Medicare fee for service. Medicare would provide a premium support payment either to pay for, or offset the premium of, the plan chosen by the beneficiary, depending on its cost.

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“The Medicare recipient would choose, from an array of guaranteed-coverage options, a health plan that best suits his or her needs,” the proposal states. “This is not a voucher program. A Medicare premium support payment would be paid, by Medicare directly to the plan or the fee-for-service program to subsidize its cost.” A new Medicare online exchange would be established to facilitate this new system.

Next: What the plan entails

 

What the plan entails

According to the GOP proposal, the program would operate similar to the Federal Employees Health Benefits program, where plans compete for individuals’ choice based upon premium amount, with a contribution from the government to lower the cost of coverage.

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Other key provisions of the GOP plan include:

  • repealing the IPAB, which the GOP plan said “demonstrates a key flaw of the Medicare fee-for-service system’s inability to tackle health care inflation”

  • repealing the ban on physician-owned hospitals imposed by Obamacare; plan authors said this would “make markets more competitive by driving down prices and increasing quality”

  • repealing an Obamacare provision that results in hospitals in some geographic areas being paid more than those in areas with lower costs

  • combining Medicare Parts A and B into a single program, also beginning in 2020, with a unified deductible

  • developing a personalized care demonstration program that would give beneficiaries and providers the ability to voluntarily agree on items and services outside the Medicare system

  • allowing providers to choose which health care plans they participate in

  • beginning in 2020, the Medicare eligibility age would be increased gradually to correspond with that of Social Security.

Obviously, whether such sweeping Medicare reforms are ever enacted depends largely on the outcome of the presidential and congressional elections this fall. But the GOP proposal provides the basis for Republican candidates to argue that they now have a detailed proposal for replacing Obamacare, while Democrats have been handed ammunition to charge that the GOP wants to gut Medicare and jeopardize seniors’ health care.

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