Cutting Provider $$, Raising Taxes Could Help Shore Up Medicare’s Part A Trust Fund
What can be done to ensure that the Medicare Hospital Insurance Trust Fund doesn’t get depleted by 2026? Cutting payments to providers and increasing taxes on high-income individuals are among the possibilities, speakers said Friday at a webinar sponsored by the Alliance for Health Policy.
“We have this gap where benefits are higher than dedicated revenues,” said Josh Gordon, PhD, director of health policy at the Committee for a Responsible Federal Budget. “And the way to have solvency is to close that gap. And the way to have sustainable solvency is to make sure that once you close the gap, it stays closed over the longer term.”
Medicare has two separate trust funds, the Hospital Insurance (HI) trust fund and the Supplementary Medical Insurance trust fund (SMI), explained Bowen Garrett, PhD, senior fellow at the Urban Institute. The HI trust fund pays for Medicare Part A, which covers inpatient hospital services, hospice care, and skilled nursing facility and home health services following hospital stays; SMI pays for Medicare Part B — which covers visits to doctor’s offices and other outpatient facilities — and Part D, which covers prescription drugs. As things currently stand, the HI trust fund is paying out more than it takes in, and is expected to reach insolvency in 2026.
The HI trust fund “is financed through a payroll tax on workers’ earnings, while SMI is financed roughly 25% by beneficiary premiums and 75% by general federal revenues,” Garrett continued. So, although funding for SMI can always be increased by just using more general revenues, if the HI trust fund goes insolvent, “full payments to providers for services covered under Part A will be delayed” unless more money is found. “Medicare would only be able to pay hospitals and other party providers 91 cents on every dollar it owes for patient care.”
The HI trust fund hasn’t always been in trouble, Garrett said; in fact, “in the early 2000s, [the] HI [trust fund] brought in more revenue than it paid out … At its peak in the mid-2000s, the trust fund had enough in reserve to pay for 1.5 years of spending.” However, “year by year, those accumulated surpluses have been spent,” with the projected deficit now at $364 billion. “So, the government will need to raise or borrow ever-increasing amounts to pay for the level of spending projected under the current program.”
So what can be done? When the Urban Institute posed this question last year to a group of Medicare experts, they thought the most feasible approach “would be combining some increased revenue with targeted spending reductions that minimize impacts on beneficiaries,” Garrett said. Expanding the base of high-income taxpayers who pay Medicare taxes on their investments to include people involved with S corporations and limited partnerships would be one good way to raise additional revenue, he added.
Harriet Komisar, PhD, senior strategic policy advisor at AARP, said that “while it’s absolutely essential to address the Part A financing challenge, the situation is not unique nor dire. That said, it’s better to act soon and not wait until the last minute.” She recommended expanding innovative payment programs that increase efficiency and value in the Medicare program, including accountable care organizations, as well as Medicare’s Independence at Home program, which allows people to receive primary care services at home.
Gordon noted that reducing overpayments to Medicare Advantage plans is another problem that needs to be solved. “We expected if you had private plans covering individuals in Medicare Advantage, those plans would be able to control costs better than the unrestrained fee-for-service part of Medicare,” he said. And although it’s true that Medicare Advantage is controlling costs and saving money, “the government is not actually seeing those savings.” Turning Medicare Advantage into more of a competitive bidding program might help, he added. “More competition could get us savings over 10 years and over the longer term.”
Modernizing benefit design is another thing to consider, Gordon said, noting that traditional Medicare beneficiaries often have to pay more than one premium, and all beneficiaries have no out-of-pocket spending cap. “One way to get at this would be to create a single combined deductible that has uniform cost-sharing and an out-of-pocket cap.” This idea has been proposed by both Republicans and Democrats, would make it unnecessary to buy supplemental “Medigap” coverage, and might allow fee-for-service Medicare to become more attractive, he said.
Reforming the way Medicare pays for graduate medical education (GME) — which it currently does through the Part A program — is also another cost-saving option, he continued. “There’s a debate about how much the government should be doing this versus the private sector. And there’s a debate about whether this should really be located in Medicare Part A versus general Medicare spending, because doing it through Part A leads to a kind of over-focus on inpatient settings … and also private health insurance doesn’t really spend very much to [help with] Medicare education,” Gordon said.
The current GME system also “has put an artificial cap on the number of doctors” at a time when the supply of providers needs to be increased, he said. Training more doctors “also would help lower costs to some degree.”
Health equity considerations also need to be part of any Medicare changes, said Adaeze Enekwechi, PhD, operating partner at Welsh, Carson, Anderson & Stowe, a private equity firm. “Health inequities are a huge driver of excess costs and excess waste in the system,” she said. “Medicare can take the lead on health equity.”
There are some indications that the program is looking at this area, including introducing incentives to collect data about ethnicity and social determinants of health in some of its payment programs. “It’s hard to overemphasize” the importance of collecting such data, she said.
Stay connected with us on social media platform for instant update click here to join our Twitter, & Facebook
We are now on Telegram. Click here to join our channel (@TechiUpdate) and stay updated with the latest Technology headlines.
For all the latest Health News Click Here
For the latest news and updates, follow us on Google News.