Medicare’s fiscal woes are well known, and the fiscal demise of the program’s Hospital Insurance component is looming ever closer.
The so-called Trust Fund for “Part A” – consisting of government IOUs – will begin the slide toward bankruptcy in just three years and reach total insolvency in 2019.
A lesser known fact, however, is that Congress can take several cost-controlling measures to alleviate coming budget disruptions that won’t require tax hikes, price controls or government bailouts.
Although solutions to preventing Medicare’s collapse vary, the first step toward reform may begin with something as simple as dialysis – starting at the door of Fresenius Medical Care, which has 51 clinics in Arizona.
Fresenius has more than 3,000 dialysis patients in Arizona – about half the state’s total dialysis patients in 2005, according to U.S. Renal Disease System statistics.
Medicare currently serves as the secondary payer for a patient undergoing dialysis for end stage renal disease for the first 30 months of treatment, during which the beneficiary’s own private insurance plan provides primary payment.
However, patients are forced to switch to Medicare as their primary payer after 30 months of treatment – regardless of their age or preferences.
Extending private coverage from 30 to 42 months, as proposed in the otherwise ill-advised Children’s Health and Medicare Protection Act of 2007, would save $1.2 billion over 10 years, according to a Congressional Budget Office estimate.
Given its tax and spending hikes, the CHAMP Act deserved to be buried by presidential veto, but the bill’s Patient Coverage Extension is worth salvaging.
PCE opponents claim it will severely burden private employers’ insurance plans, but only 5 percent of firms in Arizona would be affected by the extension, according to USRDS. Taxpayers would see direct and substantial savings, while health insurance costs would be minimally affected, if at all.
In addition to common-sense changes such as PCE, Congress could save tens of billions of dollars annually lost to waste, fraud and abuse in federal health programs by expanding the use of private-sector Recovery Audit Contractors.
RACs corrected nearly $443 million in improper Medicare payments – more than 90 percent of which were overpayments – in fiscal years 2006 and 2007, according to the Department of Health and Human Services.
Every dollar paid to RACs has resulted in $15 of identified improper payments.
Among the dubious cases RACs uncovered: triple-billing for a single session of speech therapy and seven appendectomies in one day for the same patient.
Lawmakers also should preserve another important accountability measure for Medicare: an “alarm bell” requiring medicare trustees to issue a warning (and Congress to respond) if overall funding from general federal revenues exceeds a 45 percent share in two consecutive annual reports.
When Medicare habitually depends on nearly half its funding from the Treasury at large instead of payroll taxes, politicians should pay attention, not play dumb.
Another way to rein in Medicare spending is means-testing, which would reduce cash and in-kind benefits on a sliding scale as income rises.
A National Taxpayers Union Foundation study determined that modest limits for wealthier individuals could yield annual savings of more than $75 billion.
Sen. (and presidential candidate) John McCain recently proposed a slightly higher premium for those with incomes above $160,000 who get Medicare’s Part D prescription benefit. This step alone has the potential to save the program several billion dollars.
Finally, Congress should enact health care reforms outside Medicare that could take pressure off the program in the future.
The Health Care Choice Act, which would allow patients to purchase health insurance across state lines, is one proposal that would expand consumer choices, reduce onerous state regulations and lower prices.
Health Savings Accounts, which empower Americans to save tax-free for medical expenses and insurance, should be expanded.
Containing Medicare’s spiraling costs likely won’t be accomplished by a single bill, but rather by a multipart approach.
Whichever party wins this fall’s election will witness firsthand the beginning of the end for Medicare’s finances. The outcome of this drama depends on whether politicians enact modest reforms sooner to avoid catastrophe later.
Pete Sepp is vice president for policy and communications for the Alexandria, Va.-based National Taxpayers Union (www.ntu.org), a 362,000-member, nonprofit, nonpartisan citizen group founded in 1969 to work for lower taxes, limited government and economic freedom at all levels.