News That’s Too Good to Be True

Did you know that when the president signed the Patient Protection and Affordable Care Act (PPACA) he wiped out $53 trillion of unfunded U.S. government liability? With the stroke of a pen, more than 60% of Medicare’s long-term deficit vanished… Poof. Zip. Gone.

It’s all in the latest Medicare Trustees report and is summarized in the following table.


You may say I’m a dreamer
But I’m not the only one

As with many of health care’s most interesting facts, you’re reading about it here first. But why? Why wasn’t something said at the press conference when the Trustees report was released? (It wasn’t even mentioned in the CMS “Fact Sheet” distributed to reporters at the time.) Why wasn’t the White House touting these numbers on the Sunday morning talk shows?

The reason, I believe, is that the news is too good. It’s embarrassingly good… It’s, well, unbelievable. Here are the numbers for the next 75 years:


Taking a closer look at the two tables, we see that not all sectors were treated equally by the PPACA. The pharmaceutical industry made out like bandits. (Billy Tauzin was worth every penny of the multimillion dollar salary PhRMA paid him.) Doctors took a bath. And the hospital industry got creamed. (You wonder if the American Hospital Association was asleep when all this was going on.)

But what if you don’t care about the lobbyists, the trade associations and the special interests? What if your main interest is in what kind of health care you’re going to get?

Well, that’s why there was a need for an alternative report — one prepared by Medicare’s actuaries. And according to this report, there’s no such thing as a free lunch. For example:

  • The Trustees report assumes Medicare doctor fees will be cut by 30% in the next three years and continue to decline in succeeding years.
  • By 2019, Medicare fees will be below the fees paid by Medicaid.
  • By 2050, Medicare fees will be one-half of what they private sector pays; by 2080, they will be one-third.

So, why will doctors continue to see Medicare patients? Why will hospitals admit them? Many won’t. And that’s why the actuaries say the Trustees report is “unrealistic” and “implausible.”  According to the alternative report:

  • By 2019 one in seven facilities — hospitals, skilled nursing facilities, home health care agencies and hospices — will be unprofitable and risk bankruptcy.
  • By 2030, one in four will be unprofitable.  By 2050, it will be 40%.

There is no more effective cost control device in the world than the simple expedient of denying people care. And that is what is being forecast for the future of the elderly and the disabled.

P.S. We rarely get partisan at this blog, but in this case I think we can safely say that it’s too bad the PPACA was not a Republican bill. If it were, everything you are reading here would be front page and above-the-fold in the East Coast press.

Comments (26)

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  1. Vicki says:

    Nice musical pairing. The entire Obama administration seems to be dreaming at the moment.

  2. Tom H. says:

    This is rather incredible and you are right. This is the only place on the Internet where you can find this type of discussion.

  3. Bruce says:

    Wall Street Journal had a lead editorial this morning on this very subject, but they botched the numbers. Thanks for laying this out.

  4. artk says:

    Interesting, Medicare part D is 15 trillion out of a total of 36 trillion. I wonder how much of that would have been saved if the Bush administration had allowed Medicare part D to negotiate drug prices the same way every insurance company PBM is allowed to do.

  5. artk says:

    Here’s my PS to your “P.S. We rarely get partisan at this blog”

    You may been an effective advocate, but to say “We rarely get partisan” is laughable.

  6. Larry says:

    There’s a saying every day is a new day in Washington.

  7. Don McCanne, MD says:

    Of course, nobody, not even John Goodman nor the East Coast press, takes seriously either 75-year or infinite-time horizons. Long, long before then, in the absence of any anticipatory action, Stein’s law would prevail.

  8. artk says:

    Don, “Stein’s law” is more of an aphorism than a law. Ohm’s law is a law. Moore’s law is a law. Stein’s law doesn’t measure up to being a law.

  9. Chris Ewin, MD says:

    More and more physicians are droppinging Medicare. That said, many will never consider it because of their specialty (neurosurgery, etc).
    PS: JG….the no spin zone

  10. John Seater says:

    “There is no more effective cost control device in the world than the simple expedient of denying people care.”

    Actually, that’s true ONLY if you don’t count all the costs. The *monetary* cost is lower, but we know the total social cost has been *increased* because the foregone care was worth at least as much as the saved dollars. We can be sure of that because people wanted to exchange the dollars for the care. Because goods are priced at the margin, the consumer surplus foregone guarantees that the value of the foregone care exceeds the dollars saved. Basic welfare economics.

  11. John Goodman says:

    John, good point.

  12. Ron Bachman says:

    Not to worry, November 2 is just around the corner.

