State of the Union: Medicare AEI on the Hill January 25, 2012 Joseph R. Antos, Ph.D.

1. State of the Union: Medicare AEI on the Hill January 25, 2012 Joseph R. Antos, Ph.D. Wilson H. Taylor Scholar in Health Care and Retirement Policy American Enterprise Institute

2. Budget drives Medicare policy …and the budget outlook is dire

4. Debt ceiling and the BCA Budget Control Act Provisions • Sequester: $1.06 T non-interest; 50% defense, 50% non-defense; 2% maximum Medicare cut; Medicaid exempt • Medicare sequester = $11 B in 2013, $123 B over 9 years • WH proposal: Medicare $248 B, Medicaid $72 B Last chance to prevent automatic cuts

5. Ryan vs. Obama: Medicare

6. SGR – No permanent solution • 27.4% reduction delayed 2 months, $3.6 B cost • Another fight in the fall?

7. SGR pay-fors • MedPAC proposal realigns FFS payments • Freeze primary care; cut specialist care 5.9% through 2014, then freeze • $200 B over 10 years • Pay-fors: spread the pain • Reduce updates and payments to hospitals, home health, SNF, DME, other services • Add home health copay • Prior authorization for imaging • Part D rebates for dual eligibles Cuts used for SGR cannot be used to reduce the budget deficit

8. Bending the curve? • ACOs • Center for Medicare and Medicaid Innovation • Independent Payment Advisory Board • Target GDP + 1% growth • Past experiments did not work (CBO) • Disease management, care coordination: spending unchanged or increased • 3 of 4 payment demos saved little or no money [See http://www.cbo.gov/ftpdocs/126xx/doc12663/01-18-12-MedicareDemoBrief.pdf]

9. Premium support • Key changes in Wyden-Ryan • Traditional FFS Medicare remains an option • Full competitive bidding between MA and FFS • Spending target GDP + 1% • Other savings provisions unspecified • Some form of premium support expected in 2013 House budget resolution