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The Health 202: This is what happens to Medicare when you cut taxes but not spending

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with Paulina Firozi


Yesterday, we learned what happens when Republicans trying to rein in government tackle the tax side of the equation but not the spending side.

The result: a Medicare program that is projected to run out of money just eight years from now, in 2026.

The latest annual report on the financial situation of Medicare’s hospital program (and Social Security), released yesterday by the programs’ trustees, led Democrats to slam the tax overhaul Republicans pushed through Congress mainly on their own last year.

That tax measure’s income tax cuts — combined with reduced payroll tax collections because of lowered wages last year — are the two main reasons for the worsening financial outlook for the part of Medicare that reimburses hospitals for caring for seniors and the disabled, per the report.

And there’s something else, too. The tax bill also ends the Affordable Care Act’s penalty for lacking health insurance. So hospitals will see more uninsured patients as some Americans presumably drop their coverage, in turn requiring the Medicare program to pay more for such uncompensated care, a senior government official told my colleague Amy Goldstein and other reporters yesterday.

That report wasn’t the only reason Medicare could use a stiff drink this week (which your extremely pregnant Health 202 author will be oh so happy to share in just about five weeks or so).

It came on the heels of another analysis released Monday by the inspector general for the Department of Health and Human Services. According to that report, federal spending on Medicare’s Part D prescription drug program spiked 62 percent from 2011 to 2015 even after accounting for the rebates and discounts pharmaceutical companies give back to insurance plans. During that time, the unit cost for Medicare drugs rose six times the general rate of inflation.

“We conclude that increases in unit prices for brand-name drugs resulted in Medicare and its beneficiaries’ paying more for these drugs,” the IG’s office wrote.

The Medicare trustees report, however, held a glimmer of good news for prescription drug spending, finding Part D projections are lower than in last year’s report due to higher rebates, a decline in spending for Hepatitis C drugs and a slowdown in spending growth for diabetes drugs.

Nonetheless, most of the focus yesterday was on the worsening outlook for Medicare's hospital program. In the past, some Republicans had sounded the alarm on the federal government’s growing burden to pay for Medicare. But one of the loudest members on the topic, House Speaker Paul Ryan, is leaving office at the end of the year without any real accomplishments along those lines.

He'd warned repeatedly of this very outcome — that cutting taxes dramatically in the measure he helped shepherd through Congress needed to be accompanied by changes to Medicare that guided the program toward financial solvency. You could almost hear the regret in Ryan’s voice when he was asked about the situation.

“Of course more work needs to be done,” Ryan told reporters in April. “It really is entitlements — that’s where the work needs to be done, and I’m going to keep fighting for that.”

Don’t forget another action congressional Republicans took this year against what was intended to be a safeguard against too-big Medicare spending growth. As part of a spending bill in February, they repealed what’s known as the Independent Payment Advisory Board, a panel allowed under the ACA that would have been formed to recommend payment cuts should spending reach a certain threshold.

Yesterday, there were fewer responses than usual from Republicans, who typically are the ones to leap on bad news about Medicare’s financial status deteriorating. And unlike in previous years, none of the trustees (which include HHS Secretary Alex Azar, two other Cabinet members and the acting Social Security commissioner) attended the report’s release at the Treasury Department, my colleague Amy noted.

From House Financial Services Committee Chairman Jeb Hensarling (R-Tex.):

Sen. Mike Rounds (R-S.D.):

A few top Trump administration officials tried to put a positive spin on the whole thing. Treasury Secretary Steven Mnuchin issued a statement saying that tax cuts, regulatory changes and altered trade policies “will generate the long-term growth needed to help secure these programs and lead them to a more stable path.”

Seema Verma, administrator of the Centers for Medicare and Medicaid Services, called on Congress to embrace Medicare proposals in President Trump’s budget, such as one shifting responsibility for uncompensated care payments from the Medicare program to the Treasury.

Of course, the trustees’ report lent itself easily to triumphant Democratic news releases — and there were plenty in our inbox by the end of the day.

“This report should eliminate any doubt that Trump’s tax law yanked Medicare closer to insolvency,” said a statement from Sen. Ron Wyden (D-Ore.). “The president’s rap sheet on health care gets worse by the day.”

