Medicare's Costs: Current Law vs. Looming Reality

So, how bad is it?

While HHS Secretary Sebelius' Affordable Care Act nostrums help the Obama Administration's muddling of policy and election year politics, CMS Chief Actuary Richard Foster has stepped forward (see page 277) with some blunt language about Medicare's solvency.  As the Disease Management Care Blog understands it, official projections on just when the money runs out are based on current law. 

That's the rub:  

"While the Part B projections.... 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 30.9 percent on January 1, 2013—an implausible expectation."

"[W]hile the Affordable Care Act makes important changes..., there is a strong likelihood that certain of these changes will not be viable in the long range. Specifically, the [anticipated] annual price updates for most categories of non-physician health services will be adjusted downward each year by the growth in economy-wide productivity. The best available evidence indicates that most health care providers cannot improve their productivity to this degree—or even approach such a level—as a result of the labor-intensive nature of these services."

"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 ... many services would be less than half of their level under the prior law. Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems.... Well before that point, Congress would have to intervene to prevent the withdrawal of providers from the Medicare market.... "

"Finally, the economic outlook remains more uncertain than usual. Due to the sensitivity of HI trust fund operations to wage increases and unemployment, the current slow recovery from the recent recession adds a significant further element of uncertainty to the trust fund projections."