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Medicare Trustees' Report Signals 'A Lot of Work Ahead'

 |  By John Commins  
   April 25, 2012

The Cliff Notes version of the 279-page Medicare Trustees Report is that the program's Hospital Insurance Trust Fund will remain solvent until 2024, and that further action is needed to assure its long-term financial stability.

That sums up much of the media's reporting of the dense tome, which was released Monday afternoon. Immediately upon the report's release, politicians, think tanks, and policy wonks from across the political spectrum used the findings to bolster their arguments for their particular brand of healthcare reform.

Obama Administration officials played up the trustees' contention that the Affordable Care Act has extended Medicare's solvency by eight years.

 "The Trustees Report tells us that while Medicare is stable for now, we have a lot of work ahead of us to guarantee its future," Acting CMS Administrator Marilyn Tavenner said in a media release. "The Affordable Care Act is giving CMS the ability to do this work, with tools to lower costs, fight fraud, and change incentives so that Medicare pays for coordinated, quality care and not the number of services."

The Heritage Foundation used the report to restate its case against the ACA's provider payment cuts. "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," the conservative think tank said it a policy brief.

Despite all the posturing, John Gorman, chairman of Gorman Health Group, a Washington, DC-based consulting group, called the trustees report "a very serious document."

"What you are seeing is all the spin in an election year around such a politically charged document," he says. "Anything as politically charged as Medicare, when the politics of the deficit are driven by this program, any trustees' report is going to go off like a thunderclap in an election year in this town."

"Everybody is making hay with it," he says, "but at the end of the day, I thought this was a positive report that said at least the measures taken in the last couple of years appear to be working at least for the short term."

Gorman says the trustees held firm on the 2024 solvency date for Medicare for the second consecutive year. In 2010, the trustees knocked five years off the solvency of the trust because they were anxious about the weak economy. "So if they are holding the line on the date of insolvency you can assume the trustees feel the economy has improved and rather dramatically since their last report and that Medicare is on a stronger footing," he said.

Paul Keckley, executive director of the Deloitte Center for Health Solutions, says the underlying assumptions in the report are driven by "a level of economic recovery that is difficult to predict."

Keckley says the trustees "ratcheted back" their optimism for economic growth in the coming months and years when compared with other federal reports on the status of Medicare.

"But the trustees also didn't go off the deep end and say the world is going to end in 12 months," he says. "Realistically, you are able to make reasonable hunches 24 to 36 months out. That is about it. If you are splitting hairs between 2021 and 2023 solvency, that is a great economic exercise, a great lecture, but it will be nothing."

"So, what do you take out of this? No one doubts that in the last 24 months we have slowed spending in healthcare, but that is not permanent. In all of these projections there is an increase in spending on a per capita and aggregate basis," he says. "The second thing it says is the more that costs grow above the baseline, the shorter the solvency of Medicare."

Keckley says the statute also restricts the scope of assumptions trustees can use when making projections about Medicare's future. "They don't pick up non-traditional competitors in the system; for example, the impact of retail clinics on access to primary care. The statutes don't allow the agencies to incorporate things that we know happen in the real world," he says.

"They are not incorporating any dire events. What happens if there is another war? What happens if by some magic longevity in the Medicare population exponentially increases because we found a miracle drug for cancer or dementia?"

Keckley says that doesn't mean the trustees report is inaccurate, just limited.

"All of these models are based on lag indicators adjusted going forward. The future of healthcare can't be predicted based on lag indicators. You can't bet that historic visits, tests, and discharges are a basis for the future because that model is not sustainable."

A lot of heat is expected to be generated by the trustees' report on the campaign trail but Gorman says there won't be any meaningful Medicare initiatives until after the November elections.

Congress in 2013 will likely examine in more detail the Medicare reforms brought forward by Rep. Paul Ryan, R-WI, and Sen. Ron Wyden, D-OR, as well as further discussions of once-taboo cost saving measures such as raising the Medicare eligibility age, and means testing for wealthier beneficiaries.

"We are going to see the big reveal on where Medicare reforms' prospects lie next year in the deficit control debate," he says. "You couldn't have spoken about those things a few years ago, and now they are part of the firmament of the discussion and that is all positive."

"At the end of the day, the only thing that will extend the life of Medicare past the next decade is structural reform that deals with beneficiaries' demographics and their true needs with the program, the ability to bend the curve on chronic illnesses that contribute most to the increases in spending in Medicare every year, and there has to be use of capitation in the Medicare program if you want to have stability in the budget."

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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