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Medicare trust fund projected to run dry by 2024
  May 16, 2011 | Chris Anderson, Senior Editor
WASHINGTON - The Medicare Trustees Report has projected that Medicare's Hospital Insurance Fund will run out of money in 2024, five years earlier than the trustees projected in last year's annual report.
President Barack Obama's administration, looking for the silver lining in the report, said that while there is work to be done to ensure the fund's solvency, the HI Trust Fund would have run dry in 2016 without the reforms contained in the Patient Protection and Affordable Care act - an additional eight years of solvency.
[See also: Medicare trustees: Trust fund solvent through 2029; Medicare solvency: A matter of opinion?] see below
"This report shows that without the Affordable Care Act, the outlook for the Hospital Insurance Trust Fund today would be much worse," said Donald Berwick, MD, administrator of the Centers for Medicare & Medicaid Services. "CMS is implementing critical reforms to improve care and reduce costs and improve the overall health of Medicare's beneficiaries and the trust fund."
While administration officials focus on maintaining solvency, others point out that it's equally important to preserve the value of the program without shifting some of the cost burden to seniors.
"We must remember that preserving Medicare means not only maintaining the solvency of the trust fund, but also maintaining the value of the benefit and the financial and health protections the program provides to the people it serves," said Joe Baker, president of the Medicare Rights Center. "Half of people with Medicare live on incomes below $20,000 per year."
According to the report, HI Trust Fund expenditures have exceeded income annually since 2008 and are projected to continue doing so under current law in all future years. The trust fund has relied on interest earnings and asset redemption to meet the deficit. In 2010, Medicare tapped the trust fund for more than $32 billion to make up for the shortfall.
At current rates of spending and cost growth, HI Trust Fund assets are projected to cover annual deficits through 2023, with asset depletion beginning in 2024.
The trustees report noted the five-year change from last year's report is due to the slowdown of the national economy, which caused tax revenues to decline and combined with higher-than-expected costs. The report pointed out that projecting earlier depletion dates from a previous report is not an uncommon occurrence. A seven-year-shorter projection was reported in 2004 due to similar economic conditions.
Not surprisingly, various groups jumped on the announcement to make political points.
J. James Rohack, MD, immediate past president of the American Medical Association, used the Trustees Report to hammer home the need to do away with the current Medicare physician payment formula, called the sustainable growth rate - or SGR - in favor of a more lasting payment formula.
[See also: House committee asks doctors for ideas on fixing SGR] below
"Physicians who care for Medicare patients form the foundation of this critical program, and the Trustees confirmed today that they face a steep payment cut of nearly 30 percent on January 1," Rohack said. "This cut is the highest ever scheduled under the broken Medicare physician payment system, and it threatens access to care for our nation's seniors, military families, people with disabilities and the baby boomers now entering Medicare. The longer it takes to reform this system, the greater the cost."
The trustees' projection didn't take into account any adjustment to the physician pament formula currently on the books and includes the anticipated payment cut of 29 percent to take effect Jan. 1, 2012.
But Baker noted payment formulas and asset depletion dates aren't at the heart of the problem.
"The problem is growing costs in the healthcare sector overall, and shifting costs from one party to another does nothing to address this issue," he said. "The ACA achieves savings without cutting benefits or increasing consumer costs, through promoting prevention, paying for quality over quantity, and improving care coordination that can help people with Medicare, including those with multiple chronic conditions, stay healthier. It is solutions like these that we must support to make Medicare stronger."
Medicare trustees: Trust fund solvent through 2029
August 06, 2010 | Chris Anderson, Senior Editor
WASHINGTON - Health and Human Services Secretary Kathleen Sebelius announced Thursday that Medicare will remain solvent through 2029.
The annual Medicare Trustees' Report shows an extension of 12 years from projections last summer which indicated solvency through 2017.
Flanked by Treasury Secretary and Managing Trustee Tim Geithner, Labor Secretary and Trustee Hilda Solis and Commissioner of Social Security and Trustee Michael J. Astrue at a press conference, Sebelius said the rosier outlook is the result of the landmark Affordable Care Act (ACA), passed earlier this year, as was well as other reforms in Medicare designed to reduce costs and ferret out fraud.
"We are committed to delivering the kinds of reforms to help increase quality and lower costs through our new CMS Innovation Center and quality reforms," said Sebelius. "In addition to the provisions of the new law cited in this report that will help make Medicare stronger, there are other important reforms going into effect that will help bring down costs and reduce fraud and waste in the system."
