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On April 14, 2015, the Senate overwhelmingly (92 to 8) passed H.R. 2 – the Medicare and CHIP Reauthorization Act (MACRA) – which repeals and replaces the flawed Medicare physician reimbursement system known as the sustainable growth rate or SGR.  The House of Representatives passed its own bill, H.R. 2 (392 to 37), on March 26, 2015.  President Obama is expected to sign the bill into law.

While MACRA stabilizes physician payment as Medicare moves “away from a volume-based system towards one that rewards value,” the bill asks too much from beneficiaries without providing enough in return.  After the House passed H.R. 2, a number of consumer advocacy organizations, including the Center for Medicare Advocacy, pushed to improve the bill for beneficiaries in the Senate, including a repeal of the annual therapy caps, raising eligibility standards for low-income programs and permanently extending outreach and education funding for critical programs aimed at low-income beneficiaries.  Despite these efforts, the Senate bill passed without amendments. The resources below discuss the impact of the “Doc Fix” legislation on Medicare and Medicare beneficiaries.

https://www.medicareadvocacy.org/analysis-of-sgr-legislation-from-the-center-for-medicare-advocacy/.

Impact of MACRA (the Doc Fix) on Medicare Beneficiaries

The Center for Medicare Advocacy agrees it is in the best interest of Medicare beneficiaries and their doctors to have a permanent solution to the broken physician payment formula called the “Sustainable Growth Rate” (SGR).  Unfortunately, the SGR replacement package passed by Congress is not sufficiently balanced.  It will require a great deal from beneficiaries – and nothing from the pharmaceutical or insurance industries – without providing enough for beneficiaries in return.

Unbalanced Offsets/“Pay-Fors”

The entire legislative package is estimated to cost roughly $214 billion over 10 years.  Of the portion of the package that will be offset, or paid for, roughly half (approximately $35 of the total $70 billion over 10 years) will come from Medicare beneficiaries through changes that will increase their out-of-pocket costs for health care, including:

  • Adding deductibles to Medigap plans purchased in the future;
  • Further means-testing premiums for higher-income beneficiaries, and
  • Overall increases in Part B premiums.

At the same time, neither the pharmaceutical industry nor the insurance industry is being asked to pay for any of this package, although doing so would pay for a major portion of the SGR replacement.

“Structural Reform” of Medicare

Proponents of H.R. 2 have argued that the bill starts to make important “structural reforms” to the Medicare program that are needed to bring costs down.  The structural reforms and the premises upon which they are based are misguided.

In addition, we are greatly concerned about the specific provisions of the legislation that shift additional costs on to beneficiaries:

First, H.R. 2 would impose changes to Medigaps  – Medicare supplemental insurance policies – that would limit coverage to costs above the Part B deductible by plans purchased by new Medicare beneficiaries beginning in 2020 (the Part B deductible is currently $147 a year; in 2020 Medicare Trustees project it to be $185 and in 2023, $217[1]).  Doing so will diminish the financial security and protection against high, unexpected out-of-pocket expenses sought by purchasers of such plans who seek an alternative to Medicare Advantage and do not otherwise have supplemental coverage. Further, this change will encourage beneficiaries to join private Medicare Advantage plans – at greater costs to the Medicare program and taxpayers.[2]

Second, H.R. 2 would add further means-testing in Medicare by making higher-income individuals pay even greater shares of their Part B and D premiums than they already pay now.   Individuals with income of $85,000 or more (and couples with income above $170,000) already pay a greater share of their Part B and D premiums.  Beginning in 2018, H.R. 2 would lower the income thresholds for the top two income groups so that individuals with incomes starting at $133,500 would be paying even higher premiums.[3]

Third, Overall Part B premiums will increase as a result of the “Doc Fix.”  In 2015, the basic Part B monthly premium is $104.90.  As noted by the Congressional Budget Office (CBO), “[u]nder current law, CBO projects that the Part B premium will rise to $171 in 2025. By CBO’s estimate, enacting H.R. 2 would result in an increase of about $10—to $181—in the basic monthly Part B premium for 2025. By comparison, CBO estimates that the basic monthly premium would increase by about $7.50 in 2025 if Medicare’s payment rates for physicians’ services were frozen at current levels.”[4]

