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JAMA Forum Archive, 2012-2019: Health policy commentary from leaders in the field
JAMA Forum

Medicare and the Year Ahead: Opportunities for Reform

When the Affordable Care Act (ACA) was signed into law in March 2010, it ushered in significant changes to Medicare. Those changes include innovations to provider payment models, including episode-based bundled payments, various new types of accountable care organizations, and greater emphasis on efficiency and quality, among others. However, it’s clear from the presidential campaign rhetoric, as well as the legislative and political calendar, that Medicare could face additional, potentially dramatic changes in the coming year. The most likely engine for change to Medicare is a confluence of statutory deadlines that some observers think could lead to a bipartisan “grand bargain.”

Austin Frakt, PhD

But first there are a few events on the calendar that are less likely to lead to big, bipartisan changes to Medicare. In June, the US Supreme Court will rule on the constitutionality of the ACA or parts thereof. Although it is possible that the justices could throw out the entire law, which would invalidate the Medicare reforms mentioned above, this is unlikely. More likely is that the court finds none of the law or perhaps just the individual mandate unconstitutional, leaving Medicare untouched.

Next up is the presidential election in November. This too could have big implications for Medicare if Republicans retake the White House and the Senate while retaining the House. Repealing the ACA, as Republicans have promised to do, would take down the new Medicare reforms as well. In place of Medicare as we know it, candidate Mitt Romney has endorsed the notion of premium support. Instead of traditional Medicare and private Medicare Advantage plans operating as they do today, Romney’s vision—shared by fellow Republicans—is to offer vouchers to Medicare beneficiaries to use as they shop for coverage in a market with competitive elements similar to those present in the Medicare drug program today.

Full implementation of such a dramatic change to Medicare would require a filibuster-proof majority in the Senate, something Republicans are unlikely to achieve. Therefore, even if the majority of contested Congressional seats are won by Republicans in November, I don’t think that alone preordains a premium support program in Medicare.

But there’s one more big event—or confluence of events—on the calendar in the next year. On January 1, 2013, the 2-year extension of the Bush tax cuts is scheduled to expire. If it does, income tax rates will increase for nearly all taxpayers. On the same day, the current patch to Medicare’s Sustainable Growth Rate (SGR) expires, threatening to decrease payments to physicians by about 30%. Furthermore, as agreed on during last summer’s showdown over the US debt ceiling, $1.2 billion in cuts to defense and other domestic spending, including a 2% cut to Medicare, are scheduled to commence at the turn of the year. As if that’s not enough, the current debt ceiling will probably be reached this fall or early winter, forcing another potentially contentious vote to raise it.

Allowing all or even a subset of these to occur could be economically and/or politically disastrous. For this reason, some speculate that this unprecedented confluence of significant statutory events offers an opportunity for a grand bipartisan bargain, one that includes a major overhaul of Medicare. I agree that there is a greater opportunity for Medicare reform during a climate of legislative urgency this fall than as a result of the Supreme Court ruling or the presidential election. But just because the opportunity may exist does not mean it’s the appropriate time for a structural change to the program.

I am on record, along with economist Henry Aaron, PhD, of the Brookings Institution, with the view that now is not the time for premium support. Aaron and I list many reasons, and he provided even more detail in his recent testimony before the House Ways and Means Subcommittee on Health. Among them is this:

The Affordable Care Act (ACA) sets in motion a process of experimentation and change, including the implementation of accountable care organizations, bundled payments, comparative effectiveness research, a center for innovation, and an independent payment advisory board, that aims to transform the financing and delivery of health care. […]

Implementing these and other changes within the framework of the current program should make up today’s reform agenda. Serious efforts to control the growth in Medicare expenditures should begin with resolute implementation of the ACA.

The reforms already decreed by law have not yet been given a chance to play out. Although it is by no means certain they will move the program toward a more sustainable growth path, there is no reason to think they’re any less likely to do so than premium support. Of course, the ACA’s Medicare reforms are not perfect or universally adored; that would be too much to expect of any reform. Unsurprisingly, then, the same is true of premium support, which comes with its own set of risks, compromises, and reasonable skeptics.

The ACA made significant changes to Medicare. The prudent approach is to support their implementation and to monitor their effectiveness, making adjustments as warranted. This fall may provide a political opportunity to attempt significant structural reform to Medicare. But the next few years provide an opportunity for something more important: to make good on the reforms already in law.

About the author: Austin B. Frakt, PhD, is a health economist and an assistant professor at Boston University’s School of Medicine and School of Public Health. He blogs about health economics and policy at The Incidental Economist and tweets at @afrakt. The views expressed in this post are that of the author and do not necessarily reflect the position of Boston University.