By John Reichard, CQ HealthBeat Editor
At a time when some debt ceiling negotiators are considering charging wealthier Americans more for Medicare, two senators not directly involved in those talks unveiled a variety of suggested program changes that would involve affluent Americans paying more—raising the possibility that some of their ideas could find their way into a debt ceiling deal later this summer.
Senators Joe I. Lieberman, I-Ct. and Tom Coburn, R-Okla., want lawmakers to swallow the whole smorgasbord of changes they laid out last week. Their package projects savings of $600 billion over 10 years and, they say, would provide an additional 30 years of solvency for the Medicare hospital Part A Trust Fund. It also would mean a three-year postponement of any sharp cuts in Medicare payments to doctors.
The proposal is probably far too controversial to pass as a whole package anytime soon. But to the extent debt ceiling negotiators are influenced by the plan, they may sample here and there from its many components.
"We can't save Medicare as we know it. We can only save Medicare if we change it," Lieberman said at a press conference. The proposal does keep Medicare as a federal entitlement program. Lieberman opposes Republican "premium support" proposals that would privatize Medicare.
Coburn had been one of the toughest fiscal hawks in the Gang of Six, a bipartisan group of senators working on a deficit reduction proposal. He quit the group last month, expressing pessimism about the prospects of reaching a bipartisan agreement. Coburn also was a member of President Obama's deficit commission and voted for the group's proposal.
Lieberman and Coburn's plan is of particular interest in light of statements made by Sen. Jon Kyl of Arizona, a key Republican involved in debt ceiling negotiations. He expressed an interest in means testing Medicare benefits and in raising the Medicare eligibility age to match that of Social Security.
The Lieberman/Coburn plan does that, among a number of other things. Their package calls for:
- Higher Part B premiums for the wealthy. Premiums for Medicare Part B, which covers doctor care outside the hospital, would rise so that individuals making more than $150,000 a year or couples making more than $300,000 a year would pay 100 percent of the costs of their Part B coverage. Premiums in general now cover 25 percent of Part B costs. Estimated savings: $5 billion to $10 billion over 10 years.
- Higher Part D premiums for the wealthy. Lieberman and Coburn estimated that monthly premiums for Part D Medicare prescription drug coverage pay only 11 percent of the costs of the program. Charging individuals making more than $150,000 annually and couples making more than $300,000 per year 100 percent of their premium costs would save $5 billion to $10 billion over 10 years.
- Raise the eligibility age. The plan would increase Medicare's eligibility age by two months every year starting with people who were born in 1949, who will turn 65 in 2014, until the threshold reaches 67 in 2025. Insurance options and subsidies in the health care law (PL 111-148, PL 111-152) will permit those above age 65, too young to qualify for Medicare access, to coverage through state-based insurance exchanges. Estimated savings: at least $124 billion over 10 years. If the health care law were repealed the eligibility age would remain as it is now, with people qualifying for Medicare when they turn 65.
- Restructure cost-sharing. The plan would establish a single combined annual deductible of $550 for both Part A and Part B services. The senators believe a single deductible would help reduce overuse of services. They would overhaul supplemental "Medigap" coverage that picks up many of the costs Medicare does not. Policy holders with this supplemental coverage use an estimated 25 percent more services than other beneficiaries. Medigap would be revamped to establish minimal cost-sharing for all Medicare services to prevent unnecessary use of treatment resources. To protect beneficiaries from having to pay too much out-of-pocket, those expenses would be capped at $7,500 a year on average, although individuals with incomes between $160,000 and $213,000 would have an out-of-pocket cap of $22,500. The net impact of these changes would save $130 billion over 10 years.
- Phase out Medicare payments for bad hospital debts. Medicare now reimburses hospitals and other providers for deductibles and co-payments not paid by beneficiaries. The new out-of-pocket caps should reduce the need to reimburse hospitals for bad debt. Savings: $23 billion over 10 years.
- Lower home health payments. "Productivity adjustments" starting in 2013 and payment "rebasing" starting in 2015 would save $9 billion over 10 years.
- Increase Part B premiums for Medicare beneficiaries. On average, beneficiaries pay 25 percent of premium costs. Their plan would increase that by two percent of Part B program costs every year for five years until beneficiaries on overage were paying 35 percent of premiums costs (the wealthy would pay more as noted above). A "hold harmless" provision would remain in effect that prevents a Part B premium increase in a given year from exceeding the Social Security annual cost-of-living adjustment. Savings: $241 billion over 10 years.
The two senators say the plan also would block a 30 percent cut in doctor payments scheduled for Jan. 1, 2012 from taking effect for three years. The cost of that fix over the three year period would be $40 billion (although the 10-year cost would be $275 billion).
An advocacy group representing Medicare patients said the proposal would harm beneficiaries.
Medicare Rights Center President Joe Baker said "it's not over-utilization caused by patients that is the problem—it's the prices." Baker added that so-called benefits simplification proposals "are scary because the allure of an out-of-pocket limit could blind patients, their caregivers and policymakers to the facts: these proposals save the government money by making patients pay more or making care so unaffordable that they just don't get it in the first place."
Baker added in a statement that "the vast majority of Medicare consumers would never benefit from the out-of-pocket limit because it is set far too high—$7,500 in the Lieberman-Coburn proposal. In fact, for most people with Medicare, out-of-pocket costs would increase because cost-sharing would apply where none existed before, like for home health care, and they would lose Medigap coverage of portions of their coinsurance and deductibles. This increase in out-of-pocket health costs would be a financial tipping point into poverty for many older Americans and people with disabilities, who on average already spend 15 percent of their income on health care."