There’s been a good deal of complaining about the future costs of health care under reform, some of it justified, some not. In particular, the release of the Medicare Trustee’s report last week noted that the date when Medicare intake is lower than outflow has gotten nearer due to the poor economy.
There’s a misconception here.
Reports indicate “The Medicare hospital insurance fund will be exhausted in 2024, five years earlier than last year’s estimate, government accountants now figure.” That’s NOT what the report says. In reality, the HI fund will not be exhausted, but rather insufficient to pay ALL projected hospital costs. In 2024, it will be able to cover 90%, slowly decreasing to 75% in 2048 than back up near 90% in 2085.
However, even that overstates the problem, as it is highly likely the IPAC’s provisions will kick in to reduce costs well before then. I’d also note that the Medicare Actuary predicted reform would add thirteen years to the HI fund’s adequacy; the new figures cut that to an eight year addition due to reform.
As Maggie Mahar pointed out:
“Today [last Friday, actually] the Trustees affirmed that “projected Medicare costs over 75 years are about 25 percent lower because of provisions in the Patient Protection and Affordable Care Act.” The Trustees highlight one plank in the ACA that will save tens of billions by reducing “the annual payment updates for most Medicare services (other than physicians’ services and drugs.)”
Here, the Trustees are referring to the provision in the legislation that shaves Medicare’s annual increases in payments to hospitals, skilled nursing facilities, home health agencies, and other institutions by 1 percent a year, for ten years, with the goal of spurring them to become more efficient. This means that if, in a given year, hospitals normally would receive an adjustment from Medicare that raised reimbursements by 3%, under the new law their reimbursements would climb by just 2%. (Note: this provision does not apply to doctors, only Medicare Part A providers.) Over the decade, the Congressional Budget Office estimates that this change will save $196 billion.”
This is not to say Medicare’s cost problems are nonexistent – far from it. We absolutely have to get costs under control. The ACA is part of the answer; increasing revenues and reducing expenditures are two other parts of the solution. Of course, we can eliminate the need to increase revenues if Medicare starts negotiating drug prices and Congress eliminates some of the dumber provisions of the Medicare Modernization Act.
