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Cuts in the Senate Overhaul Bill: Nips, Tucks or Knife to the Heart of Medicare?

By John Reichard, CQ HealthBeat Editor

December 4, 2009 -- When senators cast their final votes on a health care overhaul, one of their biggest considerations will be what shape they'll leave Medicare in if hundreds of billions of dollars are cut from the popular program.

The idea is that Medicare spending would be reduced to find dollars to help fund coverage of 31 million uninsured Americans.

To hear Republicans tell it, the typical senior—"Grandma," as they described her in Senate floor debate Dec. 1—is in serious trouble in the next decade if the cuts do occur. And Grandma's mad.

"We are receiving incredible and overwhelming response from seniors all over America who feel that the benefits that they paid in to are now in jeopardy," Sen. John McCain, R-Ariz., told reporters.

On Dec. 3, senators rejected, 42-58, a McCain motion to send the bill back to committee, an effort to strip the Medicare cuts out of the Democratic overhaul bill currently on the floor (HR 3590).

Democrats have the muscle to block such amendments, more of which are pending. But they will have to live with the consequences—including the judgment of elderly voters next fall.

Harvard University Professor Robert Blendon, who tracks public opinion and health policy, notes that seniors turn out in large numbers in off-year elections. "They have been the most negative all the way along" about a health overhaul, he observes. "And I've felt all the way along, it's around the size and perception of the Medicare cuts."

Both sides are acutely aware of the political power of this issue and have been using their Senate floor speeches and working the news media to shape their messages and gain the upper hand.

Republicans point to the assessment of Medicare's respected actuary, Richard Foster, who warned that comparable cuts in the House-passed bill (HR 3962) over time could cause hospitals, nursing facilities and home health agencies to drop out of Medicare because the rates may be based on overly optimistic assumptions about productivity gains in health care. The cuts could be modified to keep providers in Medicare, but savings would then be smaller, Foster said. He also predicted a plunge in enrollment in Medicare's private health plan program, Medicare Advantage, In 2014, he said, that program would have 4 million enrollees, not the 13 million projected under current law.

Some $200 billion in Medicare Advantage cuts in the House bill would lead to less generous benefits, which provide extras such as vision or dental care, and reduce some out-of-pocket spending, including premium payments for drug coverage and doctor care.

But taking money away from Medicare doesn't mean it would be lost to the providers who treat seniors.

Democrats point out that hospitals have already agreed to Medicare cuts because fewer uninsured people would mean hospitals would spend less in treating them. And they say having more paying customers will make Medicare cuts tolerable in other health care sectors as well.

Looking at Trade-Offs
Democrats also note that Medicare has weathered larger cuts without cutting benefits. According to White House Office of Health Reform Director Nancy-Ann DeParle, the 1997 balanced-budget law led to a much bigger percentage drop in Medicare spending than is projected to occur under the current Senate bill. Because of cuts in the 1997 law, Medicare spending was 12 percent lower than it was otherwise projected to be in the following decade, according to the analysis by the left-leaning Center on Budget and Policy Priorities. The Senate bill is projected to result in Medicare spending 6 percent lower by 2019 than current projections.

Groups that traditionally defend Medicare are also defending the Senate bill. It "properly focuses on provider reimbursement reforms," the seniors lobby AARP said in a letter to Senate Majority Leader Harry Reid, D-Nev. "Most importantly, the legislation does not reduce any guaranteed Medicare benefits."

William Vaughan, senior policy analyst for Consumers Union, says the bill would help Medicare by improving the health of Americans before they become eligible for the program. It also would goad hospitals into avoiding sloppy care by cutting payments in cases involving avoidable infection or preventable readmissions, he said.

The New York City-based Medicare Rights Center adds that the bill would improve care by fully covering annual physicals, colonoscopies, mammograms, and bone density measurements.

As for Medicare Advantage, cuts to the program would not threaten core benefits. The Senate bill would cut payments by $120 billion—a big slice, but less than in the House bill. And it's not enough to slash enrollment, according to the Congressional Budget Office. CBO says today's enrollment of 10.6 million would grow slightly to 11.3 million in 2019.

As for the politics, Blendon says polling isn't available yet on the impact of the floor debate on seniors' opinions. But Republicans are watching, and the longer the bill lingers, the more doubts they can raise. "I am quite convinced seniors can be made nervous," he says. "If this drags out longer, the Republican strategy may have an effect on some Democratic members in the Senate who will want to modify some of those cuts before they raise their hands."

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