President Obama, accompanied by Jeffrey Zients, acting director of the… (Andrew Harrer / Bloomberg )
The budget that President Obama released Wednesday doesn't include the sort of headline-grabbing initiatives that House Budget Committee Chairman Paul D. Ryan (R-Wis.) included in his proposal for fiscal 2014, such as a dramatic overhaul of the tax code and a transformation of Medicaid into block grants. But it offers a few ideas on Medicare that, while not as cage-rattling as Ryan's plan, would still bring important changes to the program. Make that, important but unpopular changes.
It's always risky to take a presidential budget proposal too seriously, given that they have no force of law and are largely ignored on Capitol Hill. Obama didn't exactly boost his influence by offering his fiscal 2014 budget a little more than two months after the statutory deadline.
Still, there are at least four features in the president's budget for Medicare that lawmakers should embrace. These are:
• Pushing physicians away from fee-for-service billing. The budget calls for developing new "accountable payment models" that would "encourage care coordination, reward ... high-quality efficient care, and hold practitioners accountable ... for consistently providing low-quality care at excessive costs." Once these were developed, physicians who did not adopt one of the new models and continued to bill Medicare for each procedure performed (fee-for-service) would have their reimbursement rates frozen.
• Requiring seniors to have more skin in the game. In addition to raising the deductibles that new enrollees pay for Part B (which covers doctors' bills) and requiring copays for certain types of home healthcare, the administration would impose a surcharge on Part B premiums for seniors with Medigap policies with "particularly low cost-sharing requirements." Medigap policies pay part or all of a Medicare recipient's out-of-pocket costs, but economists argue that this coverage can encourage people to overuse the healthcare system. A better approach is to make sure people face out-of-pocket costs that are high enough to deter frivilous demands for care but modest enough not to deter them from obtaining the treatment they really need.
• Increasing means-tested premiums. The budget would reduce the premium subsidy that higher-income seniors receive for Medicare Parts B and D, which cover doctors' bills and prescription drugs. It also would gradually reduce the threshold for such income-related premiums by not adjusting it for inflation. The change would eventually require 25% of Medicare beneficiaries to pay these higher premiums, up from less than 5% today.
•Reducing Medicare drug costs. The budget would have Medicare pay the same price for prescription drugs as Medicaid does. It also would promote the use of generic drugs among low-income Medicare beneficiaries by reducing the copays for generics and raising them for their brand-name alternatives. And it would hasten the arrival of generic drugs and biosimilars by authorizing the Federal Trade Commission to bar pay-for-delay deals and shortening the time a new biologic drug has exclusive access to the market.
All of these proposals are likely to face stiff opposition from beneficiaries, providers or drug companies, if not all three. But with the Medicare ranks set to double as the baby boom generation retires, the government has to push for all the efficiencies it can find. The right question is whether a proposed change in the system promotes savings by raising the quality of care and eliminating waste, rather than just cutting costs.