Medicare, Medicaid may double? Provider cuts likely
Latest budget, reform projections just add to anxiety
Updated budget projections and health reform law estimates from the nonpartisan Congressional Budget Office gave already-anxious providers more to worry about, economic analysts said last week.
Sandwiched between the president’s fiscal 2013 budget in February and the House Republican budget blueprint that’s expected this week, the CBO on March 13 released updated baseline projections that estimate the cost of Medicare will nearly double to $1.06 trillion in 2022 from $565.3 billion in year 2011.
The estimates include a $7 billion reduction in projected Medicare spending between 2013 and 2022 because of a $107 billion reduction in projected spending for prescription-drug benefits under Medicare part D. That reflects an “increase in the number of high-volume drugs with generic substitutes available and changes in drug utilization,” largely offset by increases in projected spending for benefits in parts A and D.
Medicaid, meanwhile, is expected to rise to $622 billion in 2022 from $275 billion in 2011. Overall, the report noted that the increases in federal healthcare programs will incur about $93 billion more than the $1.1 trillion in debt for 2012 that the CBO estimated in January.
“They project Medicaid outlays to go up $143 billion,” said Tom Miller, resident fellow at the American Enterprise Institute, a think tank in Washington. “The reason why Medicaid is up is because of a more pessimistic outlook: There are going to be more low-income people and
less people getting employer coverage.”
As a result, hospitals “can’t be too positive” by having more of their patients being covered by Medicaid than before, he said.
Days after releasing projections, the Cbo—along with the nonpartisan congressional Joint Committee on Taxation—offered estimates on the effects of the Patient Protection and Affordable Care Act on people with employer-based health insurance. The agencies estimated that 3 million to 5 million fewer people each year will obtain coverage from their employer from 2019 through 2022. Earlier, the CBO and JCT had estimated the number of people receiving coverage through their employer would be about 3 million lower in 2019 under previous law.
The report also laid out four models that reflected alternative assumptions about employers’ behavior. In one scenario, the two agencies estimated that the Affordable Care Act would reduce employment-based insurance coverage in 2019 by 20 million people, compared with 5 million in the baseline projections.
The pivot point will come in 2014, when a new market emerges that could change depending on how people react to it, Miller said.
James Capretta, a fellow at the Ethics and Public Policy Institute in Washington, said a new market could lead to “sorting” from employers to make the most of tax subsidies. Then low-wage workers would end up with coverage in the exchanges, while higher-wage earners would stay in tax-deferred plans from their employers.
For providers, the looming cloud in the budget-conscious environment is a familiar one: The threat of more cuts in reimbursement.
“The guaranteed way to hit a budget target is provider payment reductions,” Capretta said. “On paper, using Cbo-type estimates, if you’re trying to save a few hundred billion in health spending, the surest, easiest way to get there is provider cuts.”