According to the report, the largest amount of projected savings under the Affordable Care Act comes from lower annual increases in the prices Medicare pays for services by hospitals, skilled nursing facilities, home health agencies and most other providers. It also projects lower payments to private Medicare Advantage health plans.
In addition, the program will benefit from a slight increase in revenue as a result of an increase of 0.9 percent of single taxpayers earning higher than $200,000 and married couplkes earling higher than $250,000, which directly benefits the Medicare Hospital Insurance Trust Fund. Since these earning levels are not indexed, an increase in the number of taxpayers affected by this additional payroll tax is expected over time.
According to information from the Centers for Medicare & Medicaid Services, Medicare provided health insurance coverage to 46.3 million people in 2009. Total Medicare expenditures were $509 billion and income was $508 billion, with expenditures slightly lower than projected in last year's report.
The new outlook compared with last year - when the trust fund was projected to run dry in 2017 - is largely based on revised estimates of projected cost increases. CMS currently projects costs to increase by 6.4 percent of the Gross Domestic Product by the end of the long-range, 75-year projection period. Last year, those costs were projected to increase steadily (and rapidly) to more than 11 percent of the GDP in 2084.
In praising the new report, new CMS Administrator Donald Berwick also offered a note of caution.
"These favorable changes depend critically on a specific ACA provision, which will slow the rate of growth in Medicare payments to most categories of providers by about 1.1 percent annually in anticipation of improvement in productivity," he said. "It is important to note that the effect of these adjustments will reduce payment rates over time, and it is possible that providers would not be able to slow their cost growth correspondingly."
That said, Berwick noted his experience as a physician leads him to believe these results are achievable.
"I have seen firsthand the substantial improvements in quality and cost-effectiveness that can be achieved by healthcare providers," he said. "As a result of this provision, providers will have strong financial incentives and many other supports to find more efficient ways to care for patients that not only reduce costs but more importantly improve quality."
House committee asks doctors for ideas on fixing SGR
April 01, 2011 | Stephanie Bouchard, Associate Editor
WASHINGTON - The House Energy and Commerce Committee is seeking feedback from 51 medical associations on how to fix the Sustainable Growth Rate - the formula used by the Centers for Medicare and Medicaid Services to control Medicare payments to physicians.
A letter from the committee points out that the need to fix the SGR is considerable, since doctors are facing a 29 percent payment reduction in 2012 and costs to abandon the formula are estimated to be as high as $300 billion.
Congress has passed several temporary fixes since 2002 to delay reductions in physician payment, but such overrides are not sustainable, the letter says. With a lack on consensus on how to fix the Medicare physician payment schedule, the committee is seeking ideas that would translate into legislation.
"For too long, Congress has failed to address the outdated physician payment system. Each time Congress delays action, the costs to taxpayers and providers increase," said Committee Chairman Fred Upton (R-Mich.) in a press release. "The committee is committed to working together to implement a permanent, sustainable solution this year that lessens taxpayers' burden and ensures providers have the resources they need to provide quality care to patients."
The House Energy and Commerce Committee plans to hold a hearing on the SGR problem in May and is soliciting "specific ideas and proposals from physician organizations and the provider community on how to reform the physician payment system and move to a system that reduces spending, pays providers fairly and pays for services according to their value to the beneficiary." Ideas will be accepted through the end of April.
"We are pleased that the Energy and Commerce Committee has reached out to a variety of stakeholders, including hospitals, for comments and look forward to working together to find solutions," said Matt Fenwick, a spokesman for the American Hospital Association.
"We know that the physician payment formula is broken and we have long supported a replacement," Fenwick said. "The fix should be done in a manner that does not result in reduced payments to other providers. Lacking a permanent solution, legislation should be enacted to prevent the cuts to physicians scheduled to begin Jan. 1, 2012, with sufficient planning time so as to not impact beneficiary access to care."
"We're pleased that the Energy and Commerce Committee and its Subcommittee on Health has asked physician groups to comment on the SGR Medicare payment issue," Roland Goertz, MD, president of the American Academy of Family Physicians says. "Gathering input from those in the field who actually deal with the process is important. The AAFP will respond and suggest an increased emphasis on primary care payments in an attempt to further the development of the patient centered medical home model of care delivery, a model that has shown in study after study, the ability to decrease health care costs while delivering the highest quality of care to patients."
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