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  • Medicare Trustees to America: A Bleak Future Without Real Reform

    On September 8, 2011—well after the enactment of Obamacare—President Obama told Congress: “Millions of Americans rely on Medicare in their retirement. And millions more will do so in the future.… But with an aging population and rising health care costs, we are spending too fast to sustain the program. And if we don’t gradually reform the system while protecting current seniors, it won’t be there when future retirees need it.” The just released 2012 Medicare Trustees report reinforces the need for serious reform. But seniors and taxpayers alike should keep three things in mind:

    1. The short-term outlook of the Hospital Insurance (HI) Trust Fund says nothing about the long-term financial challenge posed by the Medicare program. HI Trust fund insolvency, focused only on hospital payments, is only one marker of Medicare’s fiscal health. The 2012 trustees report says that the HI program, financed almost entirely by payroll taxes, will remain solvent until 2024, the same target date for insolvency as stated in last year’s report. Since 2008, HI expenditures have exceeded income. If the HI fund is exhausted, it cannot pay for seniors’ hospital benefits. Some higher costs for Part A have been offset by the 2 percent reduction in Medicare expenditures are a result of the Budget Control Act of 2011. However, the likelihood of these cuts starting in 2013 as scheduled is problematic given the history of overriding prior cuts, such as the Sustainable Growth Rate (SGR), which would theoretically cut the payment to Medicare doctors by 30 percent in 2013. However, Congress has always overridden the scheduled SGR reduction in the past.

    But the central fiscal challenge facing Medicare is not the HI Trust Fund; it is the dramatic growth in Medicare spending and the accumulation of massive debt. In 2011, the Medicare Actuary projected long-term debt at approximately $37 trillion. The 2012 report states that bringing Medicare Part A into actuarial balance would require an immediate 47 percent increase in the payroll tax or a 26 percent cut in Part A benefits. The status quo is a path that is unsustainable and guarantees a Medicare crisis in the not so distant future.

    2. The President’s Medicare agenda will not solve Medicare’s central problems. While Obamacare will impose record-breaking payment reductions on providers, yielding $575 billion in savings in the initial 10 years of the law, this blunt strategy guarantees either access problems for seniors or failure to control costs.

    Recall that the Medicare Actuary initially projected that the scheduled hundreds of billions of dollars in provider payment cuts would drive 15 percent of Medicare providers into the red and that reimbursement rates will start to dip below Medicaid levels by 2019. Later, the Actuary confirmed that Obamacare’s cuts would mean that by 2030, Medicare providers would be operating at a loss. Under his newly created Independent Payment Advisory Board, the President would ratchet down Medicare payments to medical professionals even more.

    Benefit guarantees on paper do not equal access to real care. Provider payment cut strategies will reduce access to care if there is a scarcity of providers able to absorb the shock of continually lower payments. If seniors want to know what this strategy looks like in practice, they should check out Medicaid: Enrollees on Medicaid have a hard time finding providers to care for them and suffer as a result. The Medicare trustees believe that Medicare providers will be forced to reach “the achievement of unprecedented improvements in health care provider productivity” or Medicare reimbursements will fall far below private sector and even Medicaid.

    Under Obamacare, seniors face a no-win situation. If the Administration’s crude strategy of payment cuts is successful, reduced access to care for seniors is virtually guaranteed. If the provider cuts are reversed, the Medicare financial condition simply worsens. In their analysis of the impact of Obamacare, both the Congressional Budget Office and the Medicare Actuary have formally stated that the President’s payment reduction strategy is either politically difficult to sustain or unrealistic. Already, the Administration has resorted to using $8 billion in demonstration funds to undo the scheduled payment cuts to Medicare Advantage in 2012 and 2013.

    For the third year in a row, the actuaries of Medicare believe that the provider cuts in Obamacare are unsustainable. The true state of Medicare finances are more accurately reported in the alternative trustees’ report. The true cost of Medicare is over 50 percent higher than current law at the end of the 75-year window because the productivity and SGR cuts to doctors are not sustainable either in policy or in political reality.

    3. Expanding real competition is the only sound solution to Medicare’s deepening problems. Given the magnitude of the Medicare challenge, there are only three broad options available to policymakers:

    1. Raise general or payroll taxes to cover the rapidly rising costs of the Medicare program. This would mean levels of taxation for all Americans unlike they have ever seen, reducing disposable income for younger families, small businesses, and capital investment.
    2. Double down on failed provider payment cuts with the certain knowledge that ever deeper provider payment cuts will make it increasingly difficult for doctors, hospitals and other medical professionals to continue to offer the level or quality of care that seniors are getting today. It also means that the practice environment for physicians will worsen, aggravating the already dangerous physician shortage that baby boomers are facing.
    3. Build upon the defined-contribution (premium support) programs that already exist in Medicare Part D and the Federal Employees Health Benefits Program.

