A Medicare Update
Fifty-five million Americans rely on Medicare for their health insurance. Most of these people are elderly, although not all. Medicare’s healthcare bill came to $710 billion in 2017.
Medicare is in the teeth of the Baby Boomer surge right now, so can the federal government pay for Medicare over the next 20 years of rising retirements?
The answer, according to the Trustee’s report, is yes but only if taxpayers are prepared to pay the freight once the Medicare Trust Fund is shut down.
Predicting Healthcare’s Future
The analysts who wrote the Trustee’s report predict that Medicare spending will rise to somewhere between 6.2-8.9% of the economy. Add in Social Security and retiree support will be the single largest federal expenditure.
The Trustee’s gave some scenarios and then urged Congress to pass legislation to ease the looming financial problem.
To help get Congress off its duff, the Trustees presented an alternative view of the future—which they termed the “more realistic ‘illustrative alternative.’”
As explained in the Trustee’s report, the illustrative alternative:
- reduces provider payments by healthcare-specific rather than overall productivity
- moves from current law to the Medicare economic index (MEI) to adjust physician payments
- assumes physician bonuses will continue indefinitely after 2025
Notably, the report pointed out that 34% of Medicare beneficiaries are enrolled in Medicare Part C (aka Medicare Advantage), which is Medicare’s managed care alternative.
Paying Doctors
Recall that physicians who accept Medicare patients were faced with an annual reduction in pay under the sustainable growth rate (SGR) provision but that the SGR was annually deferred by Congress until, finally, the Medicare Access and CHIP Reauthorization Act of 2015 killed the SGR entirely.
That helped the doctors but eroded Medicare’s long-term solvency prospects.
The Trustee’s report goes on to say, “In particular, additional payments of $500 million per year for one group of physicians and 5-percent annual bonuses for another group are scheduled to expire in 2025, resulting in a significant onetime payment reduction for most physicians. In addition, the law specifies the physician payment update amounts for all years in the future, and these amounts do not vary based on underlying economic conditions, nor are they expected to keep pace with the average rate of physician cost increases.”
The Trustee’s forecast did include doctor payment rate reductions, but those won’t happen.
Furthermore, the ACA did mandate that provider reimbursement rates be reduced according to a fairly complicated formula based on the growth in economy-wide private nonfarm business multifactor productivity.
But with the Trump’s administration’s determined attacks on the ACA, that’s also probably off the table.
So, CMS is angling for some new rules, or just let the chips fall where they may.
