Healthcare Business News
Robert Reischauer

Trustee stresses uncertainty of Medicare projections

By Jessica Zigmond
Posted: April 23, 2012 - 6:15 pm ET

Although the overall message from the 2012 Social Security and Medicare Trustees Reports differs “little from those of previous reports,” it's important to recognize the high level of uncertainty included in those projections, a public trustee for the entitlement programs' trust funds said.

“This is particularly true with respect to the Medicare report, in which the current-law projections that are the basis of this report assume that payments under the physician fee schedule will be cut by 30.9% at the start of 2013 to comply with the sustainable-growth rate mechanism,” Robert Reischauer, a public trustee for the Medicare and Social Security trust funds and former director of the Congressional Budget Office, told reporters during a news conference Monday at the U.S. Treasury department. “It's almost certain that lawmakers will override this reduction and that Medicare Part B expenditures will therefore be higher, conceivably as much as 12% higher than is reported in these reports for 2013.”

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In their latest report, the Medicare trustees found—as they did last year—that the Medicare Trust Fund will remain solvent until 2024. After that date, and without congressional action, the hospital insurance trust fund revenue would be sufficient to cover 87% of estimated expenditures in 2024 and 67% of projected costs in 2050. According to the CMS, Congress has never allowed a Medicare trust fund to exhaust its assets.

Meanwhile, the report projects that the Supplementary Medical Insurance Trust Fund—which includes Medicare Parts B and D—is financially balanced because beneficiary premiums and general revenue financing are able to cover expected program costs. In the past five years, spending from the Part B account of the SMI trust fund grew at an average rate of 5.9%, according to the report.

At a briefing with reporters after the news conference, a senior government official highlighted some notable changes the CMS Office of the Actuary accounted for in the report this year.

“For Part A Medicare, actual expenditures in 2011 came in about 2.3% lower than we had estimated—so that's a positive, right off the bat,” the official said. “That was primarily due because we had fewer inpatient hospital admissions than we were expecting. And also, the mix of hospitalizations was less costly on average than we had expected. Normally, that average gets a little more expensive year by year and this year it didn't—so that's a positive.”

Also, on the recommendation of a technical panel, analysts slowed the growth in the average mix of hospital cases compared with prior assumptions. The official also noted two so-called negative changes this year: in their projections, analysts increased the assumed rate of utilization of skilled-nursing, home-healthcare and hospice services, as well as the average complexity of those cases.

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