Debt Panel’s First Policy Hearing Could Set Tone for Future Discussions

The newly formed bipartisan, bicameral debt panel will hold its first policy hearing on Tuesday, which will focus on testimony from Congressional Budget Office Director Douglas Elmendorf, National Journal reports (O'Donnell, National Journal, 9/12).

As part of the recent debt deal, the 12-member panel -- also known as the "supercommittee" -- must develop and pass by the end of November $1.5 trillion in federal spending cuts over 10 years. Failure to do so would trigger a series of across-the-board cuts.

Medicaid would be exempt from those cuts, and Medicare would be protected from deep spending cuts. However, the deficit panel is not bound by those stipulations. As a result, many observers expect the panel will suggest deep cuts to entitlement spending (California Healthline, 9/12).

Budget experts and lobbyists are expected to monitor closely panel members' questions and responses on Tuesday, to determine how closely lawmakers will adhere to party lines. According to observers, the tone of the hearing could foreshadow the climate of budget discussions in coming weeks (O'Donnell, National Journal, 9/12).

CBO Report Finds $123B in Savings From Sequestration

In related news, a recent CBO report found that the 2% cut to Medicare that would occur if the panel fails to develop a cost-cutting strategy would reduce federal spending by about $123 billion over the next decade, The Hill's "Healthwatch" reports.

However, the report noted that the structure of the cuts limits their potential savings. For example, the government would lose around $31 billion in Medicare Part B premiums because of the automatic cuts, making it unable to cut the deficit by as much as lawmakers expected.

The report also found that without the 2% cap on Medicare cuts, savings from Medicare would have accounted for $256 billion. Instead, any savings above the $123 billion from Medicare will come from other federal programs.

CBO noted that its estimates are "subject to a considerable degree of uncertainty" (Baker, "Healthwatch," The Hill, 9/12).

Raising Medicare Eligibility Age

Next Monday, President Obama is expected to release his long-term deficit reduction strategy, which could include a proposal to raise the Medicare eligibility age from 65 to 67, CQ HealthBeat reports (Bunis, CQ HealthBeat, 9/12).

According to National Journal, many experts agree that the proposal would save the federal government money. However, some analysts believe it would end up increasing national health costs.

The Center on Budget and Policy Priorities on Monday held a teleconference regarding a report from the Kaiser Family Foundation that found the proposal would save the federal government $5.7 billion in 2014 but would increase overall health costs by $11.4 billion, because more elderly U.S. residents would enter the private insurance market seeking costly care (Sanger-Katz/McCarthy, National Journal, 9/12).

Paul Van de Water, senior fellow at CBPP, said, "The higher costs to individuals, employers and state would be twice as large as the savings to the federal government," noting that raising the eligibility age would increase "the burden health care costs place on the economy."

He explained that elderly U.S. residents who lose Medicare eligibility also could qualify for Medicaid once it is expanded in 2014 under the federal health reform law, which would drive up care costs for the federal-state program.

Van de Water said raising the eligibility age also would result in:

• 65- and 66-year-olds paying an estimated $2,200 more annually in premiums and copayments;
• Employers having higher costs for certain retirees who would not have Medicare as their primary insurer;
• Medicare beneficiaries having higher premiums because the healthiest seniors would no longer be in the risk pool; and
• More seniors ending up uninsured if the reform law is repealed or defeated in the courts (CQ HealthBeat, 9/12).

Van de Water said, "The president may include it in his forthcoming budget plan … but this is a classic example of (how) cost shifting cuts don't actually reduce health care spending."

However, the KFF report assumes an immediate change to Medicare, while House Democrats and Obama have considered a plan that gradually raises the eligibility age (Sanger-Katz/McCarthy, National Journal, 9/12).

Actuaries Want Medicare Changes

On Monday, the American Academy of Actuaries sent a letter asking the debt panel to consider Medicare spending as part of cost-cutting initiatives, CQ HealthBeat reports.

Corci Uccello, senior health fellow at the organization, said, "Our message to the members of the committee is that achieving long-term sustainability for Medicare will require slowing the growth in overall health spending, not simply shifting costs from one payer to another" (CQ HealthBeat, 9/12).

Specialty Doctors Want Panel To Address SGR

The Alliance of Specialty Medicine in a letter to debt panel co-chairs Rep. Jeb Hensarling (R-Texas) and Sen. Patty Murray (D-Wash.) wrote that lawmakers should address Medicare's Sustainable Growth Rate as part of budget talks.

The group also wrote that the panel should eliminate the Independent Payment Advisory Board, which was created by the reform law to recommend spending reductions in Medicare, because "access to specialty care will be severely limited due, in part, to the additional payment cuts the IPAB will impose on physicians."

Further, the group wrote that the debt panel has the "perfect opportunity" to overhaul the medical liability system, noting that CBO has said the strategy could reduce total health care spending (Norman [1], CQ HealthBeat, 9/12).

Analysts Say Debt Panel Unlikely To Address SGR

Panelists at an Alliance for Health Care Reform event on Monday said the debt panel is unlikely to develop a long-term overhaul for the SGR, CQ HealthBeat reports.

Gail Wilensky, an economist at Project Hope and a CMS administrator in the George H.W. Bush administration, said it will be difficult to make significant changes to health care programs until after the 2012 election because of the fundamental disagreements between the parties about how to cut spending.

Robert Greenstein, founder and president of CBPP, agreed and said that it is more likely that the panel will "kick the can down the road" (Norman [2], CQ HealthBeat, 9/12).