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Some Savings in Senate Reform Bill are Unrealistic, Says CMS Actuary

Janice Simmons, for HealthLeaders Media, December 11, 2009

By 2019, the number of uninsured could be reduced from an estimated 57 million to 24 million under the current Senate healthcare reform bill. However, the accompanying additional demand for services that would accompany this expansion would be difficult to meet initially with existing health provider resources—leading to "price increases, cost-shifting and/or changes in providers' willingness to treat patients with low-reimbursement health coverage," according to a Dec. 10 memo compiled by Richard Foster, the Centers for Medicare and Medicaid Services (CMS) chief actuary.

The memo also notes that while net Medicare savings are estimated at $493 billion for the next decade, some of those savings may be unrealistic. For instance, the Senate reform bill would add "permanent annual productivity adjustments" to price updates for most providers--such as hospitals, skilled nursing facilities, and home health agencies—using a one-year average of productivity gains throughout the economy.

While the payment update reductions could provide "strong incentives" for all providers to improve their efficiency in providing services, "it is doubtful that many could improve their own productivity to the degree achieved by the economy at large," the memo noted.

Over time, this could cause Medicare rates to grow more slowly and "in a way that that was unrelated to the providers' costs of furnishing services to beneficiaries," according to the memo. This would mean that for those providers for whom Medicare "constitutes a substantial portion of their business," they could find it in the long run difficult to remain profitable.

And without legislative intervention, they could possibly end their participation in the program—thus jeopardizing the care of Medicare beneficiaries. Simulations by the Office of the Actuary also show that about 20% of Part A providers could end up becoming unprofitable, as well.


Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at jsimmons@healthleadersmedia.com.

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