The Medicare Trustee Report Is Troubling

This year’s release of the annual Medicare Trustee’s report on June 22—261 pages of mind-numbing healthcare and budget minutiae—coincided with the release of the House Republican’s long-awaited alternative to the Affordable Care Act.  

            Coincided, but not coincidence.  Republicans’ sought to leverage the annual report’s hand-wringing about Medicare’s fiscal unsustainability—to draw attention to their proposals, even though they are generally useless and almost certainly won't be enacted.

            By contrast, this year’s Medicare Trustee’s report comes at a crucial moment.  We are five years into ACA implementation and its strengths and flaws are becoming clearer.  Health costs are again on the upswing. And the long-term fiscal and federal budget challenge posed by Medicare, Medicaid and Social Security remain largely unaddressed.  

            At a joint Brookings/American Enterprise Institute briefing on the report on June 23, a group of healthcare experts (of all political stripes) strongly agreed that Congress has been “sleepwalking into a major entitlement crisis” for more than a decade.  Conservatives/Republicans grumble about this a lot more than liberals/Democrats, but the Dems, too, get that the problem is serious.

Among the issues:

• 76 million baby boomers began moving into Medicare in 2011 at the rate of 10,000 a day
• Medicare spending is projected to double over the next decade, from $683 billion in 2016 to $1.3 trillion in 2025  
• The average annual per beneficiary cost in the program is projected to rise from $12,925 in 2016 to $19,400 in 2025

As a result, Medicare hospital trust fund will be insolvent by 2028, two years earlier than the trustees projected last year.

Medicare spending will rise from 3.6% of GDP in 2016 to 5% in 2030 under current law.    (It was just over 2% of GDP in 2000.) (Health care spending overall is now 18% of GDP, and projected to rise to 20% by 2024.)  

We not only have to stay the course on improving efficiency and productivity in healthcare while bringing the growth rate in costs down, we have to accelerate that effort.  And we can’t wait until 2025 or beyond to do it.  If we do wait, healthcare costs will come to dominate the federal budget (they are already 20% of it) and crowd out other, necessary spending and force wrenching changes.  

Here’s are portions of the report that jumped out at me, edited for brevity:

“The Board (of Trustees) assumes that the various cost-reduction measures [in the ACA and MACRA] will occur…. [and are] achievable if healthcare providers are able to realize productivity improvements at a faster rate than experienced historically. However, if the health sector cannot transition to more efficient models of care delivery and achieve productivity increases commensurate with economy-wide productivity, and if the provider reimbursement rates paid by commercial insurers continue to follow the same negotiated process used to date, then the availability and quality of health care received by Medicare beneficiaries would...fall over time compared to that received by those with private health insurance….

“The Trustees are hopeful that U.S. healthcare practices are in the process of becoming more efficient as providers anticipate more modest reimbursement growth rates, in both the public and private sectors, than experienced in recent decades. The methodology for projecting Medicare finances assumes a substantial long-term reduction in per capita health expenditure growth rates relative to historical experience...

“Notwithstanding recent favorable developments, current-law projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation.”

The report did not even touch on  the long-running debate over the role of Medicare Advantage; IPAB (the Independent Payment Advisory Board mandated in the ACA to control Medicare spending); and the politics of Medicare reform in the presidential campaign. That last part is triggered in part by a possible 20% or more increase in Part B premiums in 2017 for wealthier beneficiaries. But those are topics for another day.   

Steven Findlay is an independent journalist and editor who covers medicine and healthcare policy and technology. A version of this article originally appeared on the Health Care Blog.