Health Care Is Pivotal Issue In D.C. Budget Battle
Roger Stark, MD, FACS, Health Care Policy Analyst, May, 2011
The Republicans in Congress recently released their ten-year budget proposal. The federal budget debate is essentially about how large government should be and how costly social welfare programs should be managed in the future. The Republicans would simplify the tax code and close tax loopholes. The president would like to raise taxes on the wealthy and ultimately on the middle class.
Federal government spending the past two years has been at 25% of the gross domestic product (GDP), which is well above the historic level of 18% since World War II. The Republican budget would drop spending back to below 20% of GDP, versus more than 23% of GDP for the president’s plan.
A large part of the federal budget is now consumed by Medicare and Medicaid. The two political parties propose very different plans for the future of these troubled government-run health care programs.
The president’s plan for both Medicare and Medicaid is contained in the new federal health care reform law passed last year (Patient Protection and Affordable Care Act, or PPACA). The Republican budget plan would repeal the new law.
Medicaid began in 1965 as a safety-net health insurance plan for children of poor families. It is funded by both state and federal taxpayers in a 50/50 ratio, although it is heavily regulated by the federal government. Medicaid has grown into one of the largest budget items for each state and is projected to double in cost within the next ten years. Patient access to health care is limited because of low provider reimbursement and, except for isolated conditions like AIDS and HIV, health outcomes for Medicaid patients are no better than for people who have no insurance.
The PPACA vastly expands Medicaid, extending coverage to any adult in the country who earns less than 133 percent of the federal poverty level (FPL). It is estimated that an additional 16 million people will be placed in this low-quality health plan.
The Republican budget addresses Medicaid with block grants. The federal government would give each state a fixed amount of money (no open-checkbook) and would relax the stranglehold of regulation and allow each state to design its own health care safety-net program. State governments would then have a fixed budget to work with and would have control over their own Medicaid programs.
Medicare began in 1965 and is the country’s health insurance program for anyone 65 years old and older. By 1990 Medicare was seven times over budget and currently is growing each year by twice the cost-of-living (7% versus 3% per year). Democrats and Republicans agree Medicare is not financially sustainable in its present form.
The PPACA addresses the Medicare problem in two ways. First, the law cuts over $500 billion from the program over the next ten years. The vast majority of these cuts come from reduced provider payments. This will lead to access problems, reduced quality and ultimately rationing of care for seniors.
The second major Medicare change in the new law is the formation of a regulatory, government committee, the Independent Payment Advisory Board (IPAB). The IPAB will tell patients and doctors how much and what kind of health care patients can receive. The result will be further rationing of health care for seniors based on the recommendations of this committee. Board members will be appointed and will not have to answer to taxpayers, patients or voters.
The Republican plan does not change Medicare for anyone currently in the program or for anyone who will enter the program in the next ten years. After ten years Medicare would transition to a defined contribution plan, rather than an open-ended defined benefit plan as it now exists. Each new enrollee would receive a taxpayer-funded premium support, or voucher, to purchase health insurance in an open market. Sicker and poorer individuals would receive a larger premium support. Eligibility for Medicare would gradually increase from age 65 to 67 during the eleven year period from 2022 to 2033.
The PPACA forces more government control, more regulations, higher taxes and less patient choice on the American public. The Republican budget gives more control of health care spending and decisions to individual patients and their providers. Americans face two clear choices over the future of government entitlements. Let the budget debate begin.