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2013 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds

June 4, 2013 | No Comments
Posted by Frank Ciesla

As you are aware from the numerous newspaper articles, they are now projecting that this fund will remain solvent for an additional two years.

However, as we have pointed out consistently in the last couple of years with our blogs , this report is fundamentally flawed as set forth on the last two pages of this 2013 report (pages 273 and 274).  In fact, those are the only two pages of the report that you need to read.

The following are excerpts from those last two pages:

In past reports, and again this year, the Board of Trustees has emphasized the strong likelihood that actual Part B expenditures will exceed the projections under current law due to further legislative action to avoid substantial reductions in the Medicare physician fee schedule. While the Part B projections in this report are reasonable in their portrayal of future costs under current law, they are not reasonable as an indication of actual future costs. Current law would require a physician fee reduction of an estimated 24.7 percent on January 1, 2014—an implausible expectation. …

Without unprecedented changes in health care delivery systems and payment mechanisms, the prices paid by Medicare for health services are very likely to fall increasingly short of the costs of providing these services. By the end of the long-range projection period, Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services would be less than half of their level without consideration of the productivity price reductions. Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems for Medicaid enrollees, and far below the levels paid by private health insurance. Well before that point, Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result. Overriding the productivity adjustments, as Congress has done repeatedly in the case of physician payment rates, would lead to substantially higher costs for Medicare in the long range than those projected under current law.

For these reasons, the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range (as a result of the unsustainable reductions in physician payment rates) or the long range (because of the strong likelihood that the statutory reductions in price updates for most categories of Medicare provider services will not be viable).

As can be seen, to accomplish the projections that have been bandied about would require a significant reduction in compensation both to physicians as well as to all other health care providers.  As the actuarial opinion states clearly this is unlikely.

However, what this does indicate, to all health care providers, is a concern that the government is looking, for viability of these programs, to reductions in what they will pay the providers for the services that these programs have promised to the elderly population in this country.  As set forth, again in the actuarial opinion, at the end of the report, this philosophy and approach can only result in lack of access for that population.

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