Kicking Cuts in Medicare Health Insurance Payments Further Down the Road

6 December 2010 |

Two events occurred this week that cast further doubt on how and, ultimately, if taxpayers will be able to pay for government-controlled health care insurance programs in the future.

First, Congress once more prevented cuts in payments to doctors by Medicare, the taxpayer-funded health insurance program for seniors, for the eleventh time since the cuts were authorized by Congress in the 1990s. It was the fifth time this year that the mandated cuts were delayed. And there no doubt will be another vote to delay the cuts later this month.

“This bill is a stopgap measure to make sure that seniors and military families can continue to see their doctors during December while we work on the solution for the next year,” explained Congressman Frank Pallone, a Republican from New Jersey who is the chair of the House Energy and Commerce health subcommittee.

The extension is only good for one month. Another cut in Medicare payments to doctors is scheduled for January 1, 2011.

If Congress had done nothing, Medicare payments to doctors would have been reduced by 23% on December 1. With the delay, doctors will continue to receive the full amount.

The cuts were part of the vaunted balanced budget that Congress passed in the 1990s, however this key provision has never gone into effect. The same law would have reduced payments to doctors by 21% in June (see previous post). The gradual step-down in payments would reach 25% with the January 2011 cut.

When Congress prevented the June cut to take effect, President Obama criticized lawmakers in both parties for “kicking cuts down the road.” The delay, Obama declared in June, just wasn’t “an adequate solution to the problem.”

The concern among members of Congress was that doctors would stop seeing Medicare patients if their pay was cut. If Congress keeps intervening, Medicare will pay out $300 billion in unbudgeted expenses over the next ten years, offsetting three fifths of the $500 billion in Medicare savings that the Congressional Budget Office (CBO) said would go toward paying for the national health insurance reform bill passed in March.

That bill, the Patient Protection and Affordable Care Act, was projected to cost the $788 billion over ten years and help reduce the deficit. Unfortunately something happened on the way to deficit reduction. Just a couple weeks after the bill was signed into law by President Obama in March, the CBO revised the cost of the legislation to $940 billion. The addition $152 billion was not covered by new taxes or savings, so it wiped out the $140 billion in deficit reduction that was supposed to occur. Then, in May, the CBO revealed that the implementation of the program would cost another $115 billion, also unfunded. That would put the program $127 billion in the red over ten years. If Congress continues to keep doctor payments were they are, that will mean that healthcare reform will run $427 billion in the red.

The other event that occurred this week also concerned the deficit: President Obama’s deficit reduction commission voted 11-7 to pass the panel’s recommendations on bringing down the deficit, but that fell short of the 14-vote super-majority needed for sending a package to Congress for a vote. Five of the six U.S. senators on the commission backed the plan, but only one of the six House members did so. This does not bode well for a deficit that is expected to hit $10 trillion over the next decade. The commission’s plans of cutting Medicare and Social Security by increasing the eligibility age, raising taxes, and cutting the defense budget, would have trimmed $4 trillion off the deficit.

Some people believe Congress will take up deficit reduction plans anyway, but if Congress doesn’t have the will to let Medicare cuts from the 1990s ever take effect, how will it ever get serious about cutting Medicare in the future?

Side note: Medicare is currently having open enrollment, a time to switch plans. Open enrollment closes on December 31, so if you or a loved one needs help deciding what to do, contact us now.

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