Medicare trustees released a statement. 2024 reportAnd the main takeaway is a slight improvement in the expected depletion date for the Hospital Insurance (HI) Trust Fund. The trustees’ warning that the overall outlook rests on assumptions that are questionable at best has received little attention. Relaxing these assumptions paints a very different picture, especially in the long run.
According to the trustees, HI is now expected to have sufficient resources until 2036, five years later than predicted a year ago. This improvement was due to changes in Medicare Advantage (MA) payments and increased payroll tax revenue.
After 2036, HI revenues will be insufficient to cover all of HI’s obligations, meaning Congress will need to intervene with amendments to maintain the trust fund beyond the middle of the decade .
The slight improvement in the HI forecast is welcome, but like other findings in the report, it is based on the assumption that Medicare actuaries believe it is unlikely to hold up over the entire forecast period. To show how important these assumptions are for our predictions, we get the following results: illustrative scenario It’s based on different assumptions.
The key forecast input adjusted in the example scenario is tied to the formula used to update provider payments annually for inflation.
in Affordable Care Act of 2010 (ACA), Congress has called for lower inflation updates for hospitals and other non-physician service providers to reflect economy-wide productivity gains, which Medicare actuaries estimate to be about 1.0% per year. . So, as an example, instead of annual inflation updates of 3.2 percent for hospitals, etc., he would receive an additional fee of 2.2 percent for each service billed.
This might be acceptable if hospital productivity were actually increasing by 1.0 percent each year, but Medicare actuaries believe that historically this has not been the case and that this is not the case in the future. He says the possibility of that happening is extremely low. They put the upper limit of what could be expected at 0.4%. If they’re right, hospitals will see their Medicare payments drop in real terms every year.
Restrictions on payments to doctors are even stricter.under Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (This replaces the Sustainable Growth Rate Mechanism, another failed budget control measure.) If physicians agree to participate in an alternative payment model, they will receive only 0.75 per year in the future. They will receive a % salary increase (which is far below the expected inflation rate). Otherwise it’s only 0.25%. He can also receive bonuses from two sources upon achieving certain benchmarks, but these are scheduled to expire in 2025 and 2026, respectively.
If these cuts are implemented and productivity lags, a growing number of hospitals and providers will lose significant amounts of money caring for Medicare patients, pushing their overall margins (for Medicare and non-Medicare patients) into negative territory. Actuaries say that.actuary estimate About 73 percent of hospitals are already losing money caring for Medicare patients, and future cuts will increase that rate to nearly 80 percent by 2027. One-third of hospitals are currently losing money to all patients due to significant negative care. You can benefit from Medicare business. The gap between payments for Medicare and private insurance is also widening, with actuaries predicting that Medicare rates will fall from 60% of what private insurers currently pay to just 40% by the end of the forecast period. There is.
For doctors, Medicare prices are already significantly lower than those offered by private insurance and could be lower than those paid by Medicaid by the mid-2030s.
The Trustees’ illustrative forecasts gradually ease the formula to depress the actual value of payments for services over time, after which updates catch up with historical experience of increased input costs and productivity gains. It is assumed that. The result is a significant increase in total Medicare spending in the long run, as shown in Figure 1. Using different assumptions, total Medicare spending in 2050 would increase by 8% compared to the base case assumptions in the 2024 report, an increase of more than 30%. It will be even higher by the end of the forecast period.
Figure 1. Medicare spending (% of GDP)
Source: Medicare Administrative Board 2024 Annual Report
There is already a backlash against the payment restraints envisaged in the current law.Congress approved it earlier this year. partial rollback A bipartisan group in the Senate is considering reducing the amount of cuts planned for physician fees. How to update MACRA and other payment rules Incentivize high-value care without ongoing cuts. It will be difficult to find a formula that works politically without worsening the fiscal outlook.