    Injecting intense competition into the financing and delivery of care, based on the experience of both programs, means that Medicare will have a better future: expanding access to plans, providers, and benefits while controlling costs. In the Heritage fiscal reform proposal Saving the American Dream, the Medicare premium support program would both enhance the solvency of the Medicare program and achieve a balanced budget in 10 years, maintaining that balance indefinitely. In contrast, the President’s proposed budget would never get to balance, and the Medicare program would deteriorate.

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    8 Responses to Medicare Trustees to America: A Bleak Future Without Real Reform

    1. emilybarajas says:

      I have a thirteen year old girl, and honest to god every day I wake up I am thankful that I have an incredible insurance policy that pays for my medical insurance. I found insurance from "Penny Health" website and it doesn’t pay 100% on everything, but when I receive the bill and find out just how much I would have had to pay had I not been insured I realize that there is no way in the world that I could have afforded kind of care without it.

    2. Pingback: Medicare Trustees to America: A Bleak Future Without Real Reform

    3. Fedup says:

      Yes – Medicare part D. I get several medications a month. Exactly ONE – let me repeat – ONE has about 4-8 dollars contributed by Part D. Of all the others, I pay the total amount. Sure this plan works wonders for the government. Everyone I know, including myself, has had to drop all their medications (because who can afford $100+ copay! per modern med) except basic generic, but still pays an annually-rising premium every month. So the government gets premiums from everybody forced into this plan and pays next to NOTHING out. Yes, I guess only our government would call that a "success".

      • Bobbie says:

        Be careful Fedup! A lot of what's going on is over medicating. My father in law is on 17 + pills. Most of them to combat other ones. It's sad and scary. He was employed through government so his is probably free but it seems a bit concerning to be on 17 pills and nothing is making him better. I have a condition for many many years and is rarer today than ever. My doctor wants me to go to these government mandated make work classes that don't teach me anything I don't already know through my own experiences. I went once. It is without benefit. It just took away what the doctor himself was there for and tripled the costs.

        Because I'm a paying customer they want me to comply without a choice. Afford ability isn't THEIR ISSUE! I conduct my own research and develop my own resources but the abuse of government authority is interfering! My choice is live and die without government controlled impositions! Amongst other drugs administered, I'm on ONE pill that I wasn't told but came to find out, caused dependency. If I stop taking I'll have a heart attack. TRAP! A very similar thing happened to my mother in the 90's. I'd rather have done without the pill to learn to deal with it on my own and if that means death then it's my time! Doctors influenced by government do not give thorough details anymore and government intrusion looking for ways to make a buck is only helping government, while killing us.

    4. will says:

      For Medicare to exist as anything like what we have today major funding adjustments will be necessary. This will include vastly higher premiums, higher deductibles and higher copays. The same folks who are being targeted by the current class warfare will be the ones who will make these substantial contributions to keep Medicare afloat. The same people will need to "save" Social Security… but in this case these folks may also be means tested into significantly reduced benefits. Wouldn't it make sense to figure out how much money we are going to need to save the entitlements for the most vulnerable before we tap out the only funding source we have with tax increases to fund the Administration's current"vote for us" wish list?

    5. The Obama Care law ignores and tort reform or malpractice issues forced on doctors, hospitals, Pharma or other providers. Regardless of death panel edicts, trial lawyers will still be waiting to pounce down with nuisance law suits and continue to drive costs up. Obama care is an oxymoron and only benefits the non medical issues.

    6. mary says:

      I worked 40 years and started medicare 7 months ago, I pay a monthly premium and annual deductable. my coverage is not as good as what I had through my employer. How much more do you want to cut. It is not an ENTITLEMENT, I paid into the system for 40yrs. You need to go after MEDICAID, half to the people on it are not entiled. The goverment should stop wasting money and give back to the people that paid taxes.

    7. guest says:

      The "death" rules are already here! Older patients no longer receive expensive life-saving meds in the ER. Why fill out all the paperwork only to be told "No"…. Transplants that were offered to seniors are no longer offered while illegals are moved to the front of the list. Ask why so many transplant surgeons no longer are organ donors? Then probably the worse thing to come out of BoboCare… End of much needed medical research. Researchers have two choices now – Relocate out of the US – Retire/Go on unemployment. Many Americans enjoyed free clinical trials now the people in other countries get that cutting edge care.

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