Setting the Facts Straight on Medicare
Today the Administration is preparing to release a “report” regarding the health care law’s impact on Medicare. The report doesn’t contain much in the way of new information, instead merely summarizing various provisions in the law that the Administration believes will reduce Medicare costs. The Administration claims nearly $8 billion in short-term savings to the Medicare program – but as an AP story points out, “Medicare Advantage cuts account for $5.3 billion through 2011, more than 60 percent of the total estimated two year savings.” Several other things to consider in the context of the report:
- The report implies that the Medicare cost containment provisions will be pain-free for beneficiaries. However, the Medicare actuaries found that the provisions “are unlikely to be sustainable on a permanent annual basis,” as about 15 percent of hospitals and related Medicare providers could become unprofitable within ten years, “possibly jeopardizing access to care for beneficiaries.” Likewise, the Congressional Budget Office concluded that many of the law’s major savings provisions “might be difficult to sustain for a long period,” and should not be expected actually to occur.
- The report once again claims that the health care law will extend the solvency of the Medicare trust fund. However, the Congressional Budget Office found that the provisions “would not enhance the ability of the government to pay for future Medicare benefits,” and the Medicare actuaries also concluded that the Medicare savings “cannot be simultaneously used to finance other federal outlays and to extend the [Medicare] trust fund.”
- Perhaps unsurprisingly, the report does NOT attempt to quantify the impact of the more than $200 billion in Medicare Advantage cuts on beneficiaries. However, the Medicare actuaries found that projected enrollment in Medicare Advantage plans would be cut in half as a result of the legislation, meaning the benefits to millions of seniors would change as a result of the legislation. The Congressional Budget Office also found that extra benefits for seniors participating in Medicare Advantage would fall by an average of more than $800 per year by 2019 – making the changes for millions of seniors one for the worse.
- The report claims that the various savings provisions would result in Part B premium savings for seniors – or, to be more specific, would reduce projected premium increases. However, it doesn’t mention that Part D coverage premiums will rise for all seniors – the Congressional Budget Office estimated that “the law would lead to an average increase in premiums for Part D beneficiaries of about 4 percent in 2011, rising to about 9 percent in 2019” – so that a select few will benefit. And it doesn’t point out that if Congress passes a “doc fix” increase in Medicare’s physician reimbursement levels that is not paid for – as the White House’s budget proposed to do – seniors’ Part B premiums would rise by between $50-90 billion over ten years.
- While the premise of the entire document is that Medicare can lead a national effort to reduce health care costs, it’s worth pointing out that last month the Congressional Budget Office, in its long-term budget outlook, noted (Table 2-1, page 31 of the document) that from 1975 through 2008, excess cost growth in Medicare exceeded that of the private sector by more than half a percent annually (2.5% vs. 1.8%). So the Administration’s belief that Medicare can be on the vanguard of cost-containment efforts is not matched by the historical evidence.