NCPA - National Center for Policy Analysis


October 16, 2009

The Democrats would have us believe that they can cut $500 billion from Medicare spending over the next 10 years without anyone getting less of anything.  They are going to save that money, the president says, by eliminating "fraud, waste, and abuse."  But, contrary to the president's rhetoric, the bills that Congress is currently debating do cut Medicare, says Michael Tanner, a senior fellow with the Cato Institute. 

For example, roughly 10.2 million seniors currently receive their health care through the Medicare Advantage program.  That program offers many seniors benefits not included in traditional Medicare, including preventive-care services, coordinated care for chronic conditions, routine physical examinations, additional hospitalization, skilled nursing facility stays, routine eye and hearing examinations, and glasses and hearing aids:

  • The bills currently making their way through Congress would cut payments to Medicare Advantage plans by $100 billion to $150 billion.
  • In response, many insurers are expected to stop participating in the program, while others will probably increase the premiums they charge seniors.
  • Millions of seniors will likely be forced off their current plans and back into traditional Medicare.
  • The Congressional Budget Office (CBO) makes it clear that, at the very least, the cuts "would reduce the extra benefits that would be made available to beneficiaries through Medicare Advantage plans."

The Democratic cuts also hit traditional Medicare, says Tanner.  For example:

  • The bills would reduce reimbursements for diagnostic imaging -- things like CT scans, MRIs and X-rays -- by as much as 25 percent.
  • And the Senate Finance Committee's bill would penalize doctors who perform too many procedures or tests.
  • Providers whose utilization is in the 90th percentile or above, compared to national averages, will have their Medicare reimbursements cut.

The whole point of such provisions is to reduce services, explains Tanner.

On top of that, the Senate Finance Committee assumes that there will be a 21 percent across-the-board reduction in what Medicare pays providers.  This cut is scheduled under current law and is not technically part of the health care bill, but most observers had expected Congress to defer those cuts, as they have every year since 2001.

Source: Micael D. Tanner, "The Inevitable Medicare Cuts," Cleveland Plain Dealer, October 15, 2009.

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