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James C. Capretta

New Atlantis Contributing Editor James C. Capretta is an expert on health care and entitlement policy, with years of experience in both the executive and legislative branches of government. E-mail: jcapretta@eppc.org.
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James C. Capretta’s Latest New Atlantis Articles

 Health Care with a Conscience” (Fall 2008) 

 Health Care 2008: A Political Primer” (Spring 2008) 

 The Clipboard of the Future” (Winter 2008)

 

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Text Patterns - by Alan JacobsFuturisms - Critiquing the project to reengineer humanity

Friday, May 13, 2011

The Real Medicare Trustees’ Report 

The headline news from today’s release of the 2011 Medicare Trustees’ report is that the Hospital Insurance trust fund is scheduled to be depleted in 2024, five years earlier than projected in last year’s report. The primary reason for the erosion in the condition of the trust fund is, apparently, the anemic economic recovery. It’s even worse than what was projected just a few months ago.

But important as this information appears to be, it’s really not the most important information found in the report. To get that, one needs to skip past all the mind-numbing tables and graphs to the final few pages, specifically page 265. There you will find a “Statement of Actuarial Opinion,” signed by the Chief Actuary of the program, Richard Foster. And in that statement, Mr. Foster once again warns the public not to rely on the information provided in the preceding 264 pages.

Why? Because Obamacare’s arbitrary, across-the-board cuts in what Medicare pays for services will force a large portion of health care providers to stop seeing Medicare patients. When that occurs, Medicare would be insurance in name only, as the enrollees would have a terrible time actually getting the care they need.

Here’s how Foster puts it:

By the end of the long-range projection period, Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services would be less than half of their level under the prior law. Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems for Medicaid enrollees, and far below the levels paid by private health insurance. Well before that point, Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result....

For these reasons, the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range (as a result of the unsustainable reductions in physician payment rates) or the long range (because of the strong likelihood that the statutory reductions in price updates for most categories of Medicare provider services will not be viable). I encourage readers to review the “illustrative alternative” projections that are based on more sustainable assumptions for physician and other Medicare price updates. These projections are available at http://www.cms.gov/ActuarialStudies/Downloads/2011TRAlternativeScenario.pdf.

Unfortunately, the alternative scenario referenced by Foster in his statement does not yet appear to be available on the CMS website. When it is available, it will almost certainly resemble the alternative projection released at the time of last year’s trustees’ report, which effectively showed that, using realistic assumptions, Medicare’s finances are no better off now than they were before Obamacare was enacted.

Indeed, the program is actually far worse off now because of the shameless double-counting in Obamacare. The Medicare cuts — unrealistic as they are — were used to partially “pay for” massive new entitlement promises to 32 million more Americans. When the Medicare cuts inevitably melt away, the entitlement promises made to millions of other Americans will not. The result will be that the federal government will go even deeper into debt, making it that much harder to find a way meet future Medicare obligations.

Even before Obamacare was enacted, the nation’s most difficult long-term economic challenge was runaway entitlement spending. Obamacare is more gasoline on what’s already a raging fire. The law included no real reform of Medicare or Medicaid. It simply doubled down on the failed model of command-and-control payment rate reductions. Those have never worked before to make the programs sustainable, and they won’t work this time either.

[Cross-posted on Critical Condition]

posted by James C. Capretta | 5:41 pm
Tags: Medicare Trustees, Richard Foster, payment rate reductions
File As: Health Care