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Life Health > Health Insurance > Medicare Planning

Medicare's Annual Report: The Future Looks Bleak

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The Medicare Board of Trustees issued their Annual Report on Friday, May 13. Newspapers generally headlined the report with “Medicare to Run Dry in 2024,” “Medicare to Go Broke Five Years Earlier than Projected Last Year” or “Medicare, Social Security Finance Outlook Worsens.”

I suppose the fact that it was Friday the 13th didn’t really enter into the gloomy news. Anyway, if we look at the report itself (I did, and only copied about 50 pages of the 240+ page document), we find that they are really talking about the HI Trust fund, which tracks the income and spending data of the Hospital Insurance portion of Medicare. The Supplementary Medical Insurance Trust Fund (SMI — Part B and Part D — doctor’s payments and prescription drug) doesn’t fare much better, as expected.

HHS Secretary Kathleen Sebelius, in a Friday afternoon press briefing, blamed the problems on a “smaller-than-expected influx of payroll taxes in 2010, because of a slower-than-expected economic recovery.” This stands to reason, but it also is (hopefully) a momentary condition. And it is only part of the problem. Even though much of the report says that savings in PPACA keep the projections from being even worse (a supposed 25 percent savings), and even though I can’t argue with a government report, I’m having trouble finding where these “saving” machinations truly exist.

Other report findings

Additional conclusions based on this year’s report:

  1. Hospitals are in for lower reimbursement from Medicare.
  2. Part B will be under stress, not just because of inflationary cost growth, but also because of the large increase in Boomer patients.
  3. The report assumes that the Sustainable Growth Rate, which will expire Jan. 1, 2012, remains in place, with doctors getting a 29 percent cut in Medicare payments. All signs point to the fact that this isn’t going to happen, and even though the report takes pains to explain that it must develop its projections based on current law, it results in silly calculations.
  4. According to Secretary Sebelius, if the savings in PPACA had not been constructed, Medicare would have run out of money in 2016! I think that’s a somewhat reckless statement — to glorify a politically charged PPACA and tie it into a report that has some accuracy problems within itself.
  5. At the same time, two of the trustees (the two public trustees) wrote that if the reforms (ACOs, etc) of PPACA don’t work, Medicare costs will be much higher.

The trustee list

So, here’s the roster of the trustees, as outlined in the Letter of Transmittal to Speaker of the House, John Boehner, and President of the Senate, Joseph Biden:

  • Timothy F. Geithner, Secretary of the Treasury, and Managing Trustee of the Trust Funds
  • Hilda L. Solis, Secretary of Labor, and Trustee
  • Kathleen Sebelius, Secretary of Health and Services, and Trustee
  • Michael J. Satrue, Commissioner of Social Security, and Trustee
  • Donald M. Berwick, M.D., Administrator of the Centers for Medicare & Medicaid Services, and Secretary, Board of Trustees
  • Charles P. Blahouse III, Public Trustee
  • Robert D. Reischauer, Public Trustee

At least four of these people are President Obama’s appointees — Geithner, Solis, Sebelius and Berwick, so I think it’s fairly easy to see where the praise for PPACA comes from. At any rate, the projections are bad enough, and I’m afraid they are going to be even worse next year. We went from an “exhaustion” prediction in 2009 (for the year 2029) to an exhaustion in 2010 (for 2024), a rather sudden five-year acceleration. And, with Medicare draining money at its current rate and the Boomers starting to take hold in mass numbers, what will this report look like for the 2011 edition? It could be very scary indeed.

A political charge

I have watched these Annual Reports for over ten years, and with the possible exception of the 2004 report, which incorrectly lauded MMA 2003 as a real money saver, I have not seen one so politically charged as this 2010 report. There is certainly much up for debate over these next few months, and much that PPACA proponents will need to defend. Here’s hoping that we can look more realistically at the changes being put into place and turn things around in time for a more positive 2011 report.

Ron Iverson is president of the National Association of Medicare Supplement Advisors Inc. He can be reached at 406-442-4016. This article was adapted from a piece that ran in the May 16 edition of the NAMSA newsletter.