Every year, we get a report from the Boards of Trustees for the Medicare trust funds. As in past reports, the Board of Trustees emphasized in the 2012 version that projecting actual Medicare costs based on current law was unlikely to be accurate. The board expected Part B expenditures would exceed projections because Congress would stop substantial reductions in the pay of Medicare doctors. The board actually said, “…Part B projections in this report…are not reasonable as an indication of actual future costs.”
Will Medicare Payments Fall below Medicaid Compensation?
The board said it was implausible that the estimated 30.9-percent cut in doctor fees would actually be permitted to go into effect January 1, 2013. And, sure enough, at the very last minute, Congressional action stopped those cuts. The American Taxpayer Relief Act of 2012 delayed some cuts for a year and some others for two months.
The board also found that unprecedented changes would be needed if Medicare payments were going to keep up with the cost of providing health care services. They estimated that Medicare payments for lab work, home health and hospice care, as well as treatment at hospitals, ambulatory surgical centers and skilled nursing facilities would be cut by more than half of the prior law level by the end of their long-range projection.
What Changes in Pay Rates for Medicare Doctors Mean
Medicaid payments are already less than rates paid by private health insurance companies. Perhaps, that’s why Congress has repeatedly blocked cuts in what Medicare providers are paid.
The board actually said their report didn’t set reasonable expectations even for short-range Medicare projections. The 2012 Trustees Report was based on doctors’ fees being cut by 30 percent over the next three years and bigger cuts after that, the board doesn’t expect that will happen.
If it did, Medicare costs would increase to about 5.7 percent of GDP by 2035. Within 75 years, they would be up to 6.7 percent of GDP. The board knows that Medicare expenditures are “almost certainly understated.” If pay cuts to Medicare doctors are preempted, the board says Medicare could grow to around 10.4 percent of GDP by 2086. Ultimately, Medicare costs are simply unsustainable, and substantial changes are needed if we wish to continue this program for future generations.
Jim McFadden has over 11 years of executive-level experience in the health insurance industry, is a youth baseball, softball and football coach, and has one of the worst fantasy football records in the world.