Now actuaries with Medicare (PDF) have released projections that suggest Medicare and Social Security Trustees significantly underestimated Medicare spending in coming decades.
Medicare spending will increase to 4.31% of the economy by 2020 and 10.36% by 2080, the report said.
That's compared with 3.99% in 2020 and 6.25% in 2080 based on the assumptions used by the trustees, who estimated the Medicare trust fund would be depleted by 2024.
The alternative projections for Medicare spending do not include scheduled cuts under law “that have a strong likelihood of not being feasible,” which trustees included, said the report. That includes a scheduled pay cut for doctors that Congress has rejected since 2003 and a cutback to the yearly pay increases for hospital patients covered by Medicare fee-for-service.
Medicare is scheduled to reduce physician pay by roughly 30% in 2012, which the CMS called “implausible.” The large reduction probably won't happen considering Congress has blocked prior reductions and the 2012 hit “is more than five times the size of most of those previously avoided,” the report said.
Medicare payment rates to physicians would drop to 57% of private insurance in 2012, compared with about 80% in 2009, the report said.
Meanwhile, a yearly reduction to pay increases would probably be unsustainable after 2019, actuaries said. The report dismissed the cutback—designed to reduce spending as hospitals and doctors grow more efficient—as overly ambitious. Healthcare has not made significant productivity gains in the past and is heavily dependent on labor, said actuaries. The industry also faces limits on the extent to which costs and waste can be curbed.
Over time, the yearly squeeze on pay would boost the number of hospitals, nursing homes and home health agencies operating at a loss to 40% by 2050 from 15% in 2019. Financial strain could prompt providers to stop caring for Medicare patients, raise commercial rates to compensate, or trigger mergers and acquisitions.
The CMS said Medicare and Medicaid paid about two-thirds of what commercial insurers paid for hospitalized patients in 2009 (including federal payments for hospitals with relatively high numbers of low-income patients). By 2080, the productivity cutbacks would leave Medicare and Medicaid paying about one-third of what private insurers pay for hospitalized patients, the report said.
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