A breather for Medi­care

Trust Fund’s sol­vency ex­tended by two years

Modern Healthcare - - LATE NEWS - Rich Daly

Medi­care’s hos­pi­tal trust fund gained two years of sol­vency in the lat­est fed­eral pro­jec­tions, but it is not clear why. Fri­day’s an­nual re­port of the So­cial Se­cu­rity and Medi­care trus­tees de­layed the bad news for the Hos­pi­tal In­sur­ance Trust Fund to 2026, two years later than they ex­pected last year.

The change was cred­ited to lower-thanex­pected growth in Medi­care ex­penses, in­clud­ing lower bids from Medi­care Ad­van­tage in­sur­ers and less use of skilled-nurs­ing fa­cil­i­ties last year.

The greater-thank-ex­pected Medi­care Ad­van­tage sav­ings stemmed from pro­vi­sions of the Pa­tient Pro­tec­tion and Af­ford­able Care Act.

Re­duced spend­ing on skilled-nurs­ing fa­cil­i­ties pro­vided the “vast ma­jor­ity” of the $3.6 bil­lion drop in what the trust fund paid out in 2012 com­pared with last year’s pro­jec­tion, said a se­nior ad­min­is­tra­tion of­fi­cial speak­ing on con­di­tion of anonymity.

But the White House could not ex­plain the de­cline in uti­liza­tion. Among the pos­si­ble rea­sons are that hos­pi­tals are re­tain­ing pa­tients longer or dis­charg­ing pa­tients di­rectly into the com­mu­nity, said Juli­ette Cuban­ski, a pol­icy an­a­lyst at the Kaiser Fam­ily Foun­da­tion. “Or it could be a one-year sta­tis­ti­cal anom­aly that we won’t see again,” she said.

Ad­min­is­tra­tion lead­ers, though, fo­cused on the por­tion of the lower costs at­trib­uted to the Af­ford­able Care Act—prin­ci­pally an ex­pec­ta­tion of lower fu­ture Medi­care Ad­van­tage bids.

“This con­firms that the Af­ford­able Care Act con­tin­ues to strengthen Medi­care,” HHS Sec­re­tary Kath­leen Se­be­lius said at a Fri­day news con­fer­ence.

Robert Reis­chauer, a Medi­care trustee, said the ex­tended sol­vency of Medi­care made him “cau­tiously op­ti­mistic” about its fu­ture. He warned, how­ever, that ma­jor chal­lenges re­main in es­tab­lish­ing the pro­gram’s longterm sus­tain­abil­ity.

“That’s not to say that the Af­ford­able Care Act has not had a sig­nif­i­cant im­pact and that im­pact will grow over time,” Reis­chauer said.

Re­duced tax re­ceipts in 2012 par­tially off­set the lower growth es­ti­mates.

The re­port con­cluded that the trust fund’s costs will be­gin ex­ceed­ing its in­come be­gin­ning in 2021, with the re­serves de­pleted five years later. By 2026, the fund would only cover 87% of ex­pected hos­pi­tal charges and drop to 73% by 2087.

Even with the new im­prove­ments in pro­jec­tions for the hos­pi­tal fund, its long-term out­look re­mained dark. Medi­care’s hos­pi­tal in­sur­ance trust fund has a long-range ac­tu­ar­ial deficit equal to 1.11% of tax­able pay­roll, com­pared with the 1.35% fig­ure re­ported in 2012.

Other no­table pro­vi­sions of the re­port in­cluded an ex­pec­ta­tion that cuts by the In­de­pen­dent Pay­ment Ad­vi­sory Board are un­likely to be trig­gered be­fore 2017, due to Medi­care cost growth that is slower than the over­all econ­omy.

In 2012, Medi­care cov­ered 50.7 mil­lion peo­ple—up from 48.7 mil­lion the pre­vi­ous year—in­clud­ing about 42 mil­lion aged 65 and older and 8.5 mil­lion Amer­i­cans with dis­abil­i­ties. Ex­pen­di­tures for the pro­gram in 2012 to­taled $574.2 bil­lion, which was up from $549.1 bil­lion in 2011.

The trus­tees’ re­port showed that Medi­care’s sup­ple­men­tal in­sur­ance fund—which cov­ers parts B and D—re­mains ad­e­quately fi­nanced into the in­def­i­nite fu­ture. But that is due to the au­to­matic pro­vi­sion of gen­eral rev­enue funds to cover any cost growth. The cost growth of those funds is ac­cel­er­at­ing, the trus­tees noted, from 2% of GDP in 2012 to 3.3% of GDP by 2035.

Some of the pro­jec­tions rest on ques­tion­able as­sump­tions. For in­stance, the Part B pro­jec­tions as­sume that a nearly 25% cut in Medi­care physi­cian fees will oc­cur in 2014. But Wash­ing­ton pol­i­cy­mak­ers broadly as­sume those cuts will be elim­i­nated or de­layed, as Congress has done re­peat­edly since 2003.

The trus­tees fo­cused an un­usual amount of at­ten­tion on Medi­care physi­cian pay­ment. That may por­tend move­ment this year on leg­is­la­tion to re­place the much-ma­ligned cost con­tain­ment for­mula used by Medi­care, Cuban­ski said.

It also re­mains un­clear whether var­i­ous Af­ford­able Care Act mea­sures the trus­tees re­lied on will oc­cur, par­tic­u­larly pro­duc­tiv­ity ad­just­ments.

In April, the CMS re­placed a planned 2% cut in Medi­care Ad­van­tage in­surer rates with a 3% in­crease. The re­ver­sal came af­ter in­sur­ers and their al­lies in Congress brought enor­mous pres­sure to bear on the CMS.

“Given those un­cer­tain­ties, fu­ture Medi­care costs could be sub­stan­tially higher than shown in the trus­tees cur­rent-law pro­jec­tion,” the re­port stated.


Sec­re­tary of the Trea­sury Ja­cob Lew, left, Pub­lic Trustee Robert Reis­chauer and HHS Sec­re­tary Kath­leen Se­be­lius at­tend a news con­fer­ence last week on Medi­care trust funds.

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