Experts worry ObamaCare repeal plan puts Medicare trust fund at risk

Experts worry ObamaCare repeal plan puts Medicare trust fund at risk
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This story originally appeared on The Hill Extra.

A little noticed element of the Republican plan for repealing and replacing ObamaCare could put the Medicare trust fund at risk, experts worry.

The plan, which faces a vote before the House Budget Committee on Thursday, would slash revenue for the fund that pays for hospital benefits — a precedent-setting move if signed into law.

It's not the first time that fund has been threatened, but if the ObamaCare repeal plan is implemented, it would be the first time Congress took an action pushing it near the funding cliff.

The cuts would bring the trust fund several years closer to running out of money, worrying Medicare advocates and budget hawks — and potentially leading to hospital reimbursement cuts.

“The fact that the deadline is being moved up, that deserves attention,” Paul Ginsburg, director of the Center for Health Policy at the Brookings Institution, told The Hill Extra. “Usually it is forces we don’t control that are getting us closer to insolvency.”

President Trump has pledged to not touch Medicare, but by removing an ObamaCare tax, the proposal effectively means changes to the program.

The bill repeals a 0.9 percent Medicare Hospital Insurance (HI) payroll tax on high-income earners, which supports the Medicare Part A trust fund. Although a repeal of the tax was also a part of the 2015 effort to repeal the health law that passed Congress, it was vetoed by former President Obama.

The hospital payroll tax repeal would lead to a loss of $117 billion in revenue by 2026, according to the Joint Committee on Taxation, the most significant loss among the revenue provisions in the House GOP plan.

The Centers for Medicare and Medicaid Services and the Congressional Budget Office estimate the repeal would speed up the trust fund’s insolvency date from 2026 and 2028 under current law, to 2024 or 2025. After that date the trust fund would only be able to pay for 87 percent of Part A benefits, according to the nonpartisan Committee for a Responsible Federal Budget.

“The direction is clear,” Marc Goldwein the committee’s senior policy director told The Hill Extra. “The few years matters for timing, but what is more important is that it permanently cuts off a substantial portion of funding. It doesn’t matter what happens between now and 2025. It matters what happens between 2025 and as long as we intend to continue having Medicare.”

Fending off funding cliff.

The trust fund has often come close to a funding cliff because of high Medicare spending rates, but has never reached a point at which it could not pay for full benefits. Historically, Congress has always stepped in with policy changes that make the trust fund last a little longer.

It is expected that Congress would again step in once a shortfall is imminent to reduce spending or raise revenues — but that expectation has never been coupled with congressional action to strip funding.

Howard Bedlin, vice president of public policy for the National Council on Aging, said 11 years until insolvency has been the average for the trust fund. The closest the fund has come to insolvency is two years, in 1970.

“Because it has never been a problem in the last 52 years, people don’t think Congress would be so irresponsible as to jeopardize hospital trust fund solvency ... I don’t think it will ever happen,” Bedlin told The Hill Extra. “There are ways to address these issues in a reasonable bipartisan way — but we shouldn’t be making the issue worse.”

“It is not an emergency and it is not going bankrupt,” he added.

Because the fund has never reached a cliff, the impact of insolvency is unclear. If Medicare could not cover 13 percent of benefits, Bedlin said hospitals would likely experience reimbursement cuts and have to stomach more uncompensated care.

“The best way to strengthen solvency is to reduce the rate of hospitalization,” he said.

Policy changes to curb Medicare Part A spending could include interventions that reduce avoidable admissions and readmissions, as well as measures to promote more efficient care once people are hospitalized.

“We should be looking at ways we can boost revenues and this proposal goes in exactly the wrong way,” Bedlin said.

Goldwein said Congress would need to find an alternative revenue source.

The Hospital Insurance payroll tax applies to single Americans who earn more than $200,000 and couples who earn more than $250,000. The tax bolsters the fund’s other revenue stream from a 1.45 percent tax on employer and employee earnings, and 2.9 percent from those who are self-employed, according to the Congressional Research Service.

“If you are going to get rid of that 0.9 percent surtax, replace it with something that raises as much or more money.” Goldwein said. “But most of the money is going to have to come in the long run from slowing Medicare cost growth. We need to find a way to really ramp up pay-for-performance and paying for an episode of care.”

As the GOP legislation moved through the House Energy and Commerce Committee and Ways and Means Committee last week, the patient advocacy group Medicare Rights Center criticized the bill for “manufacturing a Medicare funding crisis that could be used later in the name of cutting earned Medicare benefits.”

“We’re worried, what’s the motivation for folks who claim to be concerned about the future Medicare in including this provision?” Bedlin said.

This story originally appeared on The Hill Extra. See more exclusive content on policy and regulatory news on our subscription-only service here