House Minority Whip Steny Hoyer (D-Md.) called the report “alarming.” “These new figures are based largely on two factors: lost revenue to the Medicare program as a direct result of the Republican tax law, and slower long-term economic growth resulting in lower wages. Both speak directly to the failures of Republican economic policies over the last year.”

From Rep. Frank Pallone (D-N.J.), ranking member of the Energy and Commerce Committee:

And the former CMS acting administrator under the Obama administration:

A few wonks reminded us that Medicare insolvency has been projected....basically forever. Juliette Cubanski, associate director of the Program on Medicare Policy at the Kaiser Family Foundation:

The Post's Fact Checker Glenn Kessler:


AHH: Fashion designer Kate Spade, 55, was found dead from an apparent suicide in her Park Avenue apartment yesterday, The Post's Sonia Rao and Elahe Izadi report. Law enforcement officials told the Associated Press that housekeeping staff found Spade in the apartment about 10:20 a.m. Kate Spade New York label issued a statement saying that "our thoughts are with her family at this incredibly heartbreaking time. We honor all the beauty she brought into this world.” 

Sonia and Elahe note: "News of Spade’s death prompting an outpouring of grief and tributes from Kate Spade fans on social media. Many also shared the number for the National Suicide Prevention hotline, 800-273-8255."

OOF: Recall the Trump aide who dismissed Sen. John McCain's opposition to the president's CIA nominee because the senator was "dying anyway"? The aide, Kelly Sadler, no longer works in the president's executive office, The Post's Josh Dawsey reports. Sadler’s comments about the Arizona Republican, who has been at home fighting brain cancer, sparked a weeks-long saga after they were made public last month. “It doesn’t matter, he’s dying anyway,” she said during a well-attended White House communications meeting on May 10, shocking some staffers.

“Kelly Sadler is no longer employed within the Executive Office of the President,” White House principal deputy press secretary Raj Shah said in a statement Tuesday evening.

"Sadler could not be reached for comment," Josh writes. "An official said the departure was not spurred by her McCain comments but instead was fueled largely by an internal dispute with the White House director of strategic communications, Mercedes Schlapp, over the fallout from the comment about McCain. It was not clear whether Sadler was fired or forced to resign."

OUCH: An investigation from ProPublica Illinois finds hundreds of children in the care of the Illinois Department of Children and Family Services were kept inside psychiatric hospitals for weeks or months, even after being cleared to leave.

“Instead of moving on to a foster home or residential treatment center — a less restrictive facility where children attend school and lead more normal lives — these children have languished in secure mental health facilities, the consequence of the child welfare agency’s failure to find them appropriate placements,” Duaa Eldeib writes. “These unnecessary hospitalizations are another failure for a state system that has frequently fallen short in its charge to care for Illinois’ most vulnerable children, who suffer from conditions such as severe depression or bipolar disorder.”

While challenges facing psychiatric hospitals in Illinois are similar to other states, experts say circumstances there “are among the most dire in the nation," Duaa writes. Unnecessarily prolonged hospitals stays have negative effects on children, and doctors say delays can cause children to suffer emotionally and behaviorally.

“Some child welfare advocates said the children slipped behind their peers in their behavioral and social development, often dramatically,” Duaa writes. “Meanwhile, lawyers who represent many of the children say such stays deny them their right, guaranteed by Illinois state law, to live in the ‘least restrictive’ setting.”


— The Food and Drug Administration said yesterday it will crack down on illegal sales of opioids online. In a memo, the FDA detailed nine networks operating 53 websites to which the agency sent warnings for illegal practices “marketing potentially dangerous, unapproved and misbranded versions of opioid medications, including tramadol and oxycodone.”

“The FDA is taking additional steps to protect U.S. consumers from illicit opioids by targeting the websites that illegally market them and other illicit drugs,” FDA Commissioner Scott Gottlieb said in a statement. “The internet is virtually awash in illegal narcotics and we’re going to be taking new steps to work with legitimate internet firms to voluntarily crack down on these sales.”

