Wishful Thinking on Medicare, or Just Politics?

08/09/2010 12:14 pm EST

Focus: MARKETS

Terry Savage

Author, The Savage Truth on Money

You remember the old saying: “Garbage in/Garbage out.” Well, take that and apply it to the just-released “Medicare Trustees Report.” The report, usually out early in the year, was delayed for six months to “factor in the impact of the new health care reform law.”

That’s just what the Trustees did. And they came up with projections that are so overly rosy that the chief actuary for medicare called them “unreasonable” and “implausible.” Instead, he wrote his own report, contradicting those projections—and urged everyone to read it! Here’s the link:  http://www.cms.gov/ReportsTrustFunds/downloads/2010TRAlternativeScenario.pdf

The preface to that much-delayed Trustees’ report released on August 5th starts with a cheery greeting from Treasury Secretary Timothy Geithner. 

Geithner proclaims: “The outlook for Medicare has improved substantially because of program changes made in the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010.” He goes on to predict that “the Medicare Fund will now remain solvent for an additional 12 years, until 2029.”

But the Alternative Report posted by Medicare Chief Actuary Richard Foster on the same day included this in the opening paragraph: 

“The Trustees Report is necessarily based on current law; as a result of questions regarding the operations of certain Medicare provisions; however, the projections shown in the report do not represent the ‘best estimate’ of actual future Medicare expenditures.” Foster says his report is designed to “…help illustrate and quantify the potential magnitude of the cost understatement under current law.”

So, who do you believe—the guy with the numbers or the guy with the politics?

Even stranger, the Obama Administration is still busy denying it will make any cuts in Medicare.  It’s telling worried seniors their benefits will be “better.”

The facts are quite the contrary: Medicare reimbursements to physicians and benefits to seniors will be cut sharply by the health care act. At the same time, the increasing government mandates for expanding services are likely to make the Medicare program even more vulnerable.

But don’t take my word for it. Here is what the current Chief Actuary of Medicare just wrote in his report, to distance himself from the Trustees’ optimism. He finds the Trustees’ assumptions outrageous. So will you.

  • The Trustees’ report assumes Medicare physician fees will be cut by 30% over the next three years. Foster calls that “impossible.” (What do you think your doctor will call it?)
  • The Trustees’ report assumes that Medicare reimbursement rates will fall below Medicaid rates in the next decade. (That’s “code” for the fact that the poorest people will receive more costly services than those who paid into Medicare over their lifetimes!)
  • The Trustees’ report assumes that in the next 40 years, the rates for Medicare services will be half the rates for private insurance for the same services. (And who do you think those physicians and hospitals will be focusing on, given that discrepancy in payments for services?)
  • The Trustees’ report assumes that productivity in medical services will match productivity in the rest of the economy. (That’s an admirable goal, but the private economy will invest resources in its businesses—resources that Medicare providers will not have under lower reimbursement rates.)

Bottom line, according to Actuary Foster’s report: “The number of facilities that would become unprofitable will grow to 25% by 2030 and 40% by 2050 if the health reform law is implemented as written.”

Now, even General Motors proved you can’t stay in business if you’re unprofitable. So, what will happen when all those facilities close because of low reimbursements? You’ll find yourself standing in a long line for medical services. That’s known as “rationing health care.”

Already, physicians are not accepting new Medicare patients. It all comes back to what I said the day the health care bill passed: If you’re in your fifties or sixties, find a young doctor and establish a relationship now.

Otherwise, when your current physician retires, you’ll be out of luck finding a doctor to help you. 

And you’ll be lucky if Medicare will decide to authorize the services you were expecting. Too “costly” to care for older people?

My long-predicted “generation war” is just beginning.

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