Reducing Medicare Costs: Democrats vs Republicans

It is a difficult story to tell, but Democrats will have to distinguish the Affordable Healthcare Act’s Medicare spending reduction from the Republican House Plan to turn Medicare into a voucher program.

Although I believe Pelosi’s phrase, “We have a plan. It’s called Medicare” is truthful (because Republicans want to turn the program into a subsidy for buying insurance).  Republicans will point to the planned $500 billion cuts (through 2019) to Medicare in the health care law as evidence for “Democrats want to cut Medicare too”.

What’s the difference?

What follows is mostly from the Affordable Care Act and the deficit plan President Obama presented in April 2011.  In a separate blog I will review the debate over whether ACA can live up to its projected health care cost reductions, which totals $1 trillion over 20 years.

With the April deficit reduction measures the President would achieve a total deficit reduction from savings to Medicare and Medicaid of $1.48 trillion by 2033.  The total deficit reduction is comparable in size to the Ryan plan according to the White House.

What are the cost saving strategies proposed by the President?

(1) The role of Payment Advisory Board (IPAB) created under the reform act is enhanced:

The IPAB has been highlighted by economists and health policy experts as a critical contributor to Medicare’s solvency and sound operations. Under the Affordable Care Act, IPAB analyzes the drivers of excessive and unnecessary Medicare cost growth. When Medicare growth per beneficiary exceeds growth in nominal GDP per capita plus 1 percent, IPAB recommends to Congress policies to reduce the rate of growth to meet that target, while not harming beneficiaries’ access to needed services. Congress must consider IPAB’s recommendations or, if it disagrees, enact policies that achieve equivalent savings. If neither acts, then the Secretary of Health and Human Services would have to develop and implement a proposal to achieve the savings target. (see Kaiser Health News.)

(2) Reform the “Federal-State partnerships to strengthen Medicaid and promote simplicity, efficiency, and accountability”.

Under current law, States face a patchwork of different Federal payment contributions for Medicaid and the Children’s Health Insurance Program (CHIP). The President’s framework would replace the current complicated Federal matching formulas with a single matching rate for all program spending that rewards States for efficiency and automatically increases if a recession forces enrollment and State costs to rise.

(3) Called on the National Governors Association (NGA) to make recommendations for ways to reform and strengthen Medicaid; basically to find better ways to “incentivize” efficient, effective, high quality care for high cost patients.

(4) Improve patient safety through a new public-private partnership that will focus on eliminating complications caused by hospital stays or from procedures.

(5) Eliminate unnecessary prescription drug spending by leveraging Medicare’s purchasing power, speeding up generics, and better management of high users of prescription drugs.

(6) Increase Medicaid and Medicare accountability and integrity by recovery of erroneous payments and prevent States’ use of provider taxes as a means of lowering state spending without medical benefits.

I will explore the Payment Advisory Board in detail in my next post on this subject.



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2 Responses to Reducing Medicare Costs: Democrats vs Republicans

  1. From the Empire State says:

    Nice analysis.

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