The Future of Medicare

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According to the Kaiser Family Foundation, “Financing care for future generations is perhaps the greatest challenge facing Medicare, due to sustained increases in health care costs, the aging of the U.S. population, and the declining ratio of workers to beneficiaries.”  From 2010 to 2030, the number of people on Medicare is projected to increase from 47 million to 78 million.  Additionally, Part A Medicare Hospital Insurance Fund will be unable to pay full benefits starting in 2019.

Affordable Care Act

The March 2010 health care reform law, the Patient Protection and Affordable Care Act, “expands prescription drug and prevention benefits covered under Medicare and introduces new programs designed to improve the quality and delivery of care to people covered by Medicare… and includes other provisions designed to slow the growth of Medicare spending and strengthen the solvency of the Medicare Hospital insurance Trust Fund.” (KFF).

The law is said to reduce the average annual growth rate of Medicare spending from 6.8 percent to 5.5 percent from 2010 to 2019.  This reduced spending is said to result from three provisions.  The first provision will stop Medicare from paying substantially more to Medicare Advantage beneficiaries than to traditional fee-for-service beneficiaries.  The second provision will reduce the annual payment increases to health providers.  The third provision will attempt to reform the healthcare delivery system, such as reducing unnecessary hospital readmissions and hospital-acquired infections.  Additionally, an Independent Payment Advisory Board was established to recommend methods to reduce Medicare spending. (KFF).

The whitehouse.gov blog posted answers to Medicare questions on June 11, 2010.  As a response to questions of Medicare’s solvency, the writers point to the Affordable Care Act and its role in strengthening Medicare financially.  “Over the next 20 years, Medicare spending will grow at a slower rate as a result of rooting out waste, fraud, and abuse.  This will extend the life of the Medicare Trust Fund by 12 years and provide cost savings to Medicare beneficiaries.”  The Affordable Care Act will allegedly be paid fully by reducing waste, fraud, and abuse, and with health care reforms.  The White House says that this law will reduce the deficit by $100 billion over the next ten years.

The blog continues by saying that the Affordable Care Act “builds upon our existing system” of health care.  It also allows States “the option of pursuing their own reform plans, including running exchanges, adopting delivery system reform in Medicaid, and working with local providers to test innovative ideas through the Medicare and Medicaid Center for Innovation.”

The Office of Management and Budget (OMB) is largely in favor of the Affordable Care Act.  They say “there should be no ambiguity about whether we face unsustainably large deficits over the medium- and long-term.  We do.”  The Affordable Care Act, they argue, will “reduce the deficit by more than $100 billion over the next ten years and more than $1 trillion in the ten years after that.” However, they say the “CBO produces its estimates based on what has happened in the past, and we have never enacted such a fundamental transformation.”  Whether or not more action will need to be taken to lessen the deficit after this Act is debated.

AARP

The AARP supports the Affordable Care Act and “can say with confidence that it meets [the twin goals of making coverage affordable to younger members and protecting Medicare for seniors] with improved benefits for people in Medicare and needed health insurance market reforms to help ensure every American can purchase affordable health coverage.”

American Medical Association

AMA President J. James Rohack, M.D. wrote a letter to the Senate on March 5, 2010 to permanently repeal the broken Medicare physician payment formula.  He says the AMA “cannot support proposals that aim to address only the most imminent threat to payment levels and patient access, with no regard for the future of the Medicare and TRICARE programs.  We are opposed to further short-term patches of any duration.”  He continues by saying “the proposed 21 percent cut and the continued instability in the system will force [physicians] to limit the number of Medicare patients they can treat, reduce staff and make other tough practice decisions.”

The Heritage Foundation

James Capretta, former OMB Associate Director and current writer at The Heritage Foundation, warns of lower quality and higher costing healthcare with this new law, along with the impact on future generations.  The law is expected to bring 34 million people onto the federal entitlement rolls by 2017, and the Congressional Budget Office says by 2019 “the cost of these ‘coverage’ provisions is likely to escalate very rapidly and in line with the rising costs of existing health entitlement programs, including Medicare.”

Capretta cautions that the CBO’s estimates of national debt are inaccurate.  He names Medicare cuts as one of the reasons for increased spending.  He says “CBO and the Chief Actuary for the Medicare program have both stated that Medicare spending cuts cannot be counted twice—to pay for a new entitlement expansion and to claim that Medicare’s financial outlook has improved.  But that is exactly what the proponents of the new legislation do.  If Medicare cuts and tax hikes for the hospital trust fund (about $400 billion over 10 years, according to CBO) are used solely to improve the capacity of the government to pay future Medicare claims, then the health law becomes a massive exercise in deficit spending.”

Cost

As for the real cost of this Medicare, no one can say with certainty what it will be.  The CBO’s initial Medicare prediction in 1965 was $9 billion.  In reality it was more than 10 times that amount.  The government’s predictions cannot necessarily be trusted because no one can predict the extent of Medicare.  Healthy people live longer, thus requiring more years of Medicare.  The only thing that can be said for certain is that it will be limited by money:  there is only so much money to go around, so Medicare will be “rationed” in some way.

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