Senate Budget Resolution Whacks Medicare, Medicaid

Ken Terry

October 05, 2017

The 2018 Senate budget resolution unveiled last week would cut Medicare by $473 billion and Medicaid by approximately $1 trillion over 10 years, according to an analysis by the minority staff of the Senate Budget Committee. Their report was released on Wednesday by Sen. Bernie Sanders (I-VT), the ranking member of the budget committee, which did not publicly disclose the details.

The Senate budget resolution is a nonbinding proposal that sets top-line numbers for committees to use in creating their spending bills. Like the budget proposal approved by the House today, the Senate resolution includes "reconciliation instructions" that will pave the way for a tax reform measure. This legislative maneuver will allow the Senate to pass the tax package with a simple majority vote, rather than the 60 votes required to break a filibuster on other legislation.

It is not clear how the Senate will cut Medicare if it embraces the Republican vision. But the House budget resolution proposes allowing future Medicare beneficiaries "to select from competing guaranteed health coverage options a plan that best suits their needs." This sounds a lot like the premium support plan that House Speaker Paul Ryan (R-WI) has been pushing for years. Under that plan, Medicare beneficiaries would receive a set amount of money to buy approved private plans.

The Medicaid cuts in the Senate budget proposal are even deeper than those in the Obamacare repeal-and-replace bills that failed to pass earlier in the year. The House's American Health Care Act would have reduced Medicaid spending by $880 billion and the Senate's Better Care Reconciliation Act would have cut the program's funding by $750 billion over 10 years, according to the Washington Post.

Those bills would have retracted the Affordable Care Act's Medicaid expansion and would have capped federal Medicaid funding by converting it to state block grants. It is not known whether the Senate budget resolution includes these items. But the budget resolution summary calls for "reserve funds" that would allow Congress to repeal or replace Obamacare.

Senate Majority Leader Mitch McConnell (R-KY) made it clear that he supports the vision in the Senate budget resolution. "After a decade of lost economic opportunity, hardworking American families know the status quo is unacceptable. It's time to take more money out of Washington's pockets, and put more of it in the pockets of Americans. This budget is the first step in this process," he said in a statement.

Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Nancy Pelosi (D-CA) sent President Trump a letter asking him to oppose the Republican budget proposal, the Washington Examiner reported. They reminded the president that he promised during the election campaign not to touch Medicare. They argued that Medicare and Medicaid cuts should not be used to fund tax breaks for the wealthy.

The letter was cosigned by Sanders and Rep. John Yarmuth (D-KY), ranking members of the Senate and House budget committees, respectively, and by Sen. Ron Wyden (D-OR), ranking member of the Senate Finance Committee.

Restructuring Medicare

Robert Berenson, MD, a senior fellow at the Urban Institute, a former Centers for Medicare and Medicaid Services official, and a former member of the Medicare Payment Advisory Commission (MedPAC), told Medscape Medical News that the budget resolution shows that Senate Republicans want to restructure Medicare by adopting a premium support program. While the mechanism of the proposed $473 billion in cuts hasn't been specified, he said that the only way to achieve a spending reduction of that magnitude would be to give seniors a set amount to purchase insurance, which he considers a bad idea.

Dr Berenson doesn't believe that Medicare is broken, as the House Republicans suggested in their budget resolution. For example, they said that Medicare spending is expected to grow 7.2% per year through 2026 and that Medicare spending would double from its current level to $1.4 trillion in 2027. Dr Berenson pointed out that for the past 8 years the per-capita increases in Medicare spending have been just slightly higher than the rate of inflation and close to the rate of GDP growth. Increased enrollment in Medicare by aging baby boomers is chiefly responsible for cost growth, he said.

MedPAC members and other experts have suggested various ways to cut costs, including reductions in spending for home healthcare and durable medical equipment, he noted. Medicare's move to alternative payment models may also lower costs in the long term, he said. Congress could also raise Medicare taxes or the upper limit on income subject to those levies. And raising the eligibility age to 67 would save some money, although people over 65 should be allowed to buy into Medicare, he noted.

"Premium support is not only bad politics, but also lousy policy," Dr Berenson said. Some Republican senators like Orrin Hatch (R-UT) and Lamar Alexander (R-TN), he added, have been disinclined to support premium support in the past.

Despite the lack of specifics in the budget resolutions, Dr Berenson said, Congressional Republicans must be planning to convert Medicaid funds into block grants. "I don't know how you get $1 trillion in savings out of Medicaid if you're not going to block grants. I don't know how you get there with work requirements. I don't think that saves you very much."

The impact of block grants would be to force states to reduce Medicaid payment rates and/or benefits, he said. "I don't have confidence that any states would be able to live within a budget without really harming people."

Providers would also be affected, he added. "They'd be seeing no increases in rates or likely decreases in rates." While more independent providers would stop seeing Medicaid patients, healthcare systems would have no choice but to accept Medicaid and pass on their losses to private payers, he said.

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