2010 Medicare Trustees Report Confirms Steep Physician Cuts Ahead
ADVOCACY UPDATE (August 9, 2010) FROM AMA
On August 5, the Medicare Trustees released their annual report on the status of and outlook for the Medicare program. The report had been delayed for several months in order to incorporate the effects of the Affordable Care Act (ACA). The Trustees project that as a result of changes made by the ACA, the solvency of the Hospital Insurance Trust Fund, which funds Medicare Part A, will be extended by 12 years to 2029. For Medicare Part B, the most striking aspect of the Trustees Report is its confirmation of the precipitous declines in Medicare physician payment rates that will start in less than four months. Specifically, the Trustees forecast a 23% cut on December 1, 2010, another 6.5% cut one month later on January 1, 2011, and an additional 2.9% cut on January 1, 2012. With these cuts, 2011 payment rates would be 28% below November 2010 rates, and 2012 payment rates would be 30% below their November 2010 level.
As in each Trustees report for the last several years, Medicare Actuary Rick Foster states that while the Part B projections are a reasonable forecast of what would happen under current law, “they are not reasonable as an indication of actual future costs” because legislative action is expected to override the projected cuts. The report also states that if the physician payment cuts do in fact occur, “secondary effects could include (i) substantially reduced beneficiary access to physicians; (ii) a significant shift in enrollment to Medicare private health plans; (iii) an increase in emergency room services; (iv) an increase in mortality rates; and/or (v) an increase in hospital services.”
The extension in the solvency of the Hospital Insurance Trust Fund is due primarily to three ACA provisions: reductions in payment rates to Medicare Advantage plans, reductions in hospital and certain other provider market baskets to account for productivity increases, and increased Trust Fund income due to an increase in the Medicare payroll tax for people above a certain income threshold. The Medicare Actuary is skeptical that the productivity reductions can be sustained over the long term, so the Office of the Actuary has developed an alternative forecast for the Part A Trust Fund in which the full market basket updates are gradually restored. Under this alternative scenario, the Part A Trust Fund would remain solvent until 2028 instead of 2029. Under either the main or the alternative forecast, however, the Trustees project that the Part A Trust Fund will remain solvent for many more years as a result of the ACA.