Democrats have said they can cut Medicare spending without touching seniors' benefits. But here's the reality: They can't get several hundred billion dollars out of Medicare without at least some beneficiaries taking a hit.
And that could be a big problem if the framework for a fiscal cliff deal calls for $400 billion in entitlement savings -- most of which would be likely to come from Medicare.
Republicans insist that entitlements should be part of a deal because they're the largest drivers of the nation's debt. But Democrats insist they won't agree to any Medicare savings that would trim benefits -- and that's exactly what would happen with some of the biggest savings options that have circulated in recent years.
POLITICO has reported that $400 billion in entitlement savings is likely to be the floor in an eventual deal and that the Medicare cuts are likely to be a combination of raising the eligibility age, means testing and "efficiencies."
But if President Barack Obama and Congress do agree to phase in a higher eligibility age -- which, technically, wouldn't touch "benefits" -- many of those near-retirees would have to pay more for their health coverage. And if health care providers get hit with another round of cuts -- the other big potential source of savings -- in addition to the ones already on the way in the health care law, they're warning that some of them won't survive.
Increase the Medicare eligibility age from 65 to 67: $148 billion
Most Democrats on Capitol Hill have lined up against the idea, arguing that doing so would leave 66- and 67-year-olds without access to affordable coverage. Plus, the 66- and 67-year-olds aren't the ones sinking the Medicare trust fund; they're typically the cheapest beneficiaries.
But they likely would become the costliest in the private insurance market, which could make coverage hard to find if they don't already have it through the workplace -- and they'd probably have to pay more out of pocket than they would under Medicare.
"Many of the people who would otherwise have enrolled in Medicare would face higher premiums for health insurance, higher out-of-pocket costs for health care, or both," the Congressional Budget Office wrote in a January analysis of the idea.
An ABC News/Washington Post poll released Wednesday shows that 67 percent of people surveyed oppose the idea, too.
But many Republicans back the idea, and it was included in House Budget Committee Chairman Paul Ryan's budget. They say Medicare needs to adjust to the times. In 1965, 65 was old. Today, it's not.
And they have one prominent supporter: Obama tentatively agreed to raise the eligibility age during his summer 2011 debt ceiling negotiations with House Speaker John Boehner.
Ryan's plan would have pushed off any changes for 10 years and then gradually increased the eligibility age over 10 years.
Increasing the Medicare Part B premium to 35 percent of costs: $241 billion
This is by far the biggest saver -- but it's also one that would clearly violate the Democrats' pledge not to shift costs to seniors.
The idea would simply require seniors to pay a larger percentage of their premium for Medicare Part B, which covers doctor visits and other outpatient services. Not only would the government pay less, but seniors would be discouraged from overusing care.
It would achieve a slew of savings, but if it comes up again, this idea is sure to meet with strong opposition from Democrats who say seniors already spend a lot of their income on health care.
Prescription drug rebates for dual eligibles: $112 billion-$135 billion
This strategy whittles down the government's prescription drug expenses for about 9 million Americans known as dual eligibles -- senior citizens whose income is also low enough to qualify them for Medicaid.
The catch: Drug companies will fight to make sure the idea never sees the light of day.
It works like this: Pharmaceutical companies have to pay a rebate for Medicaid drugs, and until recently that included drugs for dual eligibles. But these folks began purchasing their meds through Medicare in 2006, when a new prescription drug option called Medicare Part D went into effect.
That means their drug rebates are now a lot lower than under Medicaid, since Medicare rebates are negotiated between private insurers and the makers themselves. So some lawmakers have suggested extending the same rebates to dual eligibles.
If the idea comes up again next month, the drug lobby is sure to oppose it vigorously. But it's unclear where lawmakers might fall on the matter.
Obama suggested dual-eligible rebates in his deficit-reduction plan last year. And during the debt-ceiling negotiations, some leading Democrats opposed extending the rebates, while others in their caucus pushed for it, and Republicans indicated possible support as long as it was part of a whole package.
Change cost-sharing for Medicare and Medigap insurance: $92.5 billion
Here's another way to make seniors shoulder more of their health care costs upfront and thereby whittle down the government's bill while discouraging Medicare misuse. If they have to bear more of their health care costs, they'll be less likely to overuse care, the thinking goes.
That's also why the idea would be a tough sell to all those Democrats who swore they would never touch benefits.
Right now, seniors still face sizable deductibles in their traditional Medicare plans, so many buy private Medigap plans to supplement the cost-sharing -- saving them from steep out-of-pocket costs at the doctor's office or after a hospital stay.
But lawmakers could cut costs by reorganizing things. One idea floated by the 2010 Simpson-Bowles deficit-reduction panel, is to combine the Part A and Part B deductibles into one deductible. Another idea is to limit how much cost-sharing Medigap policies can cover, thereby requiring seniors to pay more out of pocket.
Together, the two ideas could save about $92.5 billion, the Congressional Budget Office has estimated.
As with many of the other ideas, opponents complain that it would shift more costs to individuals. But there could be some room for bipartisan agreement on this one, since Sens. Tom Coburn (R-Okla.) and Joe Lieberman (I-Conn.) included it in the Medicare reform plan they proposed last year.
Means testing: $20 billion
This one is more likely to be in the mix -- but it also doesn't save as much as outsiders might think.
Under this idea, wealthier seniors would pay more for their premiums. While a portion of Medicare premiums are already based on income, this would increase that percentage, thereby upping health care costs for those who can better afford it and reducing the government's bill.
The idea is simple enough, but it's another issue that doesn't break clearly down partisan lines. Obama suggested means-testing in his deficit-reduction plan, but Democrats rejected the idea just months later when Republicans brought it up during year-end negotiations.
Democrats' opposition is a little counterintuitive, since they typically tend to support plans requiring the wealthy to pay more than those less fortunate. But some in the party don't want to see any seniors pay more for their Medicare -- no matter what their income level. These folks say that would just be slicing the pie differently, instead of shrinking the whole pie by reducing health care costs in the long term.
Cuts to Medicare providers: $69 billion or more
There is some common ground on Capitol Hill on cutting Medicare providers -- payments to the physicians and hospitals who treat beneficiaries. For some Democrats, cuts to providers are the only Medicare savings they'd agree to.
"As long as they don't cut eligibility or raise the retirement age," Sen. Tom Harkin (D-Iowa) told reporters in the Capitol on Tuesday. "But if they want to cut down on how much we're paying to providers, and to insurance companies, device manufacturers, things like that, sure, fine."
Republicans favor more substantial Medicare reforms, arguing that nibbling around the edges isn't going to ensure that Medicare survives for future generations. But in the absence of a larger agreement, cuts to providers could become more attractive.
There are several existing proposals that deal-makers can use.
Just about every deficit-reduction plan in recent years has suggested cutting payments to hospitals for medical residency education. The Congressional Budget Office suggested combining several similar programs and cutting $69 billion.
Several deficit plans have called for $14 billion to $26 billion in cuts to payments to hospitals to help them cover unpaid bills. Other frequently cited cuts would target hospital outpatient payments, providers in parts of the country that spend more than others or rural health care providers.
Health care providers are pushing back strongly against cuts, arguing that they've already been squeezed by cuts in the health reform law and that further cuts would only harm patients' access to care. But from the Hill's perspective, it's easier to cut providers than beneficiaries.
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