Extenders – What’s In and What’s Left Out

Whenever a temporary “Doc Fix” has been negotiated in the past, beneficiary advocates have largely focused on a number of critical “extenders” – extensions of other temporary Medicare fixes – that have traditionally been part of a larger SGR bill.  These extenders include future funding for the Qualified Individual (QI) program that pays Part B premiums for certain low-income individuals, an exceptions process to Medicare’s annual caps on coverage of outpatient therapy services, and funding for outreach and education surrounding low-income programs. Unfortunately, while H.R. 2 “permanently” fixes the SGR formula, it only makes certain of the extenders permanent, and temporarily extends the rest.  Absent the larger legislative SGR vehicle, further extension of these programs is less likely.

H.R. 2 makes the Qualified Individual (QI) program permanent, which we strongly endorse.  QI is a vital program for low-income individuals who need assistance with paying their Part B premiums.  Making the program permanent, rather than subject to periodic extensions, cements this important consumer protection.  However, given the significant cost-shifting on to Medicare beneficiaries as a means to keep physician payment stable, H.R. 2 does not expand the eligibility and scope of the Medicare Savings Programs, including QI.  An increase in income eligibility for the QI program from 135% to 150% of the federal poverty level, for example, would have provided more assistance to low-income individuals.

In contrast to making QI permanent, minimal increases for other vital low-income outreach and assistance programs, which we also support, are only extended for two years.

Further, rather than repealing the annual Medicare payment caps for outpatient therapy, H.R. 2 keeps the caps in place. It merely extends the Medicare therapy cap “exceptions” process by another two years and makes revisions to the manual review process.  The therapy caps are one of the biggest barriers to medically necessary care faced by individuals with chronic conditions, and since many providers are reluctant to use the exceptions process, individuals who could benefit from ongoing therapy go without.

Conclusion

While we welcome the permanent “Doc Fix” and a genuine consideration of expanding Medicare benefits and reducing beneficiaries’ cost-sharing burdens, we oppose redesigning or restructuring benefits for the real purpose of achieving savings.  This is particularly concerning when, as in this legislation, it is done by shifting more costs to beneficiaries while the private insurers and drug companies profiting from Medicare contribute nothing.  While H.R. 2 stabilizes physician payment and moves toward a system that places greater emphasis on value over volume, it does so by requiring too much from Medicare beneficiaries, without enough in return.  We hope Congress will right this wrong in future legislation.

April, 2015 – D. Lipshutz


[1] 2014 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. 
[2] For more information about Medigap enrollment, see Kaiser Family Foundation, “Medigap Enrollment Among New Beneficiaries” (April 13, 2015) http://kff.org/medicare/issue-brief/medigap-enrollment-among-new-medicare-beneficiaries/. Kaiser notes that:  “If the restriction on first dollar Part B coverage were applied to all Medigap policyholders with plan C or plan F (not limited to “new” beneficiaries as it is in H.R. 2), 12 percent of all Medicare beneficiaries, or about 4.9 million people would have been affected by this provision, if implemented in 2010.”
[3] See Kaiser Family Foundation, “Medicare’s Income-Related Premiums: A Data Note” (March 20, 2015), available at: http://kff.org/medicare/issue-brief/medicares-income-related-premiums-a-data-note/.  
[4] Congressional Budget Office, Letter to Speaker Boehner Re: Cost Estimate and Supplemental Analyses for H.R. 2, the Medicare Access and CHIP Reauthorization Act of 2015 (March 25, 2015).  For more information about the impact on beneficiary costs, see, e.g., See Kaiser Family Foundation, “How Much (More) Will Seniors Pay for a Doc Fix?” (March 12, 2015), available at: http://kff.org/medicare/perspective/how-much-more-will-seniors-pay-for-a-doc-fix/.

 

 

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