The newspapers and media are full of the good news about Medicare and of course Obamacare is getting much of the credit. Even the relatively insignificant reductions in hospital readmissions are being given partial credit as are the overnight changes in the way medicine is practiced.
Before we jump for joy, perhaps reading what the report actually says from a macro strategic basis is in order. Following is exactly what the report says. I added the emphasis.
You should pay special attention to the paragraph below containing these words …The projections in this report assume that, as required by current law, CMS will implement a reduction in Medicare payment rates for physician services of almost 25 percent at the start of 2014.
Congress has never allowed these cuts to go into effect. Each year there is a so-called “doc fix”. However, as the report says, current law must be used in projections even if the assumption is unrealistic. Too bad you don’t see all this on the evening news. Probably because it is not part of Obamacare.
The projections in this report, with one additional specification, are based on current law; that is, they assume that laws on the books will be implemented and adhered to with respect to scheduled taxes, premium revenues, and payments to providers and health plans. The additional specification is that the projections disregard payment reductions that would result from the projected depletion of the Medicare Hospital Insurance trust fund. Under current law, payments would be reduced to levels that could be covered by incoming tax and premium revenues when the HI trust fund was depleted. If the projections reflected such payment reductions, then any imbalances between payments and revenues would be automatically eliminated, and the report would not serve its essential purpose, which is to inform policy makers and the public about the size of any trust fund deficits that would need to be resolved to avert program insolvency. To date, lawmakers have never allowed the assets of the Medicare HI trust fund to become depleted.
Projections of Medicare costs are highly uncertain, especially when looking out more than several decades. One reason for uncertainty is that scientific advances will make possible new interventions, procedures, and therapies. Some conditions that are untreatable today will be handled routinely in the future. Spurred by economic incentives, the institutions through which care is delivered will evolve, possibly becoming more efficient. While most health care technological advances to date have tended to increase expenditures, the health care landscape is shifting. No one knows whether these future developments will, on balance, increase or decrease costs.
The financial outlook for Medicare is also uncertain because some provisions of current law that are designed to reduce expenditures may be difficult to sustain. The clearest example of this issue is the sustainable growth rate (SGR) formula for physician fee schedule payment levels. The projections in this report assume that, as required by current law, CMS will implement a reduction in Medicare payment rates for physician services of almost 25 percent at the start of 2014. However, it is a virtual certainty that lawmakers, cognizant of the disruptive consequences of such a sudden, sharp reduction in payments, will override this reduction as they have every year since 2003.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, introduced even larger policy changes and projection uncertainty. This legislation, referred to collectively as the “Affordable Care Act” or ACA, contains roughly 165 provisions affecting the Medicare program by reducing costs, increasing revenues, improving benefits, combating fraud and abuse, and initiating a major program of research and development to identify alternative provider payment mechanisms, health care delivery systems, and other changes intended to improve the quality of health care and reduce costs.
The Board assumes that the various cost-reduction measures—the most important of which are the reductions in the annual payment rate updates for most categories of Medicare providers by the growth in economy-wide multifactor productivity—will occur as the Affordable Care Act requires. The Trustees believe that this outcome is achievable if health care providers are able to realize productivity improvements at a faster rate than experienced historically. However, if the health sector cannot transition to more efficient models of care delivery and achieve productivity increases commensurate with economy-wide productivity, and if the provider reimbursement rates paid by commercial insurers continue to follow the same negotiated process used to date, then the availability and quality of health care received by Medicare beneficiaries would, under current law, fall over time relative to that received by those with private health insurance.
Given these uncertainties, future Medicare costs could be substantially higher than shown in the Trustees’ current-law projection. At a minimum, readers should not assume that the SGR- related payment rate reductions will take place.
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