Simpson-Bowles on Medicare

The President mentioned being open to Medicare reforms of similar cost magnitude to those proposed by the Simpson-Bowles report in the State of the Union last night.

Here is a post from April, 2011 on the health policy proposals of the Simpson-Bowles report. Big picture, the most important thing to understand about Simpson-Bowles and health policy is that it assumed the implementation of the Affordable Care Act (including the Medicaid expansion). Here are a few highlights of their Medicare proposals (see pp. 37-40):

  • Change the SGR (do away with the doc fix) and pay for it. They note this as saving money ($22 Billion), but that is compared to the assumption that the SGR is not allowed to take place which is a good assumption, and the alternative of freezing physician pay for a period while a new system is worked out. The offset needed to “pay for ending the SGR is $267 Billion over 10 years, or over $100 Billion more than CBO now says it is. It is insane not to do away with SGR and move toward a new system now.
  • Repeal CLASS. This has been done, but Simpson-Bowles said this would save $76 Billion, while CBO said the cost to offset was $0.
  • They then note $400 Billion in cuts (to partly pay for getting rid of the SGR above) with others to address deficit reduction. The most consequential of these are: (1) simplifying the cost share rules across the parts of Medicare (save $110 Billion over 10). (2)  reforming Medigap to not allow a first dollar option (save $38 Billion over 10); (3) expanded waste, fraud and abuse ($9 Billion over 10); (4) Reduce Medicare payment for Graduate Medical Education, or training of physicians ($60 Billion over 10); (5) End Medicare bad debt payments for Medicare beneficiaries who do not pay co-pays and deductibles ($23 Billion over 10).
  • Note that these are all “savings” to the Medicare program. Many of these simply shift costs to other payers. For example, to hospitals in the form of increased bad debt collection, or a teaching hospital in the form of lower subsidies for residency training. These sorts of Medicare savings that shift costs to hospitals will be heightened in a State that does not undertake the Medicaid expansion (like North Carolina).
  • Note that the numbers above on savings were from 2010, and the Medicare baseline has improved quite a bit since then. So, these would need to be re-scored. If we did away with SGR and moved toward some sane physician reimbursement model (not saying I know how) and modified and unified the deductible structure across the parts of the Medicare program, and had more aggressive means-testing of Medicare (maybe the imposition of a Part A premium) that would be a reasonable poke at some next steps beyond the ACA on Medicare. I am not going to try and give a cost estimate.

I want to reiterate that the underlying starting point of the Simpson-Bowles health reform policies were that they assumed the implementation of the Affordable Care Act, including the Medicaid expansion.

cross posted at freeforall

Author: Don Taylor

Don Taylor is an Associate Professor of Public Policy at Duke University, where his teaching and research focuses on health policy, with a focus on Medicare generally, and on hospice and palliative care, specifically. He increasingly works at the intersection of health policy and the federal budget. Past research topics have included health workforce and the economics of smoking. He began blogging in June 2009 and wrote columns on health reform for the Raleigh, (N.C.) News and Observer. He blogged at The Incidental Economist from March 2011 to March 2012. He is the author of a book, Balancing the Budget is a Progressive Priority that will be published by Springer in May 2012.

6 thoughts on “Simpson-Bowles on Medicare”

  1. The fact is humans are not mass produced machine, and chronic disease cannot be cured. That is where almost all of the healthcare money is going, to people that are dying, and will die no matter how much money is spent. Their bodily systems are failing one or more at a time, due to genetics, accident, or just use and abuse, which causes more things to fail, and treatment may stave off the inevitable for a while, however we must to look at the Cost Benefit of such actions and expenditures. Spending 5 times more than a person earned over their lifetime on that persons healthcare alone, is not a judicious use of tax money. Medical care is someones productivity, someones property, money is someone productivity and someones property, and if it isn’t yous, and it isn’t given as charity, it is coerced with force and thus theft, and not some thing that can be given away by a third party. The government doesn’t control costs, they cut reimbursements, the result of that for physicians and hospitals, is to charge other customers more, or show medicare patients the door, just like most physicians show medicaid patients the door. At the end of the day people want more healthcare than their productivity affords them, as a result, someone gets stolen from, as people see some people getting a free ride they do the same thing and the system implodes, that is what is happening right now. People are abdicating their responsibility, in the hopes that future tax receipts will be able to pay for past promises. People will be in for quite a surprise, when doctors don’t accept their insurance card, hospitals start to close ER’s to cut costs, avoid the medicaid pit, and lower readmission rates. The fact is Medicare is dead in the water, SSI is dead in the water, and short of payroll taxes going up to account for the numbers of decreasing workers to support each recipient the system will collapse. Every American will not eat a 5% tax increase, so the system will collapse, as the cost exceeds any benefit that they will get.

    1. What a lot of strawmen.

      Plenty of folks health can be dramatically improved by reasonable (and not so costly) medical interventions. As just one example, a very cheap thyroid supplement can vastly improve the health of many, if only the detecting blood test (again, cheap) is done.

      Increased health leads to economic improvement as those who otherwise might be sick or weak become productive.

      As to the completely phoney claim that Medicare won’t be accepted, my experience is that there is zero difference between acceptance levels from the private plan I had before and Medicare–except that Medicare is actually more widely accepted.

      If I need to get in to see my family doc or a specialist the appointments are maid easily and quickly–with Medicare picking up the tab.

      By the way, my grandmother told me that from the day social security passed during the depression there were endless predictions that it would collapse right away. She was amazed, so she said, when her first SS check arrived on time and they just kept on coming for thirty years.

    2. Neither Medicare nor Social Security is “dead in the water”. And the taxation-is-theft mantra is not only very tired, it’s also rather disgusting.

  2. Don, Do you remember why CLASS was repealed. It was because HHS couldn’t figure out how to do it without costing money.

    1. Yes, it needed either underwriting or forced risk pooling to fly. The work requirement was way too low….CLASS needed the conference committee worse than any other part of the ACA….because it was too specific. I probably wrote ~ 20 posts on CLASS, here is one Here is another, with the most interesting aspect of the HHS report shutting down CLASS, namely that consumers were not that interested in open ended low level benefits

  3. “They note this as saving money ($22 Billion), but that is compared to the assumption that the SGR is not allowed to take place which is a good assumption, and the alternative of freezing physician pay for a period while a new system is worked out.”
    I can’t understand this sentence, and therefore the whole paragraph. Why is the assumption that SGR won’t take place good? What is the first part of the conjunction joined by “and”?

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