Medicare’s hazy outlook

Like us on Facebook

That's 12 years longer than what the trustees reported last year.

But the Office of the Medicare Actuary, an agency under the Health and Human Services Department, issued an alternative report on the program's outlook, noting that "the projections shown in the report do not represent the 'best estimate' of actual future Medicare expenditures."

The trustees knew this to be the case and said so in their report.

"The effects of some of the new law's provisions on Medicare are not known at this time, with the result that the projections are much more uncertain than normal," the trustees said.

And the actuary's office knew that the trustees knew.

"The trustees report is necessarily based on current law," the actuary said.

In other words, the trustees were required to use the standards enacted in the ACA to make their calculations. One of the standards they used envisions a reduction of 30 percent in what Medicare will pay physicians over the next three years.

This is what Medicare's Chief Actuary, Richard Foster, called "implausible."

"Congress is very likely to legislatively override or otherwise modify the reductions in the future to ensure that Medicare beneficiaries continue to have access to health care services," the actuary's report said.

The actuary's office noted that Congress has overridden reductions in pay for Medicare physicians every year for the last seven and will probably do so again, or face the prospect of hundreds of doctors dropping out of the program and hundreds of thousands of constituents being upset.

The trustees acknowledge this likelihood in their report, saying that "price constraints" would likely become "unworkable" and that Congress would take action to prevent the reductions

A similar problem arises with non-physician Medicare providers. The ACA anticipates a growth in productivity for the entire economy, due to improvements in technology, and a subsequent reduction in costs, so that providers over time could be paid less for their services.

The Medicare actuary said that this is not necessarily so.

"The best available evidence indicates that most health care providers cannot improve their productivity to this degree-or even approach such a level-as a result of the labor-intensive nature of these services," the actuary's report states.

Once again, Congress is likely to step in and prevent reductions in payment to Medicare providers, as they will for physicians, because it would be disastrous for the program not to, the actuary said.

Again, the trustees knew this and warned about it.

 "We recommend that the projections be interpreted as an illustration of the very favorable financial outcomes that would be experienced if the productivity adjustments can be sustained in the long range-and we caution readers to recognize the great uncertainty associated with achieving this outcome," the trustees' said.

There is also a problem with double counting the savings the ACA will generate for the Medicare program. Using their "current-law" scenario, the trustees assume that the savings in the Medicare system will be plowed back into that system, further reducing the cost of running Medicare.

But, as the non-profit Committee for a Responsible Federal Budget has pointed out "much of the tax increases and spending cuts in the health reform legislation was used to finance a new regime of health insurance subsidies and an expansion of Medicaid. "

"The money cannot be counted twice," CRFB reported.

The Congressional Budget Office made the same point, saying that monies saved through the health reform law "cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending on other parts of the legislation or on other programs. "

Republicans in Congress wasted no time in attacking this example of creative mathematics.

"Simple logic says that you can't spend and save the same dollar - but logic doesn't apply if you're a Democrat in Washington,' said House Minority Leader John Boehner, R-OH.

"The trustees' report confirms that Medicare's future now rests on Washington Democrats' accounting gimmicks and tricks, a risk America's seniors are by no means eager to take," Boehner said, adding that "Democrats are raiding Medicare, not saving it."

Democrats, on the other hand, accentuate the positive.  

 "These reports show the tangible, positive results of the improvements made to Medicare by health reform,' said Sander Levin, D-MI. "Because of reform, Medicare's solvency was extended by 12 years, making it a stronger program, and its strength will continue to improve as more components of reform are implemented."

The opinion of the actuary's report is not completely at odds with that of the Medicare trustees. Indeed, considering its several objections, the actuary only reduces the extension of Medicare's solvency by one year, to 2028.

"The Affordable Care Act establishes a broad program of research into innovative new delivery and payment models in an effort to improve the quality and cost-effectiveness of health care for Medicare-and, by extension, for the nation as a whole," the actuary said. "As the Trustees note, the projections in this year's annual report provide an unequivocal incentive to vigorously pursue the development of effective and sustainable new approaches, with the potential to make quality health care much more affordable."

But keep in mind that the Trustees projections are "poor indicators of the likely future financial status of Medicare," the actuary's report said.

Maya MacGuineas of the CRFB said the process of producing such a report under current circumstances was problematic to begin with.

"All this uncertainty makes projection making extremely hard," MacGuineas said. "On one hand, you have to go with current law - that is, after all, the law. But on the other, it is not helpful to pretend that things that will not happen, will."

She said the Medicare trustees are "in the awkward position of having to make assumptions when there is no right answer. It would be better if we just passed laws that were implementable and Congress stuck to them, although there would still be plenty of uncertainty."

Medicare covers more than 46 million retirees and disabled people.