California Could Lose $61B in Medicare Pay. Does it Matter?

by Dan Diamond, California Healthline Contributing Editor
California Could Lose $61B in Medicare Pay. Does it Matter?

A new analysis projects the impact of the Affordable Care Act's Medicare cuts on California: at least $61 billion over a decade. It's a striking figure -- but the effect on patients and providers is still unclear.

ObamaCare takes about $716 billion out of Medicare spending across a decade. That much isn’t up for debate.

But does that figure represent “cuts” to Medicare, as opponents of the Affordable Care Act contend? Or is it just payment reductions phased in over time that won’t affect benefits, as the White House maintains?

Where you stand on that may depend on your politics — and semantics.

Either way, the ACA will play a role in tamping down spending on Medicare. But how much those billions of dollars will be missed … well, that is the debate.

Mapping Costs

One challenge: Big budget numbers in Washington, D.C., may not feel real when taken out of context.

“No one really understands what that [$716 billion] means to their community, or what that distribution looks like along the country,” the American Action Forum’s Michael Ramlet told California Healthline.

One way to get a sense for the impact, Ramlet says, is to map how the ACA reductions would play out — state by state and county by county.

And that’s exactly what Ramlet and Robert Book, senior research director of the HSI Network, did in a new working paper. Drawing on the latest Congressional Budget Office analysis, the two researchers modeled the impact of the changes to Medicare fee-for-service and Medicare Advantage payments across a decade.

Golden State Will Take Big Hit

By assuming proportional reductions to FFS and MA payments, the two researchers projected that California would see a loss of $60.6 billion between 2013 and 2022 — the most of any state in the nation, by far. Specifically:

To be clear: Those changes are to provider payments, not to beneficiaries’ benefits. But those figures also don’t reflect the full impact of the ACA’s $716 billion reduction. Ramlet notes that the study didn’t account for $144 billion in other Medicare spending reductions, like the creation of the Independent Payment Advisory Board, which is projected to take $114 billion out of the program across the decade.

The researchers didn’t include potential changes to disproportionate share hospital payments either. That’s largely because those changes are still being finalized, but Ramlet notes that DSH cuts could hit areas like Los Angeles — with its large network of safety-net hospitals — especially hard.

Tracking the Impact

The $716 billion figure has been politicized in recent weeks. Both President Obama and Republican presidential nominee Mitt Romney have traded shots over whose plans would do more to preserve — or dismantle — the Medicare program. And amid the partisan sniping, the actual impact on Medicare beneficiaries has been lost in the shuffle.

Trying to explain the ACA’s changes, an alert from the Center for Medicare Advocacy takes pains to “clarify that the Medicare reforms do not reduce Medicare’s guaranteed benefits.” (Emphasis in the original.) And the ACA contains payment incentives designed to reward providers that band together to deliver better care.

But some say that the intent of the law’s reductions doesn’t matter. The trickle-down effect is bound to hit patients eventually, argues Avik Roy, a Forbes contributor and health adviser to the Romney campaign.

“What happens when you reduce payments to doctors?” Roy asks at Forbes. “Doctors stop being willing to see Medicare patients. And if you can’t actually get a doctor’s appointment, what does it really matter what your insurance plan covers on paper?”

Cuts May Impact Financial Health — and Then Patient Health

Importantly, the evidence on how payment changes actually affect patient outcomes is mixed.

One study looking at the impact of the 1997 Balanced Budget Act — which made significantly larger and more direct changes to Medicare than the ACA — drilled down on acute myocardial infarction mortality rates at hospitals between 1995 and 2005. Researchers found little difference in AMI outcomes immediately after the BBA’s cuts took effect.

But as Sarah Kliff points out at the Washington Post‘s “WonkBlog,” the researchers observed a more pronounced effect by taking a long view and contrasting hospitals that saw small cuts with facilities that took a bigger hit.

About four years post-BBA, “small-cut hospitals [kept] making improvements in mortality rates, while large-cut hospitals have results that are pretty stagnant,” Kliff writes. Essentially, providers that grappled with the most painful BBA payment reductions had deeper challenges investing in staff and infrastructure, which can lead to continued quality and process investment.

Speaking with California Healthline, Ramlet acknowledges that it’s hard to link cutting provider payment with negative outcomes, but some hospitals will need to tighten their belts post-ACA. That may be a tall order, given that many hospitals have already made cuts since the economic downturn began and analysts think providers may be running out of tactics to find cost savings.

Will the ACA’s reforms incent hospitals to deliver more efficient care or just lead to more pain for providers and patients? That may be next year’s Medicare debate.

Here’s what else is happening around the nation.

Medicaid Expansion

In the Courts

In the States

On the Hill

Rolling Out Reform

Studying Its Effects

Spotlight on ACOs

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