Gottlieb added the warning letters to the websites are “part of a comprehensive campaign to target illegal sales of unapproved opioids," saying the agency plans to take additional steps to target illegal opioid sales online and through the mail.


— The Senate Judiciary Committee plans to consider the CREATES Act, a bill The Health 202 wrote about in February. The measure, supported by lawmakers on both the far right and the far left, tries to even the playing field for generic drug developers who often run up against blockades from branded pharmaceutical companies seeking to keep their competition at bay.

The panel announced yesterday the bill will be part of its executive business meeting on Thursday, although it's more likely to be considered next week under the committee's usual processes.

Senate Majority Leader Mitch McConnell told senators that the Senate would recess for one week in August as opposed to four. (Video: The Washington Post)

— We hate to say this, but better hold off on those August vacation plans if you work in the Senate. Senate Majority Leader Mitch McConnell told members yesterday he will cancel most of the chamber’s August recess. The Senate will now recess for just one week in August, instead of the whole month, our colleague Sean Sullivan reports. The move, which will force vulnerable lawmakers to shuffle their campaign schedules, was widely anticipated in the Senate Republican Conference. Senate Democratic leaders say they welcome the extra time in session to address health-care costs, including prescription drug prices.

“After a roller-coaster 2017 for the Republican-controlled Senate, which failed to repeal and replace the Affordable Care Act but later passed a sweeping tax bill that became law, GOP leaders have set a more modest agenda for the months leading up to the midterm elections,” Sean writes. “The Senate has mostly been focused on confirming executive branch nominees and judges.”

— Top Senate Democrat Chuck Schumer plans to send McConnell a letter today asking him to set aside time in August for votes on five Democratic-backed measures aimed at expanding and lowering the cost of health care, Politico's Elana Schor reports. "We believe this previously unscheduled session time can be put to good use to finally help Americans secure the affordable health care the President and Congressional Republicans have thus far failed to deliver," Schumer writes in the letter obtained by Politico.

Trump weighed in late last night, too:

— A few more good reads from The Post and beyond:


Trump readies new VA health plan as report slams defective Choice Program (Joe Davidson)


A Promising Cancer Treatment Made Patients Worse, Not Better (New York Times)


Genealogy site MyHeritage says 92 million user accounts compromised (Stat News)

Drug prices are falling—but not necessarily in a way that helps patients (CNBC)



  • The House Financial Services Subcommittee on Housing and Insurance holds a hearing on the “Homeless Children and Youth Act of 2017."
  • The House Energy and Commerce Subcommittee on Health hold a hearing on “Examining the Reauthorization of the Pandemic and All-Hazards Preparedness Act."
  • HHS Secretary Alex Azar testifies before the House Committee on Education and the Workforce.
  • The House Ways and Means Subcommittee on Health holds a hearing on lowering health care costs and expanding access.
  • The American Enterprise Institute holds an event on “The 2018 Medicare Trustees Report.”

Coming Up

  • The House Small Business Subcommittee on Investigations, Oversight, and Regulations will hold a hearing titled “Vets First? An Examination of VA’s Resources for Veteran-Owned Small Businesses” on Thursday.
  • The House Veterans Affairs Subcommittee on Disability Assistance and Memorial Affairs holds a hearing on memorializing veterans on Thursday.
  • The House Veterans Affairs Subcommittee on Health holds a hearing on the “Potential Health Effects of Burn Pit Exposure among Veterans” on Thursday.
  • The American Enterprise Institute holds an event on the opioid crisis and foster care families on Thursday.
  • Axios hosts an event on “The Innovation Impact on Health Care” on Thursday.
  • The Senate Health, Education, Labor and Pensions Committee holds a hearing on prescription drug costs on June 12.

"Frankly, I think my credibility's probably higher than the media's," White House press secretary Sarah Huckabee Sanders told reporters: 

White House press secretary Sarah Huckabee Sanders said, "I think my credibility's probably higher than the media's," when asked about an untrue statement. (Video: The White House)

A brief history of athletes visiting Trump's White House:

President Trump disinvited the Philadelphia Eagles Super Bowl championship team to the White House on June 4. (Video: Victoria Walker/The Washington Post)

Stephen Colbert on first lady Melania Trump's whereabouts: