Trustees report finds healthcare reform to extend Medicare's life

Medicare is in much better financial shape as a result of the new healthcare reform law, which has extended the life of the nation’s largest health benefits program by 12 years, the Obama administration reported Thursday.

Democrats are pointing to the figures as vindication after a tough and partisan reform fight, but the sunny outlook comes with some asterisks: Not only have Medicare’s own analysts questioned some of the accounting, but the projections also assume that Medicare doctors will take a steep pay cut this fall — an event that would bolster Medicare’s balance sheet, but also something Congress likely won’t allow.

“As impressive as these achievements are,” Treasury Secretary Timothy Geithner conceded Thursday, “there is still work to be done.”

The much-anticipated report, authored by the trustees charged with gauging the solvency of Social Security and Medicare each year, projected that Medicare’s hospital trust fund will remain solvent through 2029 — 12 years longer than the group projected a year ago. The difference, the analysts said, hinges on provisions in the reform law that reduce payment updates for a number of health products and services.

Health and Human Services (HHS) Secretary Kathleen Sebelius told reporters Thursday the reform law will likely save Medicare even more than Thursday’s report indicates — the result, she said, of preventive care measures “that don’t show up in the economic projections at this point.”

The figures mirror preliminary estimates by Medicare’s chief actuary, Richard Foster, who said in April the healthcare reform law would save Medicare $575 billion over a decade and extend the hospital trust fund by a dozen years.

Still, Foster was also quick to warn that the figures rely largely on modes of accounting that create the appearance of savings where none likely exists.

For instance, the savings the law provides to Medicare’s hospital benefit, Foster wrote in April, “cannot be simultaneously used to finance other federal outlays (such as the coverage expansions) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions.”

White House officials have defended their math, which Jonathan Blum, director of HHS’s Center for Medicare Management, told reporters this week represents “consistent budget convention.”

Such statements have done little to appease conservative critics of reform law, who are accusing the White House of peddling “gimmicks.”

“Simple logic says that you can’t spend and save the same dollar,” House Minority Leader John Boehner (R-Ohio) said Thursday. “The trustees’ report confirms that Medicare’s future now rests on Washington Democrats’ accounting gimmicks and tricks, a risk America’s seniors are by no means eager to take.”

The report — delayed for several months with the arrival of the new healthcare law — carried a particular significance: It was the trustees’ first examination of Medicare finances since the reforms were enacted in March.

Capitol Hill Democrats were quick to trumpet the figures as indication of healthcare reform’s effectiveness. House Ways and Means Committee Chairman Sandy Levin (D-Mich.) said the projections “show the tangible, positive results of the improvements made to Medicare by health reform.” And Rep. John Dingell (D-Mich.) said the report offers proof that “provisions designed to slow the growth of Medicare costs do exactly that.”

“I am pleased that the trustees’ report shows our hard work paid off,” Dingell said.

But GOP leaders aren’t so sure. They’re pointing to Foster’s comments and the Medicare doc-fix pickle as an indication the savings projected in Thursday’s report likely won’t materialize.

“Without real solutions, the critical benefits so many Americans rely on, and future generations have been promised, are at risk,” said Rep. Dave Camp (Mich.), senior Republican on the Ways and Means Committee.

Aside from hospital fund savings, the trustees say the fund covering Medicare outpatient services, including doctors’ fees, has also been bolstered by the reform law. Last year, the group estimated that Medicare Part B payments would represent 4.5 percent of the nation’s economy in 75 years. This year, they’re projecting that to be 2.5 percent.

Seniors in Medicare’s prescription drug benefit also have reason to cheer the trustees’ report, which indicates a slight drop in Part D premiums relative to last year’s projections.

Nancy LeaMond, executive vice president of AARP, said that, for seniors, the report brought “important good news.”

Still, the projections assume that doctors treating Medicare patients will take a 23 percent pay cut in December, and another 6 percent cut in January — reductions that congressional leaders have vowed to prevent.

Indeed, HHS crunched alternative estimates assuming Congress will give Medicare physicians a slight raise instead. Under that scenario, the 75-year outlook for Part B changes dramatically, from representing 2.5 percent of the economy to consuming 5 percent.

The alternative projection puts total Medicare spending at 10.7 percent of GDP in 2080, versus 6.4 percent under current law, which includes the steep doc cuts.

And fixing the doc dilemma will be expensive. Last November, the House passed a bill to fix doctors’ payments that cost more than $210 billion over 10 years.

Sebelius said Thursday that she recently launched a new panel of health policy experts to examine the so-called sustainable growth rate (SGR) formula that dictates payments to Medicare doctors.

She also vowed to work with Congress to tackle the SGR, which has evolved into a perennial (and expensive) thorn in the side of policymakers wary that steep cuts would lead doctors to drop Medicare patients.

The fix, she said, would be “fully paid.”

— This story was originally posted at 11:52 a.m. and updated at 6:59 p.m.