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Wednesday, September 15, 2010

CRS Issue Statement on Medicare Reform

Patricia A. Davis, Coordinator
Specialist in Health Care Financing

Medicare is the nation's federal insurance program that pays for covered health services for most persons 65 years and older and for most permanently disabled individuals under the age of 65 years. It consists of four parts, each responsible for paying for different benefits, subject to different eligibility criteria and financing mechanisms. The Patient Protection and Affordable Care Act (PPACA, P.L. 111-148) and the Health Care and Education Reconciliation Act of 2010 (HCERA, P.L. 111-152), signed into law on March 23, 2010 and March 30, 2010 respectively, made numerous changes to the Medicare program that modify provider reimbursements, provide incentives to improve the quality and efficiency of care, and enhance certain Medicare benefits. 

With the enactment of health care reform legislation earlier this year, the remaining months of the 111th Congress may be spent working on addressing Medicare physician payment issues, identifying and making any necessary technical fixes to the March legislation, and considering extensions of Medicare policies that will expire at the end of 2010. Over the longer term, Congress' focus will include monitoring the implementation and effects of payment and program changes made by the health care reform laws to determine, for instance, whether payment reductions are sustainable and whether delivery models being tested through pilot programs and demonstrations have the potential to slow cost growth in medical care and/or improve the quality of services provided. 

Some of the key policy issues and questions Congress will likely face include the following: 

• A combination of factors have contributed to the rapid growth in Medicare spending. These include increases in overall medical costs, new and increasing use of technology, increases in the percentage of the population over 65, and longer life spans. How will changes made in recent health care reform legislation affect the growth in Medicare expenditures and the long-term solvency of the Medicare Hospital Insurance (Part A) trust fund? How effective will the Independent Payment Advisory Board created by PPACA be in controlling costs? Will existing financing mechanisms be sufficient to support program spending over the long term? 

• Under PPACA, certain providers, such as hospitals, skilled nursing facilities (SNFs), and home health agencies (HHAs), face permanent reductions in the annual updates to their Medicare payment rates. How will these providers modify services to become more efficient? Will there be a reduction in access to these services for Medicare beneficiaries? Will Medicare payment reductions for these providers lead to higher prices to other payers? Will these reductions result in some providers leaving Medicare or being unable to remain in business? 

• Medicare payments to physicians and other providers under the Medicare physician fee schedule continue to grow at rates that require reductions in the reimbursement rates under current law by the sustainable growth rate (SGR) system. While Congress has passed legislation several times to avert these reductions, the search for a long-term solution or replacement for the update formula continues, while each override becomes more costly. Additionally, the longstanding issue with Medicare's physician payments and the potential for future reductions has accelerated concern that Medicare beneficiaries will be increasingly unable to access providers. What will the impact be on access to care due to increased demand for health care services as a result of PPACA's Medicaid expansions and the expected growth in the number of insured in the

private sector? How will the rates paid on behalf of these new covered groups compare with Medicare rates, and would providers be more willing to provide care to one population over another?

Date of Report: July 7, 2010
Number of Pages: 5
Order Number: IS40347
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