The Inflation Reduction Act Comes for Medicare

It will cut benefits and increase premiums, upsetting millions of elderly voters.

President Biden has accused Republicans of scheming to cut Medicare. In fact it is his signature legislation, the Inflation Reduction Act, that will lead to benefit cuts and premium increases for seniors. Medicare’s popular drug-coverage program is headed for a painful amputation.

The private plans participating in Medicare’s prescription-drug program, known as Part D, currently draw on three sources of revenue to finance prescriptions: out-of-pocket payments from patients, premium payments made by plan members, and subsidies from the federal government. In 2025, under the Inflation Reduction Act, both government subsidies and out-of-pocket payments by patients are scheduled to be cut sharply. The difference will have to be made up by premiums. But the statute inhibits this third revenue source, which is also subsidized, from increasing more than 6%. That’s hardly enough to cover inflation, let alone compensate for the other two revenue losses.

We estimate that beginning in 2025, plan subsidies—specifically, the reinsurance subsidies for the beneficiaries with the most drug spending—will be cut $30 billion, out of revenue that currently totals about $110 billion. Something will have to give with $30 billion less to finance prescription benefits. Plans currently have far too little profit to span the chasm that the Inflation Reduction Act opens between expenses and revenue.

Existing plans have room to cut benefits, although the original Part D statute limits their ability to do so. As plans are under no obligation to take a loss, their other choice is to exit the market, which from the patient’s perspective means that all the benefits disappear. In essence, the Inflation Reduction Act statute may prohibit Part D plans from being economically viable, even if it doesn’t explicitly ban them.

We see a last resort. Seniors might find drug coverage in Medicare Part C even as the Biden administration unwittingly amputates stand-alone drug plans from the Medicare program. These plans, known as Medicare Advantage, cover drugs, hospitalization and physician visits. They will also be losing the same two drug-revenue sources, but the Inflation Reduction Act gives them room to compensate with higher premiums, reduced drug benefits (with fewer drugs covered and more constraints on accepted claims), or cuts to nondrug benefits such as dental or mental-health coverage. They will likely do all three, which will be undesirable for seniors but at least be economically viable. The best part of the last resort? The plans won’t go away.

Roughly half of Medicare beneficiaries currently have traditional Medicare coverage rather than Medicare Advantage plans. These are the beneficiaries relying on stand-alone Part D drug plans, which are the ones that may be run out of business by the Inflation Reduction Act. Traditional Medicare members face a difficult choice in 2025: Either take drastic cuts in drug coverage, or switch to Medicare Advantage plans that cover prescriptions but may not cover the hospitals and doctors who are currently providing them care.

[OCS: Seniors opting for traditional Medicare and Part D drug coverage, with or without supplementary drug insurance, may be forced into a difficult choice: your doctor or life-saving drugs!]

Welcome to the fiscal and regulatory nightmare known as government-provided health care, where those writing the rules don’t understand the consequences of what they do. Democrats hate that Medicare Advantage has been available as a pseudo-private alternative to original Medicare’s single-payer arrangement. Yet they have (unwittingly?) passed a law that so thoroughly disrupts traditional Medicare as to render it the worst of the Medicare options.

From a political perspective, Democrats couldn’t have scheduled Medicare’s amputation for a worse time. With Congress so evenly divided, a short-term legislative fix may be impossible. By September 2024, the presidential campaign will be in high gear at the same time that beneficiaries begin to consider their 2025 Medicare enrollments. That’s when the Inflation Reduction Act will thoroughly upset tens of millions of elderly voters, all while the authors of the statute ask the country to vote for their presidential nominee. By then, America will have no doubt which party is cutting Medicare. <Source>

Medicare 2.0—A Vision for the Future of America’s Health Insurance Plan

It is time for “Medicare 2.0”: a redesigned Medicare program that meets today’s health care challenges in a comprehensive, cost-effective, and equitable way. Medicare 2.0 includes 5 major reforms to the traditional Medicare program. At a time when private Medicare Advantage plans are growing rapidly, Medicare 2.0 offers an urgent blueprint to preserve and strengthen the public Medicare program for future generations. What follows is a road map that organizes disparate Medicare reform proposals into a unified vision for this health insurance plan.

[OCS: Have you ever seen a cost-effective government program that works as intended and wasn’t larded with waste, fraud, abuse, and the insertion of lobbyist-promoted loopholes and exclusions?]

Transform and Simplify Traditional Medicare Into a Single, Comprehensive Plan

In traditional Medicare, most beneficiaries carry 4 distinct insurance plans: Part A for hospital services, Part B for physician services, Part D for prescription drugs, and supplementary insurance through Medigap, Medicaid, or other private sources.

Medicare 2.0 should have a single, comprehensive benefit structure that covers physician and hospital services, prescription drugs, dental, vision, hearing, and long-term services and supports (LTSS) with a unified cost-sharing structure. Recognizing the significant financial resources needed to meet LTSS needs, a sensible starting point is to prioritize coverage for home and community-based services, which are cost-effective and preferred by many patients and families.

[OCS: A long-winded way to say government-controlled single-payer healthcare system. Home and community-based healthcare services are among the critical goals of the radical communist-founded SEIU (Service Employees International Union), which is attempting to control the delivery of home healthcare by its members.]

