Medicare trustees


The 2013 Medicare Trustees’ Report

Last Friday, the Medicare trustees released their annual report on the state of Medicare’s finances. And, yesterday, the American Enterprise Institute held its annual event on the report, moderated by AEI’s Joe Antos.  The session always features a presentation on the report’s main findings by a representative from the office of the actuary that prepares the report. For many years, that task fell to long-serving chief actuary Richard Foster, but Mr. Foster retired earlier this year after a distinguished career. So, yesterday, Paul Spitalnic, the acting chief actuary for Medicare, performed the duty for the first time, and did so admirably.

The rest of the session featured comments on the state of health care costs and Medicare by Mark Pauly of the University of Pennsylvania, Chapin White of the Center for Studying Health System Change, and myself, followed by a question and answer session with the audience.

Video of the entire AEI event can be viewed here. In addition, the slides that I used for my presentation are available at the bottom of the same event page.

posted by James C. Capretta | 3:30 pm
Tags: Medicare, Medicare trustees
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Obamacare and the New Medicare Trustees’ Report

The Medicare Trustees released their annual report on the state of the Medicare trust fund last Friday, and, not surprisingly, Obamacare supporters are already pointing to the report’s findings as evidence that the law is working. Such claims are nonsense, as I argue in a short post on National Review Online.

For starters, Medicare’s unfunded liability remains staggering — a full $43 trillion over the infinite horizon. That’s nearly $7 trillion more than the 2010 report.

Moreover, as was the case in every report from 2010 onward, Medicare’s actuaries have again told us that the real state of Medicare’s financial outlook is far worse than the official projections indicate. That’s because the cuts to Medicare contained in Obamacare are so irrational and blunt that they will almost certainly be reversed. Most especially, the actuaries expect the so-called “productivity improvement factor” will be reversed because of the damage it will do to access to care for seniors. That would be the provision in Obamacare that reduces the inflation update for most non-physician providers of services, especially hospitals. The cuts begin this year and continue every year, in perpetuity. If they are allowed to stand, they will push reimbursement rates for hospitals to levels that are so low they’ll fall below what Medicaid pays by the end of this decade. Medicaid’s rates, meanwhile, are so far below what private insurance pays that the network of hospitals willing to take large numbers of Medicaid patients is quite constrained. The actuaries expect that, by 2030, the cuts would push revenue for 25 percent of the nation’s hospitals below their total costs, leading many of them to withdraw from the Medicare program entirely.

You can read the rest of the post here.

posted by James C. Capretta | 12:06 pm
Tags: Medicare Trustees, Obamacare
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The Medicare Trustees’ Report and the $8.1 Trillion Double Count

I have a new post up at the Weekly Standard blog on the recently released 2012 Medicare and Social Security trustees’ reports:

The other important story with respect to Medicare’s finances isn’t covered at all in the trustees’ report.... That’s the double counting of Medicare tax hikes and spending cuts in the Obamacare legislation.

Earlier this month, Chuck Blahous, one of two public trustees for the Medicare program, brought renewed attention to this subject when he released a paper documenting the double count and quantifying its impact on the federal budget. According to Blahous, when cost estimates are adjusted to remove the effects of double counted Medicare “savings” provisions, Obamacare increases the deficit by as much as $530 billion over ten years....

You can read the rest of post here, and see the trustees’ reports here and here.

posted by James C. Capretta | 11:15 am
Tags: Medicare, double-count, Medicare Trustees
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Discussing Medicare

Yesterday, I had the pleasure of participating in a forum at the American Enterprise Institute entitled “The Future of Medicare: A Reality Check.” The session focused on the 2012 Medicare Trustees’ Report and began with a presentation from Richard Foster, the Chief Actuary of the Medicare program. I was joined on the panel by Norm Ornstein of AEI, Bob Reischauer of the Urban Institute, Gail Wilensky of Project Hope, and Wendell Primus, who is a senior advisor to House Minority Leader Nancy Pelosi. (The event video can be found here).

I focused my comments on what I called the $8.1 trillion Medicare double count in Obamacare (the subject of my most recent blog post).  My remarks precipitated a mini-debate with Wendell Primus over the issue; in the video linked above, that part of the session begins at about the fifty-minute mark.

Our panel was preceded by remarks from Senators Tom Coburn and Richard Burr on their Medicare reform legislation.

posted by James C. Capretta | 5:33 pm
Tags: Medicare, double-count, Medicare Trustees, Richard Foster, Robert Resichauer, Wendell Primus
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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