Saturday, May 21, 2011


Last week’s startlingly gloomy annual report from the Trustees of the Medicare Trust Funds lent new urgency to the need for further Medicare expenditure reforms. Whether Washington DC politicians will respond with more than sound bites is less likely.

The Trustees’ report shows a dramatic deterioration—even based on the most optimistic assumptions— in the financial position of the Part A Trust Fund, along with expectations of continued faster-than-GDP growth for Parts B and D.

Compared with the prior year’s Trustees’ report, which forecast that the Part A Fund would run out of money in 2029, the latest report estimates that the fund will dry up in 2024—five years sooner. The reasons for the sudden acceleration of financial disaster include a significant drop in revenues from taxes on workers’ earnings due to the ongoing recession, and new forecasts of longer life spans for beneficiaries.

The report also includes new forecasts for Medicare Part B and Part D, which operate on a pay-as-you-go basis using mixes of beneficiary premiums and general federal monies. While Parts B and D will not exhaust their respective trust funds, they will have increasing impacts on the deficit as their federal subsidies are forced to increase. Medicare B costs are projected to grow at a 4.7 percent annual rate (based on current law), and Medicare D at a 9.7 percent rate through 2020, compared with forecasts of 5.2 percent annual GDP growth.

Unfortunately, the preceding estimates are optimistic ones, and assume both the imposition of the physician rate cuts required by the 1997 Balanced Budget Act, and the implementation of all cost controls included in the Affordable Care Act.

No-one, and obviously not the Medicare Trustees, believes that Congress will allow the impending 30 percent slashing of physician fees to take place. Far more probable is that Congress will—as it has every year since 2003—choose to duck what would otherwise be a draconian reduction, one that would lead to a wholesale exodus of doctors from Medicare. Assuming that Congressional behavior does not suddenly change, Part B cost increases will jump to a 7.5 percent annual rate, not the wildly optimistic 4.7 percent.

Almost as unlikely is that the Part A cost controls included in the Affordable Care Act will all be implemented. The primary mechanism—the Independent Payment Advisory Board—is already under fierce political fire from Republicans. Even if the IPAB survives, both its appointees and its recommendations depend on approvals by a Congress that has shown no willingness to make difficult cost-cutting decisions.

And that’s the problem. House Budget Committee Chair Paul Ryan’s proposal for shifting much more of Medicare’s costs to beneficiaries has been disowned by his Republican colleagues—and given Democrats a huge political gift. The IPAB is under fire and could be dumped. Earlier, more nuanced proposals, like those from the co-chairs of the 1999 Bipartisan Medicare Commission, have died for lack of political support. With an election beginning to loom, and both parties looking to the senior vote, the chances of responsible bipartisan solutions seem far, far, away. Meanwhile, Part A and the federal deficit are rushing towards their respective precipices. It’s political bankruptcy in every sense.

Thursday, May 19, 2011


Last week saw more legal activity around challenges to the Affordable Care Act, with a hearing in Richmond, Virginia before three appeals judges on the constitutionality of the individual mandate.

In a statistical surprise, the three judges drawn randomly from the Fourth Circuit Court’s panel of fourteen judges equally divided between Democratic and Republican nominees were all from the former group.

The judges heard arguments appealing two lower courts’ contradictory decisions in Virginia. In Richmond, the federal district court had found that the individual mandate was unconstitutional. In Lynchburg, the federal district court had upheld the individual mandate as falling within “well settled principles” set by the Supreme Court.

The three Democratic nominees fired questions at the opposing lawyers for more than two hours, but with rather more skepticism being shown to the arguments of the ACA opponents. The key issues for the judges were whether, in the Richmond case, Virginia’s attorney general had legal standing to challenge the federal ACA, and, in both cases, how to define the choice not to buy health insurance: as commercial activity that the Supreme Court has ruled can be regulated, or as inactivity that is beyond Congress’s reach.

Two additional cases will be heard by federal appeals courts in the next three weeks. On June 1 in Cincinnati, the Sixth Circuit Court will hear arguments in the appeal of a ruling upholding the law. On June 8, in Atlanta, the Eleventh Circuit will hear the Obama administration’s appeal of a Florida judge’s ruling that the entire act was unconstitutional.

Although it’s generally assumed that the constitutionality issues will lead eventually to a decision by the Supreme Court, the timing and path to the Court remain uncertain. The Court might take any one or more of the various cases, depending also on the preferences of opposing lawyers and on the decision by the Fourth Circuit as to Virginia’s legal standing to challenge the law. It is also possible that one or more of the cases being heard by the three-judge appeals panels could be referred to the respective full fourteen-judge circuit panel. In general, though, it appears that both sides are interested in moving fairly expeditiously towards the Supreme Court. However, there may be some attempts to finesse the timing to fit the schedule of the 2012 presidential election. The best guess: a Supreme Court hearing this fall with a decision in the first quarter of 2012.

Sunday, May 15, 2011


In just a few days, Vermont’s Governor Peter Shumlin will sign into law what the media is calling “single payer health care reform.” But is it?

Vermont has certainly demonstrated more enthusiasm for a single payer approach than any other state. The Governor and key Democratic legislators have supported the concept, the state has a well-organized lobbying group in Vermont for Single Payer, and a state-funded study earlier this year estimated that a single payer approach could dramatically reduce health care costs. The major result has been passage in the past month by both of the state’s legislative chambers of the bill that Governor Shumlin indicates that he will sign.

So does this mean that Vermont is ready to upend its existing health care financing system and replace it with a French or British-style system? Not exactly.

The versions of the bill passed by Vermont’s House and Senate are each far, far more tentative than committed single payer advocates would wish, and have already been subject to scathing criticism by national single payer advocates. The bill provides for the creation of the legal framework of a public insurance program, to be called Green Mountain Care, but includes no funding mechanism, defines no benefit standards, is vague on the future roles of private insurers, and is silent on exactly how existing federal programs are to be incorporated.

What the bill does do is to establish the state exchange required by the Accountable Care Act, encourage experimental capitated payment structures, and create a Board for Green Mountain Care with responsibility for examining funding, benefit, and other issues, with recommendations to be submitted to the state legislature in 2013.

Even if the Board’s proposals are very strongly in favor of a single payer system, they will face some considerable obstacles to implementation.

Because the present bill’s approach to creation of a new system is to allow two years for development of recommendations, any implementing legislation will be delayed until 2013 at the earliest, giving opponents considerable time to organize and fund their fight. At the same time, whatever funding structure the Board recommends will inevitably result in some winners and some losers—who will almost certainly oppose the proposal—even if the net result is a gain for Vermont’s citizens.

While small businesses are expected to get coverage through the state’s planned exchange, and thus could be forced to participate in a future state-controlled single payer plan, larger employers present more of a problem. If a single payer plan could be shown to be less costly, such employers would presumably be willing to participate. If they are not persuaded of the merits of single payer, however, they could rely on ERISA law to keep their employees out of the new program.

The bigger obstacles, however, are likely to be at the federal level. The Accountable Care Act allows states to opt out of federal reform starting in 2017, but not before. (Although an earlier date has been proposed, it has limited support). The pooling of federal funds envisioned by Vermont’s single payer advocates would require negotiations with Medicare, Medicaid, TRICARE, and Public Health administrators, all in the face of opposition from lobbyists for insurers, providers, and businesses who fear the impacts of a single payer structure on their revenues and profits. And who would be willing to guess whether or not in 2013 the administration in Washington DC is favorable towards any kind of health care reform?