  13. artk says:

    Dr Erwin, it’s my understanding that a large portion of a specialist’s residency is paid for by Medicare. I think a specialist has the right to decide not to accept Medicare patients. I also think that Medicare should then have the right to ask that specialist to reimburse Medicare for the portion of his or her training paid for by Medicare.

  14. David Boucher says:

    Right! And were not the savings also predicated on the 21% cut to physician’s reimbursement that Congress just delayed for the umpteenth time?

  15. David Lenihan says:

    Care will still be obtained. It just won’t be paid for by Medicare. One by one, the social contracts made with the citizens of the country will be broken. Social security will be deemed to be what it is…a tax, not a safety net for many of the contrubutors. A wealth spreader to be sure…but still a tax. The best way for the govt to cut costs is to give less care, particularly in the last days of life. So now we know and we can plan for our futures.

  16. Kenneth A. Fisher, M.D. says:

    Mr. Goodman,
    Someday our society will realize that the only way to really control health care costs is to change our medical culture. This will not be easy, but it can be accomplished. My blog http// explains how this can be done. Kenneth A. Fisher, M.D.

  17. Chris Ewin, MD says:

    Art, the average salary for a medical intern is roughly $45-50 K…This is after 4 years of college and 4 years of medical school that many fund themselves by loans. They have been out of the workplace (and personal lives) during the prime of their life b/c they are committed to patient care. There salary increases gradually through their training.
    That said, they are treating Medicare, Medicaid and the uninsured. My son-in law is in his second month as an ortho intern…a young Doc who graduated from Southwestern in Dallas…He and his fellow interns work long hours. He makes $46k/year.
    Interns/residents and fellows value as cheap labor for 3-7 more years after medical school should be unchallenged.

  18. artk says:

    Charles, none the less, much of the expenses of residency are paid for by Medicare. Give them a choice, opt out in advance and get more student loans, or accept Medicare’s underwriting and return the favor. I think it should go further. Have Medicare pay for medical school in exchange for the guarantee of providing proportional service to Medicare and Medicaid patients. The military does that, why not extend it?

  19. Arnie Poutala says:

    Artk suggests that Part D would be cheaper if the government had the right to negotiate drug costs. My experiece is that government does not negotiate, they price fix instead. For example, provider fees under our current Medicare system. Other government systems like in Canada cannot get some drugs for their citizens because government will not pay the freight.

    Clearly, artk feels this blog leans too far to the right. Do you, artk, have a solution that is clearly transparent and not full of gimmicks like that of that of the Obama administration.
    Thanks, John, for laying this issue out so clearly.

    Again, it would be nice to here from Uwe.

  20. arf says:

    The military has a fixed commitment. A year for a year. You don’t get military support for medical education in return for a lifetime in the military. Would this Medicare thing be limited, or are you committing to a lifetime of Medicare servitude.

  21. artk says:

    arf, actually it’s two years of service for every year of scholarship. I’m just asking them to accept fair payment as part of their practice in exchange for free medical school. I keep on hearing how doctors have to charge high fees because to the crushing debt burden of medical school. This will make that problem disappear. The doctors will make more, Medicaid will cost less, everyone wins. They still have the option of student loans. This gives them an option.

  22. artk says:

    Well, arnie, I would the top 4 PBMs have sales of close to 160 billion dollars a year. That’s a very high percentage of the gross sales of the pharmaceutical industry and significant bargaining power. Why should Medicare recipients be paying more for medications then people private insurance. As for drugs missing in Canada, I’ve heard the same anecdotes as you have. Here’s what’s available in Canada, you tell me what’s missing.

  23. Earl L. Grinols says:

    Those who have been paying attention know that a responsible estimate of unfunded obligations was $106.7 trillion, or $736,000 per member of the American workforce. Presuming all were to be paid off during a working lifetime, this amount would have to be amortized in addition to all other family and household obligations. Since roughly half the American population pays virtualy no federal income tax, $1.47 million is what those who do would have to pay.

    How will these obligations be treated? Some will be covered by higher taxes (including the inflation tax), but most will be reneged upon.

    A guess: the Obama administration is not so much attempting to renege upon Medicare promises now, as it is trying to provide political cover for continued spending and re-election. It knows that the unfunded obligations issue is beginning to rise to the level of appearing on the electorate’s radar.

  24. Jennie Fiedler says:

    Man, oh man. Pain killers and Jack are looking better and better. And I’m not being flippant here. The LAST thing I want to do is grow old and infirm in this country and need any kind of medical care. It just won’t be there for me.

  25. John Getz says:

    I sure wish you’d put Gov’t worker retirement and healthcare (i.e. “entitlements!!) with this!!!