When it was published in December 2010, the Simpson-Bowles deficit reduction plan passed into seeming oblivion. President Obama refused to endorse it, and Congress never seriously discussed it or adopted any of its suggestions. Few Medicare reformers championed it. It lingered on life support only because a handful of policymakers and powerbrokers kept it alive, but just barely.

But now, as the president and policymakers wrangle with the so-called fiscal cliff, Simpson-Bowles has emerged from its coma in grand style. Co-author Erskine Bowles, a former Clinton White House chief of staff, is being mentioned as a possible Treasury Secretary nominee. And the Medicare reform component of the plan has now moved to center stage in the wake of the election.

Simpson-Bowles is back in the guise of "Fix the Debt," a group that is backed by former Sen. Alan Simpson (R-Wyo.) and Bowles. The group's steering committee is a who's who of corporate, congressional and other Beltway heavyweights such as Alice Rivlin, former director of the Congressional Budget Office (and author of a different deficit reduction plan), and Robert Zoellick, former president of the World Bank. The group has revived interest in Simpson-Bowles and launched a nationwide petition campaign to push Congress and the White House to adopt its recommendations.

To understand the comeback of Simpson-Bowles, you have to parse the middle ground it staked out. While mentioning "premium support" in passing, it never really endorsed the concept. The plan built upon some core principles in the Affordable Care Act (ACA) while pushing forward some controversial pieces, such as the Sustainable Growth Rate (SRG), or "doc fix."   

Inside Simpson-Bowles's Medicare Reforms     

The deficit reduction plan is a template to carve $4 trillion out of government spending by 2020. Through a combination of lower income tax rates, elimination of personal deductions and across-the-board savings in every government category, Simpson-Bowles was considered to be one of the most centrist approaches to deficit reduction. It also lumped together Medicare with other government health spending by imposing a cap on annual growth at the level of the gross domestic product increase plus 1 percent. What would happen if actual spending breached that limit? The report wasn't clear.  

The Medicare portion of Simpson-Bowles is a hybrid of long-term spending reductions and extensions of ACA pilot programs. Here's a summary of what it contains:

• Reform the "doc fix": Originally the SGR was intended to keep spending for Medicare physician services in line with growth in the national economy. But the SGR has been put on hold since 2003, and doctors lobby to shut it down every year. Simpson-Bowles would lock incremental reductions in doctor reimbursement fees every year through 2020 to save $26 billion. Here's where their doc fix gets interesting: They would tie the new formula into cost-savings methods, such as coordinated care and quality-based compensation, "instead of quantity of services." While it doesn't mention it by name, Simpson-Bowles would slowly scrap fee-for-service compensation. This would be a radical leap for the Medicare program, and the idea has previously been suggested by reformers such as Dr. Ezekiel Emanuel, who has been working with the Obama White House on this subject.
• Reform Medicare cost-sharing rules: This would save approximately $110 billion through 2020. Basically, this would consolidate and increase out-of-pocket costs for beneficiaries. The plan recommends a "single, combined annual deductible of $550 for Parts A and B along with 20 percent coinsurance on spending above the deductible." Total of out-of-pocket expenses would be capped at $7,500, meaning that patients pay more because more of the cost of care is passed along to them. This has never sat well with Medicare advocacy groups, but policymakers say that more risk-shifting is necessary to improve long-term sustainability.
• Restrict First-dollar Medigap Coverage: It's long been argued that Medicare supplement policies, otherwise known as "Medigap" plans, encourage overutilization of care because they take the sting out of having to pay for what Medicare doesn’t cover. Simpson-Bowles would create a $500 deductible for the policies and then limit coverage to "50 percent of the next $5,000 in Medicare cost sharing." This is estimated to save $38 billion through 2020, according to an analysis conducted by the deficit reduction commission, which the Simpson-Bowles report summarized.
• Miscellaneous Fixes: Simpson-Bowles would reduce excess payments to hospitals for medical education, cut Medicare payments for bad debts, accelerate home-health savings and accelerate ACA pilot programs for bundled payments and Accountable Care Organizations (ACOs). These measures would save another $160 billion. ACOs were designed to integrate care with cost-saving measures and were part of the Affordable Care Act. They are still in the pilot phase, but could be offered on a wider scale if they meet their goals.

A Viable Middle Ground?

Why do these proposals enjoy a revival in interest now? They represent an uncharted middle ground in Medicare reform. The original Simpson-Bowles report only gave a glancing blow to premium support, the plan favored by Mitt Romney and Paul Ryan.

Although Simpson-Bowles will receive exponentially more attention in the coming weeks, it's still not receiving strong endorsement from the progressive community. Its most anti-beneficiary measures are not even borne out by the research it provides on growth in spending, which is based on baby boomers retiring. In one slide on the fixthedebt.org website, Medicare spending, based on Congressional Budget Office numbers, is projected to grow by only about 3 percent between 2011 and 2022. The last growth tally was 2 percent in 2010. This is down from the 4 percent annual rate of increase that has been typical since Medicare's inception in the mid-1960s. .

That brings up the question of whether total Medicare spending—thanks to ACA reforms—is headed downward over the long term. If so, that would blunt the case for Simpson-Bowles and its larger cost shifts to beneficiaries. A durable trend of lower cost growth, assuming it wasn't all tied to the recession, would also argue for an expansion of the cost-saving provisions of the ACA.

"Simpson-Bowles targets Medicare and Medicaid—though the real problem is rising healthcare costs across the board," wrote Congresswoman Jan Schakowsky (D-IL), a leader of the House progressive caucus, just before the election. "Yet it would cap them at arbitrary rates and simply shift the growing costs to patients, providers and employers. To start, they would ask Medicare beneficiaries—seniors and disabled people—to pay $110 billion more out of pocket."

By using the ACA as a foundation, Simpson-Bowles gives a nod to the fundamental approach of President Obama's strategy: reform the program internally, pass along more costs, and restructure payments and treatment modes. This multifaceted plan might have more currency because it's already in place and will keep adding provisions well into 2018. Simpson-Bowles, however, will cast an increasingly large shadow as Congress is pressed to find Medicare spending cuts.  

MedicareNewsGroup.com (MNG) original articles can be reprinted or republished with credit to The Medicare NewsGroup. To use our content, simply copy and paste text from the MNG website. Use of our content is done in compliance with our Terms and Conditions but does not extend to material from other sources that are subject to their copyright.