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Medicare Fund Gets an Independent Actuarial Review

Margaret Dick Tocknell, for HealthLeaders Media, May 25, 2011

Medicare's Hospital Insurance Trust Fund is projected to remain solvent only until 2024, the 2011 Medicare Trustees report shows.

But an alternative scenario outlined in an independent actuarial study of the Medicare Trustees Report presented to the Centers for Medicare & Medicaid Services this month, paints a darker picture of the program's prospects. It projects sharp cost increases and difficulties in achieving sustainable reductions in spending on hospital services.

The report was authored by CMS' independent actuary. "Presenting an alternative look at another report is something we do," explained Donald McLeod, a CMS press officer. "The purpose isn't to say one report is right and the other is wrong."

While the independent analysis agrees with the Trustee report that Medicare's HI Trust Fund will remain solvent until 2024, the independent report forecasts significant increases in the cost of physician and hospital services as early as 2012.

Physician Reimbursement Reductions
The actuarial report uses a different set of assumptions for physician reimbursements and productivity adjustments. Its projections demonstrate what could happen to Medicare when Congress, as expected, overrides the 29% physician reimbursement reduction scheduled for 2012 and phases out cuts to hospitals, nursing homes, and home health agencies.

The Trustees report leaves the physician reimbursement reduction in place. Although the Trustee report termed that outcome as "unrealistically constrained," the reduction remains the basis for analysis of the Medicare Part B costs, which include physician bills and other outpatient expenses. That helped create a more financially favorable outcome for the Medicare HI Trust Fund as well as Medicare Part B.

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