The good news for today’s Medicare beneficiaries is that for the second year in a row there is no increase in premiums plus there is also no increase in the Part B deductible. Frankly, a cynic like me sees that as a negative. I think the Administration is at best taking a chance not raising both and at worst is simply playing politics to garner votes and support the Affordable Care Act, but as I said that’s my opinion.
In the HHS a press release the Secretary of HHS said:
“Thanks to slower health care cost growth within Medicare since the passage of the Affordable Care Act, next year’s Medicare Part B monthly premium will remain unchanged for the second consecutive year,” said Secretary Burwell. “The Affordable Care Act is working to improve affordability and access to quality care for seniors and people with disabilities.”
“The stabilization of Part B premiums is another example of how we are containing health care costs to provide a more sustainable and affordable health delivery system. The Administration has taken important steps to improve the quality of care while keeping the cost of Medicare premiums and deductibles the same,” said CMS Administrator Marilyn Tavenner. “This means even greater financial and health security for our seniors next year as their premiums will remain unchanged.”
The fact is that there are 165 different provisions in the Affordable Care Act affecting Medicare, none of which at this point can be said effective in controlling long-term costs, others clearly adding to costs such as expanded benefits. The Trustees assume the growth rate in costs for Part B over the next five years will be one-half of one percent less than the previous five years. That’s 5.7% versus 6.2% and that certainly is not zero growth. Stabilizing a premium is not containing costs, it is stabilizing the premium. I once sat on a government board for state benefits. One year the board set premiums to stabilize them knowing full well in advance that premiums would be less than projected claims. The papers noted I was the only board member opposing the move.
We should also note that both Ms Burwell and Ms Travenner are Medicare Trustees and signed the 2014 annual report, excerpts from which are shown below. You should take the time to read these few paragraphs.
In a world of high uncertainty, of underfunding and projected growth in costs of 5.7% with Trustee comments such as “The financial projections in this report indicate a need for additional steps to address Medicare’s remaining financial challenges;” is it realistic, prudent or just plain politics to stabilize premiums?
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 estimated depletion date for the HI trust fund is 2030, 4 years later than was shown in last year’s report. As in past years, the Trustees have determined that the fund is not adequately financed over the next 10 years. HI taxable earnings in 2013 were slightly higher than last year’s estimate; after 2013, however, projections of earnings throughout the period are lower mostly due to lower GDP based on lower assumptions for the GDP deflator and real GDP. HI expenditures in 2013 were significantly lower than the previous estimate, and through 2016 the projected level grows more slowly than shown in last year’s report largely due to reductions in utilization assumptions, reflecting recent trends.
HI expenditures have exceeded income annually since 2008 and are projected to continue doing so through 2014. The Trustees project slight surpluses in 2015 through 2022, with a return to deficits thereafter until the fund becomes depleted in 2030.
The SMI trust fund is adequately financed over the next 10 years and beyond because premium and general revenue income for Parts B and D are reset each year to cover expected costs and ensure a reserve for Part B contingencies. Part B and Part D costs have averaged annual growth of 6.2 percent and 7.2 percent, respectively, over the last 5 years, as compared to growth of 2.7 percent for GDP. Under the projected baseline scenario, the Trustees project an average annual Part B growth rate of 5.7 percent over the next 5 years; under current law, the average annual Part B growth rate would instead be 4.9 percent. For Part D, the estimated average annual increase in expenditures is 9.9 percent over the next 5years. The projected average annual rate of growth for the U.S. economy is 5.0 percent during this period, significantly slower than for Part D and slightly slower than the growth rate for Part B.
The Trustees project that HI tax income and other dedicated revenues will fall short of HI expenditures in most future years. The HI trust fund does not meet either the Trustees’ test of short-range financial adequacy or their test of long-range close actuarial balance.
The Part B and Part D accounts in the SMI trust fund are adequately financed because premium and general revenue income are reset each year to cover expected costs. Such financing, however, would have to increase faster than the economy to cover expected expenditure growth.
The financial projections in this report indicate a need for additional steps to address Medicare’s remaining financial challenges. Consideration of further reforms should occur in the near future. The sooner solutions are enacted, the more flexible and gradual they can be. Moreover, the early introduction of reforms increases the time available for affected individuals and organizations—including health care providers, beneficiaries, and taxpayers—to adjust their expectations and behavior.
The Trustees recommend that Congress and the executive branch work closely together with a sense of urgency to address the depletion of the HI trust fund and the projected growth in HI (Part A) and SMI (Parts B and D) expenditures.
QUINNSCOMMENTARY 