By Bobby Jindal and Newt Gingrich*
Let’s begin with three indisputable facts.
First, the Medicare hospital trust fund is projected to run out of money in 2028, triggering a 10% payment cut for medical providers that will get larger as the imbalance between payroll tax collection and Part A benefits grows.
Second, this type of indiscriminate, across-the-board payment cut will make the provider shortage in the U.S. worse, leading to longer wait times and rationing of healthcare.
Third, longer wait times and rationing for those on Medicare is a de facto benefit cut.
By attacking any attempt at modernization to ensure Medicare can continue to honor America’s promise to seniors, President Biden and the Democrats are the ones in favor of cutting Medicare benefits for seniors, not congressional Republicans.
While changes to entitlements shouldn’t be part of any debt-ceiling deal, Medicare needs to be modernized if we are to keep our government’s commitment to seniors who have paid into the program their entire lives. It’s possible to modernize Medicare without cutting benefits for seniors or raising taxes. It has been done before.
In 1995 the hospital trust fund was projected to run out of money in 2001, and the newly elected congressional Republican majorities were faced with a hostile news media and a Democratic president keen to find a way to attack the GOP for daring to be responsible.
Despite this opposition, we eventually passed, and the president signed, the Balanced Budget Act of 1997, which slowed the rate of growth of Medicare spending to extend the solvency of the trust fund by a decade. Remarkably, we did so with the support of AARP because we found ways to reform the program without cutting benefits.
This same four-part strategy can be followed today. First, establish site-neutral payment policies. Medicare pays hospitals more than independent outpatient facilities, such as surgery centers, to perform the same procedures. This creates an incentive for medical systems to purchase independent practices so they qualify for the higher, hospital level reimbursement.
There are legitimate reasons why someone with high comorbidities would need to have a procedure done in a hospital rather than a surgery center, but we can fairly compensate hospitals for these special cases through a risk-adjustment program. The Department of Health and Human Services estimates this plan would be budget neutral. The Committee for a Responsible Federal Budget estimates that establishing site-neutral payment policies would reduce Medicare spending by more than $150 billion and save seniors nearly $100 billion in premiums and cost sharing over 10 years.
Second, end Medicare’s bad-debt compensation program that reimburses hospitals for 65% of uncollected patient out-of-pocket costs. The program was intended to prevent hospitals from shifting costs to health plans, but according to the Congressional Budget Office, there is little evidence that it has worked. Meanwhile, the program reduces the incentive for hospitals to communicate out-of-pocket costs to their patients clearly, preventing them from seeking better value. It also makes it less appealing for hospitals to offer patients discounts or affordable payment plans.
Third, get serious about tackling fraud in Medicare. Estimates from the Government Accountability Office suggest that just under 7% of Medicare spending is improper. That is $43 billion a year. Compare this with the rate of fraud in the credit card industry: 0.1% to 0.4%. The difference is thanks to investment in a data infrastructure that can detect fraud in real time. The government chases fraud rather than preventing it, which means criminals need only move faster than the government. Investing in data infrastructure that can monitor claims in real time for suspicious patterns would pay for itself hundreds of times over.
Fourth, recognize preventive medicine as a money saver rather than a money spender and achieve savings through better health. It is often said the U.S. doesn’t have a healthcare system but a sick-care system. The Preventive Health Savings Act is a bipartisan bill that would instruct the CBO to account for cost savings accrued through preventive health measures more accurately. One way to do so is to extend CBO’s artificial 10-year budget window to two additional 10-year periods. We would then see the long-term benefits of helping people stay healthy instead of treating them after they get sick.
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These reforms would extend the solvency of Medicare’s hospital trust fund without cutting benefits for seniors. Congress should continue the long-term reforms necessary to ensure Medicare can keep the commitments made to America’s seniors, and it should move toward a premium-support model that encourages savings from competition and benefits taxpayers. Medicare Advantage plans—private plans that deliver Medicare benefits, widely introduced in 1999 and revamped in 2003—have grown rapidly, giving rise to new ways of providing care to seniors, such as a focus on improving outcomes through disease management and prevention. The plans have fostered innovation such as value-based care and a focus on the social determinants of health, as well as other benefits tailored to each senior’s unique needs. Congress should allow more flexibility in the design of benefits and care delivery models.
In 1995 we extended the life of Medicare without raising taxes or cutting benefits. We can do it again. Lawmakers must not let the demagoguery of Mr. Biden and the Democratic political establishment scare them into shirking their responsibility to America’s seniors.
*Mr. Jindal served as governor of Louisiana, 2008-16, and a U.S. assistant secretary of health and human services, 2001-03. He is on the boards of LifeMD and U.S. Heart & Vascular; the latter manages Medicare providers. Mr. Gingrich, a Republican, served as speaker of the House, 1995-99, and is chairman of Gingrich 360, a consulting and production firm that advises companies and organizations in the healthcare industry.
This article is part of an agreement between El American and America First Policy Institute.
