CMS Chief Supports Bush Medicare Proposals

CMS Administrator Mark McClellan on Tuesday said Congress should pass President Bush's proposals that would eliminate increases in Medicare provider payments and require higher-income beneficiaries to pay higher Medicare premiums, CongressDaily reports.

Speaking at an event at the American Enterprise Institute, McClellan said the two proposals, which are included in Bush's fiscal year 2007 budget, would help lower Medicare costs and might avoid the need to make more drastic cuts in the future. He said the financial problems predicted in the annual report from Medicare trustees justify the need for Congress to pass Bush's proposals (Heil, CongressDaily, 5/2).

According to the report, released Monday, the Medicare hospital trust fund will become insolvent in 2018, two years earlier than was predicted in the trustees' 2005 report. In addition, the report predicts that a spending threshold that requires the president to submit legislative proposals to cut Medicare costs soon will be met.

Under the 2003 Medicare law, the president is required to submit to Congress legislative proposals to reduce Medicare spending if trustees project that general revenue contributions will exceed 45% of total Medicare spending for two consecutive years within the first seven years of the program. The trustees' 2006 report makes that projection for the first time, saying that the 45% threshold will be met in 2012.

That means President Bush would have to propose legislative changes to the program in 2007 if the trustees' projections are similar next year (California Healthline, 5/2).

McClellan said the president's current proposals, along with other cost-saving steps underway at CMS, would help reduce reliance on general revenues. "We are not waiting for that second year," McClellan said, adding, "We are proposing action now." He continued, "The more [lawmakers] do now, the less pressure there will be to take drastic steps down the road, like reductions in payments or reductions in benefits."

When asked if the report would encourage lawmakers to pass the administration's proposals, McClellan said, "It's only been one day. Let's give it a little time" (CongressDaily, 5/2).

Medicare chief actuary Richard Foster, trustees Thomas Saving and John Palmer and former Congressional Budget Office Director Douglas Holtz-Eakin also spoke at the AEI event.

Foster said eliminating scheduled cuts to provider payments, combined with other factors, would lead to double-digit increases in premiums for Medicare Part B, which covers outpatient care. The trustees' report projects an 11% Part B premium increase in 2007. Foster said rapid increases in Part B costs might mean significant increases in premiums for several more years.

Saving predicted that by 2040, 45% of the money in Social Security checks will go toward premiums for Medicare parts B and D, the prescription drug benefit. He said increasing Medicare costs will also impact taxpayers and the federal budget, with half of all federal income tax revenues going toward Medicare or Medicaid in 25 years (Reichard, CQ HealthBeat, 5/2).

Foster said legislative proposals that would allow Medicare to negotiate drug prices with pharmaceutical companies would not result in savings because the private insurers sponsoring Medicare drug plans are more effective negotiators than the federal government. Foster also dismissed legislative proposals that would extend the May 15 deadline for enrolling in the drug benefit.

Foster said some beneficiaries are delaying enrollment to the last minute because they want to avoid paying premiums, not because they are confused about the drug benefit, as some lawmakers maintain. In addition, low-income beneficiaries who have yet to sign up will not be more likely to do so if the deadline is extended, according to Foster (CongressDaily, 5/2).

Foster said the good news about the drug benefit is that the trustees' report projects the program's cost to be about 20% lower than was previously estimated. About four percentage points of that decrease are the result of greater-than-expected discounts that the drug plans have negotiated, and another four percentage points are the result of lower-than-expected enrollment, Foster said.

Palmer said projections in the trustees' report assume that the percentage by which increases in health care costs will exceed increases in the gross domestic product -- a figure known as "excess cost growth" -- will be 1.4% annually 25 years from now and zero percent 75 years from now. He said that assumption might be optimistic because economists can't know for sure if those projections will hold.

Holtz-Eakin said economists are unsure if, or how, some parts of the excess cost growth could be beneficial increases in health care spending. That question needs to be addressed in order to better understand what to do about Medicare, Holtz-Eakin said (CQ HealthBeat, 5/2).

"No one thinks Congress will keep retirees from getting hospital care as a result" of the projection that Medicare's hospital trust fund will become insolvent in 2018, "but policy makers need to start thinking about solutions" for the program, a Boston Globe editorial states. The solution should "involve new revenue with perhaps a few benefit cuts," the editorial says. However, "revenue ... would be lost if the tax cuts proposed by the administration and passed by Congress are made permanent," it states. The editorial concludes, "Next year's trustees' report ought to be accompanied by a commitment from the president to abandon the tax cuts for the sake of Social Security and Medicare" (Boston Globe, 5/3).