As required by law the 2011 Medicare Trustees Report is required to project its costs based on current law, including the health care reform law. That leads to some interesting conclusions and savings projections. Those optimistic figures lead to good press and PR for the Administration. What you don’t often see in the paper is what is behind the assumptions along with the reservations expressed by the Trustees. Following is an excerpt from the introduction of the 2011 Trustees Report. I provided the highlighting. As with many assumptions required by Congressional action, the reality of the impact of PPACA on Medicare is likely to be much different from advertised.
As was the case with the 2010 Trustees Report, this report reflects the effects of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010. This legislation, referred to collectively as the “Affordable Care Act” or ACA, contained roughly 165 provisions affecting the Medicare program by reducing costs, increasing revenues, improving certain benefits, combating fraud and abuse, and initiating a major program of research and development for alternative provider payment mechanisms, health care delivery systems, and other changes intended to improve the quality of health care and reduce its costs to Medicare.
Although the long-term viability of some of these provisions is debatable, the annual report to Congress on the financial status of Medicare must be based on current law. In this report, the various cost-reduction measures—most importantly the reductions in the payment rate updates for most categories of Medicare providers by the growth in economy-wide multifactor productivity—are assumed to occur in all future years, as required by the Affordable Care Act. In addition, an almost 30 percent reduction in Medicare payment rates for physician services is assumed to be implemented in 2012 as required under current law, despite the virtual certainty that Congress will override this reduction.
In view of the factors described above, it is important to note that the actual future costs for Medicare are likely to exceed those shown by the current-law projections in this report. We recommend that the projections be interpreted as an illustration of the very favorable financial outcomes that would be experienced if the physician fee reductions are implemented and if the productivity adjustments and other cost-reducing measures in the Affordable Care Act can be sustained in the long range—and we caution readers to recognize the great uncertainty associated with achieving this outcome. Where possible, we illustrate the potential understatement of Medicare costs and projection results by reference to an alternative projection that assumes—for purposes of illustration only—that the physician fee reductions are overridden and that the productivity adjustments are gradually phased out over the 16 years starting in 2020.
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