Significantly Reduce Out-of-pocket Costs for Patients

Medicare 2.0 should minimize or eliminate financial barriers to care. One promising option is to require no cost sharing for beneficiaries under a certain income threshold, such as 138% of the poverty level to match current Medicaid criteria. Other beneficiaries could be provided coverage with no deductible, zero co-payments for primary care and other especially high-value services, a package of prescription drugs at no cost, and an out-of-pocket cap indexed to income. Replacing private Medigap coverage with universal low cost sharing would make Medicare 2.0 both more equitable and more efficient.

[OCS: The phrase “other beneficiaries” is often government-speak for “illegal aliens” who should have coverage limited to emergency healthcare. When you see the word “equitable,” you need to be wary of the progressive communist democrat’s social justice warriors who segment the population using Marxist-style class warfare.]

Modernize Prescription Drug Policy

Medicare 2.0 should build on the reforms of the Inflation Reduction Act to negotiate the price of prescription drugs by both increasing the number of medications eligible for negotiation and pursuing negotiations for newly launched drugs. The negotiation process should consider whether a medication’s primary patent has expired (i.e., drugs that forestall competition only with secondary patents and other “evergreening” strategies should be paid for at lower rates). Medicare should also be empowered to engage in innovative purchasing strategies, such as subscription-based models in which a fixed sum pays for all the drugs used by the Medicare population in a given period, direct contracting with manufacturers to produce generic drugs, and bulk purchasing to create stockpiles of drugs important for public health.

Medicare 2.0 should offer a package of high-value medications at zero out-of-pocket cost. Analogous to the rigorous evidence reviews and recommendations prepared by the US Preventive Services Task Force, a “US Chronic Disease Task Force” could be created to review the evidence for the clinical benefit of different medications in treating common chronic conditions. Medications receiving an A or B recommendation could enter the drug negotiation process with the goal of offering the medication to all Medicare beneficiaries at zero out-of-pocket cost.

[OCS: As noted in the Wall Street Journal piece above, the Inflation Reduction Act will damage traditional Medicare. Government price controls do not work, are anti-competitive and will lead to the elimination of specialty drugs, like genomically-targeted cancer therapies predicated on a patient’s DNA, that may save few lives in relation to more widely-used drugs that benefit larger populations.]

As for stockpiles, the lessons of the pandemic should apply. Most stockpiles contained out-of-date drugs and medical supplies, including obsolete or uncalibrated equipment. Only the vendor profited as the rotation of stockpiled items was an often-ignored afterthought. In the final analysis, someone must pay – and that someone is you, whether through premiums, co-pays, or access fees.]

Place Primary Care at the Center of the Health Care System

Medicare 2.0 should leverage this influence to significantly expand the primary care workforce, with a particular emphasis on increasing the number of primary care physicians, nurse practitioners, and physician assistants trained in community health centers and other underserved settings. CMS should also empower all Medicare beneficiaries to declare a primary care clinician.

Medicare 2.0 should significantly increase payments for primary care to make it a more attractive career option, improve prevention, reduce emphasis on procedural interventions, and expand the nation’s primary care infrastructure. In the short term, this process would be facilitated by enhancing the capacity of CMS to develop payment rates that encourage more robust primary care rather than reflexively adopting the payment rates recommended by the specialty-heavy Revenue Update Committee. In the longer term, the traditional fee-for-visit strategy of paying for primary care should be transformed to reflect and accelerate best practices for modern, integrated primary care practice.

[OCS: This establishes government-controlled gatekeepers who will determine if you need specialist care. An incompetent or rushed caregiver might cause prolonged suffering or death depending on their diagnostic skills and willingness to buck a cost-containment system to recommend specialist care. Already, some primary care practitioners are incentivized by their organizations to curtail costly procedures and prescriptions. Think about the socialized medicine in Canada and England, where denials, delays, and deaths are common.]

Reinvent Medicare as an Agency That Finances Population Health, Not an Insurer That Reimburses for Services

Under Medicare 2.0 CMS should be an activist deeply invested in continually improving the quality of health care. More than that, under Medicare 2.0 CMS should be conceptualized not as a public insurer but as an agency that finances population health. One critical element of this approach is integrating social investments into the Medicare mission: health care organizations should be given the flexibility to shift dollars from medical care into health-related social needs, including to existing community programs and public agencies. This likely requires migration away from fee for service as the predominant payment chassis.

A second element of this approach is to deliberately direct resources to respond to health inequities. The traditional insurance model risks directing resources away from underserved communities because payments are often benchmarked to past spending. Especially given stark historical inequities, payment policy should not try to perpetuate prior spending patterns; instead, it should actively direct spending to where it is needed most, which will often involve increasing spending on historically marginalized groups. The “health equity benchmark adjustment” included in the recently announced ACO REACH program is in this spirit.

To ensure that these increased resources actually reach patients in need, a complementary strategy is to strengthen requirements for representation of patients’ and communities’ interests in the governance of health care organizations. Taking inspiration from the federally qualified health center model, health care delivery organizations accepting population-based payments from Medicare could be required to have a meaningful percentage of the governing board made up of community representatives and patients, including those with disabilities and chronic illness and people in marginalized populations.

[OCS: This is bullshit! You do not allocate healthcare by race, sex, or what your ancestors may have done in times long past. In the final analysis, we do not need another inept bureaucracy like the highly-politicized Centers for Disease Control (CDC) or the corrupt Food & Drug Administration. (FDA). Decisions must be made by competent medical personnel, not bureaucrats beholden to the regime in power.]

<To read the entire article, in full and in context, it can be found here on the JAMA Action Network>