The Congressional deficit “Super-Committee” formally began its work last week, and President Obama is expected to release his deficit reduction proposal today at 10am EDT. The President’s plan is expected to seek as much as $3 Trillion in savings — including, most notably, the new “Buffett Rule” establishing a new tax bracket for millionaires. The plan also includes $320 Billion in health savings over the next decade including $248 Billion in Medicare (would add 3 years to the trust fund) and $72 Billion in Medicaid cuts. The plan calls for exempting existing enrollees from some changes.
Proposed changes to Medicare are not expected to take place until 2017, and would only kick in if Republicans agree on certain revenue raisers. The President’s proposal is no longer expected to include an increase in the eligibility age. Medicare cuts would mainly come from providers (reduce bad debt and graduate medical education payments, align rural providers payments with the cost of care, encourage efficient post-acute care) and by increasing Part B and D payments for higher-income beneficiaries, and discouraging certain Medigap plans. Details to come following the announcement.
We remain convinced that the best-case scenario for Medicare Advantage and Part D plans is that the Super-Committee fails to vote out a proposal (7/12 margin required), or that Congress fails to pass the plan by at least a majority vote. This would trigger sequestration, an across-the-board 2% cut to Medicare payments to providers and plans. Those cuts would hit 2013-2017, and are likely less severe than any proposal voted out of the Super-Committee.
And what about the “doc fix” — reform of the Sustainable Growth Rate? It remains the biggest indirect threat to MA rates. Docs are facing a 29.5% cut in their fee-for-service Medicare payments starting January 1 unless Congress intervenes. Failure to address it could mean MA rates take a 7-8% hit beginning in 2013. The Medicare Payment Advisory Commission (MedPAC) plans to make recommendations for payment cuts to the health care sector that would help offset the cost of a long-term Medicare physician payment reform plan. At its meeting in Washington last week MedPAC outlined the plan, which included a freeze in reimbursements for primary care physicians and reimbursement reductions for specialists.
Stay tuned and watch this closely as the Super-Committee reconvenes on September 22nd. While MA plans “gave at the office” in health reform with around $130 Billion in cuts, we’re not out of the woods yet for a second round of payment reductions.