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Looming Trump Medicare Order Sparks Fear of Program Cuts in 2021

Oct. 3, 2019, 9:51 AM

The White House has been tight-lipped for months about President Donald Trump’s executive order on Medicare, now expected to be released on Oct. 3.

The directive, delayed since August, is expected to strengthen the private Medicare Advantage plans that cover more than 22 million people while criticizing Medicare for All proposals being championed by Democratic presidential candidates.

Max Richtman is already warning supporters about what could lie ahead for the program in a second Trump term.

The chief executive officer of the National Committee to Preserve Social Security and Medicare, Richtman worries Medicare could be targeted for cuts by congressional Republicans eager to pay down the deficit if Trump is re-elected in 2020.

“I worry they might have a receptive president in a second term of a Trump administration,” Richtman said. “His budget has tinkered around the edges of Medicare cuts in the last couple of cycles, so it’s a serious concern. I’m not sure how it all plays out. Nobody is. But it’s something we worry about.”

So far, congressional Republicans and the White House have given no indication that spending cuts are being considered for Medicare. And they won’t. Doing so could spark a backlash among seniors, a historically potent voting bloc, in the run-up to the 2020 elections.

Trump’s 2020 budget does, however, call for trimming roughly $600 million from Medicare over 10 years, mostly in cuts to providers. But that tactic can only do so much.

“If you cut providers below their cost of operations, you’re going to cut access for Medicare recipients,” Sen. Bill Cassidy (R-La.), a physician and member of the Senate Committee on Health, Education, Labor and Pensions, told Bloomberg Law.

‘Different Sort of a Cut’

Well aware of Medicare’s shaky finances, Cassidy said the program could save money by improving payments that reward efficient delivery of care and by providing incentives for other caregivers to become more efficient.

Revamping Medicare payments for acute care provided after a hospital stay, for example, could save the program $75 billion through 2029, the Congressional Budget Office estimates.

“That’s a different sort of a cut,” Cassidy said of utilizing more innovative payment models in Medicare. “I don’t know what the administration’s plans are. But if it is that sort of approach, we should all be for it.”

But Medicare spending is expected to nearly double to more than $1.5 trillion by 2028. And conservative analysts like Joseph Antos, the Wilson H. Taylor Resident Scholar in Health Care and Retirement Policy at the American Enterprise Institute, say payment reforms alone won’t right Medicare’s sinking ship.

‘Just Untenable’

In a recent article, Antos and Robert E. Moffit, a senior fellow at the Heritage Foundation, resurrect past conservative proposals to cut Medicare spending. The proposals include gradually raising program eligibility from age 65 to 67, increasing beneficiary premiums, and replacing Medicare’s guaranteed benefits package with “premium support” payments or vouchers that would help beneficiaries pay for private coverage.

“The economics of the situation is just untenable and we have to do something about it,” Antos said.

Raising the eligibility age to 67 over a decade would save $22 billion, Antos said. Hiking basic premiums for Medicare outpatient and prescription drug coverage to pay for 35% of the actual benefit would save $418 billion over 10 years, he added.

When Medicare was first established in 1965, the Part B premium covered half the cost of the actual benefit, Antos said.

“So we’re not talking about something that we haven’t seen before in the program,” he said. “We’re talking about whittling away at generosity that various Congresses have provided to Medicare beneficiaries that is no longer sustainable.”

In Congress’ Sights

While stabilizing the federal debt should be a policy priority, it’s not necessary to restructure Medicare through “premium supports,” said Paul Van de Water, senior fellow at the liberal Center on Budget and Policy Priorities.

“Policymakers and the American public should not be driven into adopting such proposals by misleading claims that Medicare is on the verge of ‘bankruptcy’ or is ‘unsustainable,’” Van de Water wrote recently. “Instead, we should pursue a balanced deficit-reduction approach that puts all parts of the budget on the table, including revenues.”

Van de Water said Medicare could find meaningful savings by ending overpayments to drug companies for medication prescribed to low-income beneficiaries, increasing efforts to stop fraud and wasteful spending, and reducing overpayments to Medicare Advantage plans.

Because of its size and impact on the federal budget, Medicare is a frequent target of major legislation every few years by both Democrats and Republicans, Van de Water said.

Examples include the GOP-backed Medicare Prescription Drug, Improvement, and Modernization Act that created the Medicare prescription drug benefit in 2003; the Obama administration’s Affordable Care Act that lowered overpayments to Medicare Advantage plans; and the Medicare Access and CHIP Reauthorization Act of 2015 that ushered in the era of value-based care.

“I think that pattern is going to continue,” Van de Water said. “I think Medicare has been and is going to continue to be one of the front-burner issues for Congress. It never really goes away.”

To contact the reporter on this story: Tony Pugh in Washington at tpugh@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Andrew Childers at achilders@bloomberglaw.com

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