Medicare Trust Fund Is Still Running Out of Money -- Just Not as Soon As Previously Thought

June 2, 2013

1334532_ambulance.jpgOn May 31, 2013, the Boards of Trustees of The Federal Insurance and Federal Supplementary Medicare Insurance Trust Funds (Boards of Trustees) issued the most recent report (the "Report") on the financial condition of the U.S. Medicare Program. The Board of Trustees oversees the financial operations of the Medicare Part A and Supplementary Medical Insurance (SMI), which is Medicare Part B and D. The Social Security Act requires the Board of Trustees to report annually to the Congress on the financial status of the Medicare Program. The Report is 280 pages packed heavily with information and actuarial data analyzing the crippled patient, the U.S. Medicare Program, concluding that the Medicare Hospital Insurance Trust Fund will not run out of money until 2026, two years later than the last projection. The slightly improved forecast (from the prior report) is due apparently to slower growth in U.S. health care costs, according to current the Board's analysis.

But whether and when the Medicare Program will go broke is apparently not possible to determine with reasonable certainty. There are too many variables. The Board, comprising or advised by the best the best minds on the subject, have said as much. The Board concedes in the Report:

Projections of Medicare Costs are highly uncertain, especially when looking out more than several decades. One reason for the uncertainty is that scientific advances will make possible new interventions, procedures, and therapies. Some conditions that are untreatable today will be handled routinely in the future. Spurred by economic incentives, the institutions through which care is delivered will evolve, possibly becoming more efficient. While most health care technological advances to date have tended to increase expenditures, the health care landscape is shifting. No one knows whether these future developments will, on balance, increase or decrease costs.
The Report, p. 2.
The Report further indicates that the ACA "The ACA introduced even larger policy changes and projection uncertainty. . . . This legislation [the ACA] contains roughly 165 provisions affecting the Medicare program by reducing costs, increasing revenues, improving benefits, combating fraud and abuse, and initiating a major program of research and development to identify alternative provider payment mechanisms, health care delivery systems, and other changes intended to improve the quality of health care and reduce costs." Id.

All the uncertainty is disconcerting for patients and health care providers, the slightly improved Medicare budget outlook notwithstanding. This is because essential health care reform is in many ways dependent upon finding viable solutions to the high cost of Medicare. The U.S. Medicare and Social Security pension programs are the two largest expenditures in the U.S. Budget and together account for about one-third of all federal expenditures. According to Reuters, the Report "will feed into bitter arguments between Democrats and Republicans over how to reform the programs to keep them solvent and able to support the needs of the massive Baby Boom generation that is now starting to retire." The ACA will continue to fuel political acrimony and debate in anticipation of the 2014 mid-term elections as both political parties try to seize advantages and avoid blame in the inevitable wrangling over a critical, highly sensitive and potentially disastrous financial problem for the United States: it cannot afford the cost of the Medicare benefits that voters still think of as an entitlement. U.S. voters cannot (so far) say "no" to consumption of health care because they believe someone else (the government, an employer, an insurer) should have to pay for it. The cost of health care consumption thus continues to go up.

For physicians, wanting to practice medicine happily, the extreme pressure mounting to reduce Medicare costs is just more bad news. The Report anticipates further "physician fee reductions" as a cost-saving measure. Id. at 5. And, because large private payers tend to follow the lead of Medicare with regard to reimbursement rates and billing protocol, the entire third-party payer system will be impacted by what Medicare does. The overall effect tends to be more red tape, more rules, more impositions upon medical judgment, less money for doctors and, ultimately, less access to care for patients. Beyond frustrated, increasingly physicians are looking for new ways to practice medicine other than through the third party payer system. The continuing uncertainty in the health care arena and talk of cutting physician fees has incentivized doctors to consider new alternatives, such as concierge practices and some old ones, such as hospital employment.

The Law Offices of Kevin S. Little PC is a business law and health care law firm focused on advising and advocating for health care businesses. We have offices in midtown Atlanta (404-685-1662) and downtown Augusta, Georgia (706-722-7886).
Source: Board of Trustees Report [http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2013.pdf]

Source: The Board of Trustees' Report

*Disclaimer: Thoughts shared here do not constitute legal advice.