The stock market today was shocked, simply shocked, that the Super Committee didn’t come up with a debt deal.
I don’t know why. Republicans can’t vote for more taxes unless they’re willing to get “primaried” from the right and risk losing their seat. Ditto for Democrats who would face the same punishment from their base if they voted to change the sacred defined benefit entitlements without at least getting tax concessions from the Republicans.
Obviously, neither side has a lot of statesmen in their ranks who would actually be willing to compromise.
I attended a depressing forum on cost-saving ideas for Medicare to present to the Congressional “Super Committee” charged with coming up with $1.2 trillion in budget savings by the end of the year. The tone was ominous, best summed up by Mark Smith, president of the California HealthCare Foundation. “In times of crisis, meat-axes are taken to whole sectors. If you don’t believe me, ask the people who used to work for Lehman Brothers,” he said.
Here’s the backdrop. President Obama in his mid-September budget reduction plan called for coming up with an additional $320 billion in Medicare savings over the next decade, which would be on top of the half trillion dollars in Medicare cost reductions contained in the Affordable Care Act. The president would get there largely by cutting payments to hospitals and other providers, although the president also called for higher premiums on wealthier seniors for physician and drug coverage.
Will the Super Committee look for the same $320 billion in cuts to Medicare? A good case can be made that Medicare’s contribution to the $1.2 trillion recommendation should be less than what the president sought. The Congressional Budget Office’s current baseline projections for federal spending over the next decade has Medicare spending $7.4 trillion out of a total of $44 trillion. That’s 16.8% of ALL federal spending (defense, Social Security, discretionary domestic programs, you name it). Apply that 16.8% to $1.2 trillion and you get about $202 billion as Medicare’s “fair share,” not the $320 billion proposed by the president.
Still, there were precious few ideas at this morning’s forum that would come up with even a fraction of that total. Robert Berenson of the Urban Institute and Steve Phurrough of the Agency for Healthcare Research and Quality, both former top-ranking officials at the Center for Medicare and Medicaid Services, outlined a series of steps CMS could take to get better pricing, stop paying for uncalled for operations, and only pay the price of the “least costly alternative” when medical interventions are comparable. But most of those changes would require Congressional approval (fat chance), and none of the examples given (they spent a lot of time talking about implantable cardio-defibrillators, where an estimated 25% to 30% of the million operations each year are in patients who don’t really need them) raised more than a billion dollars.
It’s back to work in Washington, DC and all the attention is now on the Super Committee and their goal of cutting spending by at least $1.2 trillion over ten years.
If the committee fails to come up with a plan that passes the Congress, there would be $1.2 trillion in automatic cuts. The health care special interests have reason to hope they will fail—the fallback cuts would only impact Medicare providers in a small way—2% in provider cuts—and not directly impact beneficiaries or Medicaid generally. Any Super Committee deal would likely be more far reaching if for no other reason than to protect the defense budget from the huge cuts the fallback would require.
But the fallback would not solve any of the systemic problems the health care entitlements face and only prolong the inevitable day of fiscal reckoning.
Even a $1.2 trillion reduction—$2.1 trillion with the additional $915 billion reduction in discretionary spending that was part of the deal—is only a down payment on solving America’s fiscal woes—we face a $10 trillion budget shortfall over the next ten years.
Will the Super Committee succeed? That’s the big question in Washington.
The debt deal is finally done. But it really isn’t an agreement on what cuts will be made, just the process that will be used to make them.
The real work is left to the Congressional appropriators for the first $917 billion and for a super-committee of Congress for the second $1.2 trillion to $1.5 trillion in ten-year cuts.
That second tranche is where health care will make its contribution. The super-committee has to make its decisions by November 23rd and, as a practical matter, the Congress can only accept what the super-committee decides or face the consequences of the automatic $1.2 trillion fallback cuts.
When it comes to health care and the super-committee, all federal health care spending is on the table—–Medicare, Medicaid, the new law, benefits, and provider payments.
Since the budget window for the deal is ten years, it is not likely that any changes will be made to entitlement eligibility—such as delaying the Medicare eligibility age from 65 to 67. It just wouldn’t be fair to tell a 60-year-old their Medicare eligibility age is being raised. But we could see more means testing of Medicare premiums.