Fiscal Cliff: What's At Stake For Medicare And Medicaid?

From Kaiser Health News

Jackie Judd talks to KHN's Mary Agnes Carey about the budget negotiation scenarios for Medicare, where the "doc fix" fits into the budget picture, and whether Medicaid cuts are possible.



>>Listen to the audio or read a transcript below:

Jackie Judd: Good day, this is Health on the Hill. I'm Jackie Judd. A year ago this month, negotiations on Capitol Hill to reduce the federal deficit collapsed. A year later, have the political dynamics shifted enough so that there is an opportunity for a deal? And if so, how might that affect Medicare and Medicaid? Here to sort through that question is Mary Agnes Carey, senior correspondent for Kaiser Health News.

Mary Agnes, you've spent a lot of time this week listening to what people were saying on Capitol Hill. Are you hearing anything different?  Is the tone different? Could there be a deal?

Mary Agnes Carey: Everyone seems to be talking about a "balanced approach." We hear this from the president. We hear it from Democrats. We hear it from Republicans. The president and Democrats are saying to Republicans, "If you move on taxes, if you ask some high-income individuals to pay more on taxes, we'll move on entitlements, on Medicare and Medicaid."  People seem very, very open to this idea of avoiding the fiscal cliff, of avoiding these automatic spending cuts that are set to kick in in January.  But the thing we have to remember from watching Capitol Hill for a long time is that this is where folks always are at the beginning of a negotiation.

Judd:  And when it comes to Medicare, is the struggle over, as it always seems to be, how to balance the pain between the patient and the provider?

Carey: Right. That is definitely the balance that's in the works. If you ask beneficiaries to contribute more, what do you ask the providers to do? For example, some ideas that are out there, they've been around for a while: Do you look at the fee-for-service Medicare structure on co-payments and deductibles?  Combine those into one deductible, for example, but add a catastrophic cap, which doesn't exist in fee-for-service Medicare.  On providers: As we know, their payments will continue to increase over the next 10 years, but under the health care law they're going to do so at a slower rate.  So do you go back to providers, to hospitals, to the nursing homes, to home health care agencies, and take more from them? And how do you balance that pain to get an equal result?

Judd: At this point last year, the president was suggesting that he could go along possibly with raising the eligibility age. Is that something that his liberal base is suggesting this year can be in play?

Carey: Chris Van Hollen, who is in the House Democratic leadership, suggested, in fact, this week that it should be in play. But there are others - Chuck Schumer comes to mind, a Democratic senator from New York. He had a forum at the [National] Press Club about a month ago, and he suggested that the eligibility age would not be raised and that it was extremely unpopular.  But again, it's one of those items  - same thing happened in Social Security. If you gradually raise it over a period of time, the thought is it doesn't happen right away, it doesn't affect beneficiaries right away, but over time you can save a lot of money.

Judd: The "doc fix."  That, separate and apart from the fiscal cliff negotiations, comes up at about the end of the year. Does it get folded into these discussions?

Carey: That's what I think. Because the political will, the momentum that it will take to get this big package would mean you stick in everything you can. And that's an additional pressure point, because if Congress doesn't step in, physicians who accept Medicare reimbursement are going to be cut 27 percent in January.  Congress routinely steps in to fix it - I think it will be folded into the bigger deal, if there is one.

Judd: And Medicaid: Less in the crosshairs, it seems this time. But what's possible there?

Carey: There are a lot of ideas out there. For example, instead of the federal government picking up a fixed percentage of a state cost, you would have something called a Medicaid per-capita cap. Some people love this. Some people hate it. Nonetheless, it's on the table.

Congress could also step in and change a state's ability to assess provider taxes in Medicaid which affect their federal share of money. And another idea that has been out there is something called the blended rate. Instead of the federal government reimbursing states at one rate for Medicaid or the Children's Health Insurance Program, you blend those.

But, again, the concern here from people who represent Medicaid beneficiaries is: Will this simply mean less money and cuts in services for those beneficiaries?

Judd: Congress, lawmakers go home soon for Thanksgiving. Then they come back. If they want to get back home before Christmas, it only gives them three to four weeks to make all of this happen.

Have you heard any suggestion yet that this could be pushed over to January, with the argument that the new Congress should deal with these big issues?

Carey:  That argument is certainly out there, but also if you allow that to happen, if you allow the Bush-era tax cuts to expire, if you don't patch the alternative minimum tax in the tax code, if you allow the doc fix to not be fixed and those cuts to happen, that's a lot of mess for the next Congress to clean up.

And while we'll have some new members in January and some members who are staying, it's still divided government. Democrats still control the White House and the Senate. Republicans still control the House. So there's some thought that if you can't get the big deal, you at least get a down payment with the details filled in later.

Judd: OK. Thank you, Mary Agnes Carey of Kaiser Health News.

Carey: Thank you, Jackie.