Despite the recent news that the Medicare Part A trust fund is projected to remain solvent for four more years than previously projected, it is important to understand that Medicare’s financial status still calls for immediate reforms.
Some proponents of the Affordable Care Act say there’s no evidence the ACA’s $716 billion in payment cuts is affecting seniors and that these cuts are largely responsible for Medicare’s improved financial outlook. However, Medicare Advantage program alone will face cuts of $156 billion from 2013-2022—and it already is causing changes for seniors.
United Health, the largest Medicare Advantage provider, has significantly restricted provider networks in multiple states. In addition, the generosity of the plans has decreased in at least one particular area. Research by the Kaiser Family Foundation found that the average out-of-pocket maximum has increased $565 in just one year in MA plans. These changes to the MA program have occurred despite the Obama administration’s implementation of a demonstration program (that the Government Accountability Office found legally questionable) from 2012 to 2014 that funneled money into the program, largely masking the ACA’s cuts thus far.
As for the future, Drew Altman, president of the Kaiser Family Foundation, writes, “[A]s $716 billion in Medicare savings demonstrates, the tried-and-true way to save money continues to be shaving a little off payment increases each year, as long as the health-care industry is still in the black and can absorb it.”
But can it? The Medicare Trustees and the Centers for Medicare and Medicaid Services’ Office of the Actuary (OACT), have expressed doubts.
According to the OACT, if the cuts hold, by 2019, 5 percent more hospitals would be in the red and 5 percent to 10 percent more would be losing money on Medicare. By 2040, half of hospitals, two-thirds of skilled nursing facilities and 90 percent of home health agencies would be losing money. All of which raises “the possibility of access and quality-of-care issues for Medicare beneficiaries,” the OACT stated.
However, the most important indicator of Medicare’s financial status is its long-term debt, which is projected to be more than twice the size of the current national debt. According to estimates by the Office of the Actuary, Medicare’s unfunded obligation is somewhere between $28 trillion and $35 trillion over the long term. This means the government has promised benefits to seniors now and in the future that it does not currently have money to pay for.
Reform cannot wait until 2030.
Four more years of trust fund solvency means little in the grand scheme of America’s largest health care financing problem: Medicare. The political difficulty of Medicare reform must be overcome, and urgently, to secure Medicare’s future. Congress should begin taking the steps towards transitioning the program to premium support, which the CBO says has the ability to save money for both seniors and taxpayers.
