The trustees' report showed that Medicare's supplemental insurance fund—which covers parts B and D—remains adequately financed into the indefinite future. But that is due to the automatic provision for general revenues to cover any cost growth. The cost growth of those funds is accelerating, the trustees noted, from 2% of GDP in 2012 to 3.3% of GDP by 2035.
Some of the projections rest on questionable assumptions. For instance, the Part B projection for physician services assumes that a nearly 25% cut in Medicare physician fees will occur in 2014 under the sustainable growth rate formula. But Washington policymakers broadly assume those cuts will be eliminated or delayed, as Congress has done repeatedly since 2003.
It also remains unclear whether various cost-reduction measures on which the trustees' projections rest, particularly productivity adjustments, will occur as planned under the 2010 healthcare overhaul.
In April, the CMS replaced a planned 2% cut in Medicare Advantage Insurer rates with a 3% increase. That policy reversal came after insurers and their allies in Congress brought enormous pressure on the CMS.
“Given those uncertainties, future Medicare costs could be substantially higher than shown in the trustees' current-law projection,” the report stated.
Reactions to the slightly improved fiscal outlook for Medicare ranged from supportive to skeptical.
“Today's trustees report shows reforms in the Affordable Care Act are having a real impact,” Sen. Max Baucus, chairman of the Finance Committee and an author of the law, said in a press release. “The cost of delivering care to seniors is going down while quality is going up.”
But Sen. Orrin Hatch, senior Republican on that panel, said the delay insolvency “shouldn't give anyone any comfort.”
“The snap shot of the Medicare program is largely a reflection of America's weak economic performance, but with 10,000 Americans joining Medicare every day, the demographic reality is that Medicare is on a collision course with bankruptcy,” he said in a written statement. “Slower economic growth means that fewer Americans are purchasing healthcare. As our economy improves, there will be a greater deterioration in the health of the Medicare program for our seniors.”
Nancy LeaMond, executive vice president of AARP praised the ability of the program to reduce some costs “without hurting today's seniors, their children and their grandchildren.”
Instead of President Barack Obama's proposal to improve Medicare's solvency by charging wealthy seniors more, LeaMond urged improved care coordination and drug price cuts—among other steps.
Other liberal advocacy groups also urged focusing on changes in provider care over the 13 years before the fund becomes insolvent.
“This good news affirms that policymakers have time to test and expand value-driven delivery system and payment reforms designed to improve healthcare quality while simultaneously driving down the cost of care,” said Joe Baker, president of the Medicare Rights Center. “The Affordable Care Act (ACA) offers a blueprint for these reforms, and testing of many promising reforms is already underway. Medicare is the incubator for these innovations.”
Others were less optimistic.
Thomas Wildsmith, chair of the Medicare Steering Committee of the American Academy of Actuaries, emphasized that federal officials have yet to find ways to bend Medicare's cost curve over the long term.
“While the 2013 Medicare Trustees' Report shows a modest improvement in Medicare's financial outlook, the program's underlying financial challenges still remain,” he said in a written statement. “The slowdown in cost growth behind the improvement does not eliminate the need for additional action to ensure the program's long-term solvency and financial health.”
Follow Rich Daly on Twitter: @MHrdaly
