Medicare's hospital trust fund will continue to be solvent until 2029 -- 12 years longer than previously predicted -- because of a series of improvements expected under the federal health reform law, according to a preliminary version of the Medicare trustees' annual report released on Thursday, the Washington Post reports (Goldstein, Washington Post, 8/6).
The trustees are expected to vote on a final report by Dec. 1.
Treasury Secretary Timothy Geithner, who led the development of the report, said the 12-year extension on the life of the trust fund is "a record increase from one report to the next."
The nonpartisan panel said that the 12-year extension was based on several assumptions, including that:
- Health care providers will become more efficient and adopt new, less costly ways of delivering care, particularly since the reform law seeks to cut Medicare spending over the next 10 years by about $500 billion; and
- Cuts to physicians' Medicare payments -- a 23% reduction scheduled to take effect on Dec. 1, followed by a 6.5% reduction on Jan. 1 -- take effect (Pear/Calmes, New York Times, 8/5).
The trustees also reported that the trust fund's projected deficit over the next 75 years -- a time frame that the law requires them to consider -- has significantly decreased.
However, hospital payments are the only part of Medicare that is paid through the trust fund, which allows it to operate with a shortage of money. The payment rates for other parts of Medicare are set annually and are guaranteed to be adequately funded (Washington Post, 8/6).
Geithner added a note of caution. He said, "It is important to note, for the benefits of reforms to be realized, they have to produce large improvements in efficiency and productivity" (McCarthy, CongressDaily, 8/6). Geithner added, "They have to be allowed to work. Congress will have to stick with them" (Wolf, USA Today, 8/6).
Trustees Note Caveats for Report
The report notes that Medicare still faces a number of major financial hurdles, the New York Times reports. If Congress acts to override the scheduled cut to physicians' payments, as it usually does, the cost of Medicare Part B -- which covers physician services -- is expected to increase by roughly 8% annually over the next 10 years.
In addition, the cost of Medicare Part D, which covers prescription drugs, is projected to increase by 9.4% annually.
According to the trustees, about one-quarter of current Medicare beneficiaries, new beneficiaries and individuals with relatively high incomes "will be subject to unusually large premium increases next year." The remaining 75% of current beneficiaries will not experience a similar premium increase (New York Times, 8/5).
CMS Actuary, Experts Question Report
In a two-page letter accompanying the trustees' report, CMS Chief Actuary Richard Foster expressed skepticism of its predictions, stating that they "do not represent a reasonable expectation" of Medicare's finances (Washington Post, 8/6).
Foster wrote, "While the [reform law] 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." Foster added, "The best available evidence indicates that most health care providers cannot improve their productivity to this degree -- or even approach such a level" (CongressDaily, 8/6).
Foster's projections for the Medicare hospital trust fund closely mirrored those of the trustees, estimating that fund will be insolvent in 2028.
However, analysts under Foster also reported that Medicare spending would grow to more than 8% of the economy by 2050, compared with 3.6% now, while the trustees estimated that Medicare will account for 6% of the U.S. economy in 2050. The difference amounts to hundreds of billions of dollars (Ohlemacher/Alonso-Zaldivar, AP/Philadelphia Inquirer, 8/5).
Earlier this week, lawmakers and health care industry watchdogs raised similar questions over the integrity of a new White House report, which also claimed that Medicare solvency would be extended by 12 years and that benefits will remain unchanged by the health reform law (California Healthline, 8/2).