Right Now

The 289-page 2010 Medicare Trustees Report was released mid-morning today (here). While reaction to this significant report will continue in the days ahead, readers should immediately note some of important caveats from the Trustees report.

First Findings From Medicare Trustees Report

Proponents of The New Health Law Will Tout The Finding That Medicare’s Trust Fund Appears to Be Extended 12 Years

• “The financial status of the HI trust fund is substantially improved by the lower expenditures and additional tax revenues instituted by the Affordable Care Act. These changes are estimated to postpone the exhaustion of HI trust fund assets from 2017 under the prior law to 2029 under current law and to 2028 under the alternative scenario.”

However, The Trustees’ Caveats Effectively Undermine Proponents’ Optimism About Claims of Extended Medicare Solvency

Medicare Is Still Not Funded Sufficiently. “Despite this significant improvement, however, the fund is still not adequately financed over the next 10 years. HI expenditures have exceeded income annually since 2008 and are projected to continue doing so under current law through 2013. Beginning in 2014, trust fund surpluses are estimated to occur throughout the short-range projection period and for several years thereafter.”

It is “Implausible” to Assume No SGR "Doc-Fix". “Current law would require physician fee reductions totaling an estimated 30 percent over the next 3 years—an implausible result.”

Projected Savings Likely to Not Materialize, Because the Cuts to Medicare Providers “Will Not Be Viable in The Long Range.” “Further, while the Patient Protection and Affordable Care Act, as amended, makes important changes to the Medicare program and substantially improves its financial outlook, there is a strong likelihood that certain of these changes will not be viable in the long range. Specifically, the annual price updates for most categories of non-physician health services will be adjusted downward each year by the growth in economy-wide productivity. The best available evidence indicates that most health care providers cannot improve their productivity to this degree—or even approach such a level—as a result of the labor-intensive nature of these services.”

If Medicare Reimbursement Cuts Were Implemented, There Are Difficult Choices: Either Providers Drop Out of Medicare And Jeopardize Access For Seniors, or Congress Intervenes and Costs Soar.

“By the end of the long-range projection period, Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services would be less than half of their level under the prior law. Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems for Medicaid enrollees, and far below the levels paid by private health insurance. Well before that point, Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result. Overriding the productivity adjustments, as Congress has done repeatedly in the case of physician payment rates, would lead to far higher costs for Medicare in the long range than those projected under current law.”

The “Savings” in the New Health Law Are Budget Gimmicks. “The financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range (as a result of the unsustainable reductions in physician payment rates) or the long range (because of the strong likelihood that the statutory reductions in price updates for most categories of Medicare provider services will not be viable). I encourage readers to review the “illustrative alternative” projections that are based on more sustainable assumptions for physician and other Medicare price updates.”

Financial Projections Are Subject To “Uncertainty.” “Finally, as the Chairman of the Federal Reserve recently noted, “the economic outlook remains unusually uncertain.” Due to the sensitivity of HI trust fund operations to wage increases and unemployment, the recession adds a significant further element of uncertainty to the trust fund projections.”