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Step 1: Let the government negotiate drug prices. (AP photo)

Six serious proposals to protect Medicare

COMMENTARY | June 11, 2011

The Center for Medicare Advocacy offers six measures to protect Medicare as we know it and reduce costs at the same time. They are so reasonable, and so obvious, that they probably won’t stand a chance with Congress. We thought we’d pass them along nevertheless.

By Judith Stein and Xenia Ruiz

As lawmakers debate the future of Medicare as part of broader efforts to address the federal deficit, proposals have emerged from Congress that would have severe repercussions for beneficiaries and their families. Sound and measured solutions that would protect Medicare coverage while reducing costs to taxpayers have not been seriously addressed.

The six solutions we propose would accomplish both of these goals. These solutions, unlike current proposals, do not shift costs to beneficiaries or completely restructure the Medicare program. They promote choice and competition while shoring up the solvency of Medicare. Adopting these solutions would be a responsible step in reducing our deficit the right way.

A role for national and regional reporters and editors in this would be to interview members of Congress and candidates: Do they favor these measures – would they vote for them? And if not, why not?

1. Negotiate Drug Prices with Pharmaceutical Companies
The Medicare prescription drug law passed in 2003 prohibits the Secretary of Health and Human Services from negotiating prices with pharmaceutical companies. These companies gained 44 million customers when Medicare began covering prescription drugs, but they did not have to adjust their prices in return. Requiring the Secretary to negotiate drug prices for Medicare would save taxpayers billions of dollars – potentially more than $200 billion over ten years. Taxpayers currently pay nearly 70 percent more for drugs in the Medicare program than through the Veteran's Administration, which has direct negotiating power. Savings realized from reducing Medicare drug cuts could be used to improve benefits for beneficiaries and reduce the deficit.

2. Stop Paying Private Medicare Plans Anything More Than Traditional Medicare
According to the Medicare Payment Advisory Commission (MedPAC), Medicare pays, on average, 10 percent more for beneficiaries enrolled in private insurance (Medicare Advantage or MA plans) than for comparable beneficiaries enrolled in traditional Medicare. Despite these extra payments, beneficiaries in private plans who are in poor health, or who have chronic conditions, often have more limitations on coverage than they would under traditional Medicare.

A large portion of the overpayments made to private plans actually goes to insurers rather than to benefit Medicare beneficiaries. Although the Affordable Care Act (ACA) changed the payment formula for Medicare Advantage plans, some plans will continue to be paid as much as 115 percent of the average traditional Medicare payment rate for their county when the new rates are fully implemented. MedPAC estimates that by 2017 Medicare Advantage payment benchmarks will average 101 percent of traditional Medicare. ACA also provides additional payments for plans that receive high quality ratings, increasing the likelihood that some MA plans will continue to be paid more than under traditional Medicare.

Reducing private MA payments to 100 percent of traditional Medicare, as MedPAC proposed before the enactment of ACA, will increase the solvency of the Medicare program and curb costs for taxpayers. Private plans simply should not receive higher pay than traditional Medicare.

3.  Include a Drug Benefit in Traditional Medicare
Offering a drug benefit in traditional Medicare would give beneficiaries a choice they do not now have, encourage people to stay in traditional Medicare, and save money for taxpayers. It would also provide an alternative to unchecked private plans that leave many with unexpected high out-of-pocket costs. A drug benefit in traditional Medicare would protect beneficiaries against expensive and sometimes abusive marketing practices. Further, traditional Medicare's lower administrative costs would free up money for quality care, would result in lower drug prices for beneficiaries, and save taxpayers over $20 billion a year.

4.  Extend Medicaid Drug Rebates to Medicare Dual Eligibles
Dual eligibles (people eligible for both Medicare and Medicaid) comprise one-fourth of all Medicare drug users, and are among the most costly beneficiaries. Because Medicare, rather than Medicaid, covers most of their drugs and because Medicare cannot negotiate drug prices, their drugs are not eligible for the same rebates as they would be under the traditional Medicaid program. Extending these rebates for dual eligibles would save at least $30 billion over ten years.

5.  Let People Between 55 and 65 Buy Into Traditional Medicare
People between 55 and 65 who are not disabled are currently unable to enroll in Medicare. Allowing this healthier population to buy into the traditional Medicare program would add revenue for people who will likely need less care and fewer services than older and disabled enrollees.

6.  Let the Affordable Care Act Do Its Job
The Affordable Care Act includes many measures to control costs as well as models for reform that will increase the solvency of the Medicare program and lower the deficit while protecting Medicare's guaranteed benefits. The Congressional Budget Office estimates that repealing or defunding ACA would add $230 billion to the deficit while ignoring the real issue of rising overall health care costs, which contribute heavily to the growing national debt. ACA includes strong measures to allow CMS to combat fraud, waste, and abuse that will bring down costs, as well as a variety of pilot and demonstration projects that aim to bring better care and quality to beneficiaries. The bipartisan Bowles-Simpson Deficit Commission recommended that these projects be aggressively implemented as quickly as possible. Allowing ACA to do its job will create a foundation on which to build by improving care and holding down costs for taxpayers.

"Protecting" Medicare by shifting costs from the federal government to beneficiaries and their families – whether through the creation of a voucher program or through measures that would be required by spending caps – is a perversion of Medicare's original purpose, which was to protect older people and their families from illness and financial ruin due to health care costs.  The solutions proposed by the Center for Medicare Advocacy promote financial solvency without doing it at the expense of beneficiaries.

This story first appeared on the Center for Medicare Advocacy's website.

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