An article on Bloomberg.com summarized the financial mess we’re in very nicely and concisely. Interestingly, Medicare and Social Security are not mentioned as causes of the skyrocketing deficit and debt of the United States government.

Below are excerpts from the Bloomberg article. The full article can be found here.

The 2001 and 2003 tax cuts, which lowered tax rates on income, dividends and capital gains, increased the federal budget deficit by $1.7 trillion over a decade, according to the Center for Budget and Policy Priorities, a non-partisan left-of- center group in Washington that studies fiscal policy.

The two-year extension of those tax cuts that Obama signed will cost $857.8 billion, according to the Congressional Joint Committee on Taxation.

 The wars in Afghanistan and Iraq have cost almost $1.3 trillion since the terrorist attacks on Sept. 11, 2001, according to a March 29 analysis by the Congressional Research Service.  

The 2003 Medicare prescription program [Part D] approved by President George W. Bush and a Republican-dominated Congress has cost $369 billion over a 10-year time frame, less than initially projected by Medicare actuaries.

TARP, the $700-billion bailout of banks, insurance and auto companies, has cost less than expected. McConnell, Boehner, Cantor and Ryan all voted in October 2008 for the program, which stoked the rise of the Tea Party movement.  ….Many institutions have repaid the government. The latest estimated lifetime cost of the program is $49.33 billion, according to a June 2011 report by the Treasury Department

Together, a Bloomberg News analysis shows, these initiatives added $3.4 trillion to the nation’s accumulated debt and to its current annual budget deficit of $1.5 trillion.

A common theme among the many proposals to reduce Medicare spending is that seniors and the disabled must pay a larger portion of the cost of their health care.

The theory is that when people have to pay more for medical services, they will be less likely to overuse health care.  This is called “consumer-driven” health care, where the individual decides to take a pass on physical therapy or knee replacement surgery because they have some co-pay which they deem to be too much.  Of course, the question can be asked if seniors will avoid going to the doctor, or getting treatment they really need because of higher co-pays and deductibles.

Kaiser Health News covered some of the proposals for passing on costs to Medicare beneficiaries:

CHANGING MEDICARE’S DEDUCTIBLE AND MEDIGAP COVERAGE: Medicare charges beneficiaries separate deductibles for their hospital care (Part A) and for outpatient and physician services (Part B). This year, in Part A, beneficiaries pay $1,132 for each hospital stay, and enrollees also pay daily co-payments for extended hospital and skilled nursing care. For Medicare Part B, the annual deductible this year is $162. Nearly one in five beneficiaries in Medicare’s fee-for-service program have supplemental insurance known as Medigap coverage to help with those costs.

Some proposals, including one advanced by the president’s deficit panel chaired by former GOP Sen. Alan Simpson and former Clinton chief of staff Erskine Bowles, have suggested combining the Part A and B deductibles into one $550 yearly deductible. That could reduce beneficiaries’ costs for hospital care but be more expensive for seniors who mostly use Part B. In addition, some proposals suggest a 10 to 20 percent co-payment for all services until beneficiaries reach a catastrophic limit. Others argue for making that $550 deductible ineligible for Medigap coverage so that beneficiaries are responsible for covering the cost of those initial services.

How Much Would It Save? Instituting the change in deductibles, co-pays and Medigap rules would save about $93 billion over the next decade, CBO estimates.

The Gain: Medicare would save money, but not just because beneficiaries were putting up more of their own. If Medigap plans were less generous, analysts believe beneficiaries would be more careful about spending and that could help lower Medicare costs.

The Pain: Once again, this proposal would shift costs to individuals.

The full article in Kaiser Health News can be found here.

The Centers for Medicare & Medicaid Services (CMS) has put out a 153-page letter that provides instructions and information for insurance companies as they design their Medicare Advantage plans for 2012.  Details and costs for 2012 Medicare Advantage plans must be submitted to CMS by June 6, 2011.

CMS is cutting payments to Advantage plans, but will also give the plans more money if they receive from 3 to 5 stars. The five-star rating system measures plans’ performance on a range of areas from customer satisfaction to keeping members healthy.

Because of this give and take (or take and give) CMS says actual Medicare Advantage per-capita payment will go up 1.6%. With all the talk of CMS slashing payments to Medicare Advantage plans this is good news for the insurance companies and people enrolled in Advantage plans.  And it may mean the Medicare Advantage market won’t be faced with large shocks in the form of higher premiums or plan cancellations for 2012.

In Arizona, Medicare advantage enrollment is very high among Medicare beneficiaries, particularly in Mariopa county (44%), Pinal (49%), and Pima county (45%).

In 2012, plans that have 4-star or 5-star quality ratings will get higher payments than other plans. CMS has also decided to give 3-star rated plans a bonus -though smaller than 4 and 5 star plans will receive.  Expanding bonus payments to 3 star plans is good for Arizona because most of our plans get 3 stars.  Only Cigna in Maricopa county gets 4 stars.

In 2012, Medicare will allow people to drop a lower-rated plan to enroll in a 5-star Advantage plan at any time during the year.  This does not affect people in Arizona, as we have no 5 star-rated plans.

Advantage plans that propose to increase premiums or co-pays by 10% or more will get special attention from CMS.