Congressional Budget Office Releases Options for Reducing the Federal Deficit
Tuesday, November 19, 2013
by: VNAA Policy Team

Section: Public Policy and Advocacy




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On Nov. 13, the Congressional Budget Office (CBO) released its updated Revenue and Spending Options Report, an annual publication highlighting theoretical options on ways to reduce the deficit in the next ten years. The document presents over 103 options to decrease federal spending or increase federal revenues in many areas including, defense, energy, Social Security, healthcare and changes to the tax code. 

In chapter five of the document, CBO outlines sixteen healthcare options including creation of Medicaid spending caps, conversion of Medicare to a premium support system, changing Medicare’s cost-sharing rules, restricting Medigap insurance and bundling Medicare payments to health care providers. CBO notes that changes noted above would interact in important ways and that policymakers could also “grandfather” current enrollees by maintaining existing rules for them and applying changes only to new enrollees.  Options seven and ten could potentially have the greatest impact on home health and hospice    

Option 7: Change the Cost-Sharing Rules for Medicare and Restrict Medigap Insurance
CBO notes that policymakers could alter Medicare’s cost sharing and restrict Medigap coverage in various ways to produce savings for the federal government, reduce total health care spending and create greater uniformity in cost sharing for Medicare enrollees. This would also alter distribution of health care costs between healthier and less healthy enrollees.  In particular, four main sets of rules governing Medicare’s cost sharing could be modified:
1) Deductibles could be increased, decreased, or combined;
2) Coinsurance rates and copayments could be changed;
3) A catastrophic cap could be added; and
4) Limits could be imposed on supplemental insurance coverage of Medicare’s cost-sharing obligations.
In particular CBO notes that, “Medicare beneficiaries who now receive home health services and hospice care without cost sharing would face significant financial obligations to access care. The use of global cost sharing may have surface appeal, but it can act as a barrier to care that is less costly and clinically better than care in other settings.”

Option 10 - Bundle Medicare’s Payments to Health Care Providers
CBO notes that payment bundling is a broad concept that could take many forms. The federal savings that could result from greater bundling would depend on:
1) Types of bundles constructed and their scope;
2) Duration of the services covered by a bundle;
3) Levels at which bundled payments were set and the mechanisms used to set them;
4) Method of payment used;
5) Schedule for implementing the bundling policy; and
6) Whether bundling would be voluntary or mandatory.
CBO notes that Medicare already bundles some of its payments, but they typically cover services provided by a single individual or organization. “For example, hospitals generally receive a fixed payment for each admission to cover all of the discrete goods and services they provide during a patient’s stay. Likewise, home health care agencies receive a fixed payment to cover all of the visits they provide to a patient during a 60-day episode of care, and skilled nursing facilities (SNFs) are paid a per diem rate that covers all of the services they furnish to a resident in a day.”
CBO estimates Medicare spent more than $170 billion in 2013 on services provided during a hospital stay or within 90 days of discharge. That total accounts for at least half of all nondrug spending in Medicare’s fee-for-service program. Because of this high cost, CBO examined two alternative approaches to bundling. In each, Medicare would set a target payment amount for specified episodes of care triggered by a hospital admission. One approach would cover only hospital and physician services and any related hospitals admissions occurring within 30 days of discharge. Another approach would cover the same inpatient and physicians’ services but would also include any post-acute care (such as SNF, home health, or rehabilitation services or outpatient physical therapy) that was delivered within 90 days of discharge.  Under each plan, Medicare would hold back a percentage of the total Medicare payment to account for anticipated savings, three percent for inpatient and ten percent for the inpatient post-acute bundle.   

Projected Savings
Under the inpatient care only alternative, CBO estimates that savings would be approximately  $16.6 billion in ten year spending-- while under the alternative that included both inpatient care and 90 days of post-acute care, the government could save $46.6 billion over ten years.
Other savings in the report included $106 billion to $606 billion in reduced federal spending from various types of caps on Medicaid. The federal government could convert Medicare to a premium support model and produce 10-year savings ranging from $22 billion to $275 billion, depending on the approach used.
Establishing uniform cost sharing for Medicare beneficiaries would save $52 billion over 10 years, while saving $58 billion by restricting the use of Medigap plans, which provide first-dollar coverage for beneficiaries.
VNAA continues to closely monitor all policy options that relate to home health and hospice, especially those that related to possible cuts or changes in design. 

More about CBO Report
CBO options come from proposed legislation, budget proposals of various administrations and other resources. They reflect a range of possibilities, not a ranking of priorities and inclusion or exclusion of any particular option does not imply endorsement or disapproval by CBO. 
The House and Senate are currently meeting in a bipartisan conference to determine an agreement on broad outlines of a budget proposal that would guide legislation considered by Congress.  Typically, the House and Senate will agree to a “budget resolution” each year, however there have been quite a few years without agreement. 

Read the full report here
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