UNPRECEDENTED: Medicare Chief Actuary Disavows Trustees’ Report, Publishes an “Alternative Report”

For the first time in Medicare history, the Medicare Chief Actuary has called the projections in a Medicare Trustees Report “unreasonable” and “implausible” and encouraged everyone to ignore them and view instead an “Illustrative Alternative” report. The alternative opens this way:

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.

Noting that the formal Trustees report assumes Medicare physician fees will be reduced by 30% over the next three years, Chief Actuary Richard Foster says that’s “implausible.” In addition, the Trustees report assumes Medicare fees will fall below Medicaid rates by 2019 and fall further and further behind private payment rates in future years, as the following chart shows:

 SMALL

As explained in an April 22 report by Foster, the health reform law will cause:

  • Cuts in Medicare spending of $575 billion over the next decade.
  • 7½ million members of Medicare Advantage plans to lose their coverage and cause another 7½ million to face higher premiums and benefit cuts.
  • About one in seven facilities — hospitals, skilled nursing facilities, home health agencies, and hospices — to become unprofitable and possibly drop out of Medicare altogether.
  • Many doctors to quit seeing Medicare patients entirely.

The alternative report says that 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.

Comments (28)

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  1. Ken says:

    WOW! Cheers for Rick Foster.

  2. Paul H. says:

    Hats off to Rick Foster and the actuaries at CMS.

  3. Terry says:

    Wow is right. The Emperor in fact has no clothes.

    Now, any bets on how long will Foster hold his job after dropping this bombshell?

  4. Howard Mintz, M.D. says:

    The Medicare actuary is already behind the curve. Primary physicians are no longer accepting new Medicare patients and some are dropping their established patients. Certain subspecialists are no longer seeing Medicare patients. Myself and my two associates with continue to see Medicare patients in 2011, but are no longer participating. This means that the Medicare patients will end up paying 9% more than in the past. After not receiving payments from Medicare for 45 days, we have had enough. If Medicare implements fee cuts and fails to keep up with private insurance payments, we may stop seeing Medicare patients in the future. Obama and his crew can promote their plan, but rationing already underway. Shame on the citizens of this country voting blindly for “change.”

  5. Devon Herrick says:

    Further down in Illustrative Alternative report is Figure 4, which shows the projected percent of GDP Medicare expenditures will consume by 2080. In the 2009 Trustees Report, Medicare would consume more than 11% of GPD by 2080. Yet, because of the recent changes in federal health care law, in the 2010 Trustees Report, Medicare would consume less than 6.5% of GPD by 2080. However, if you look at the Medicare actuaries alternative calculations, the proportion of GDP they actually expect Medicare to consume in 2080 is just under 11%. It’s rather disconcerting that the Medicare Trustees would issue a bogus, political-inspired report that they know does not contain the most feasible estimates.

  6. Dr. Ernest Wilder says:

    How about a 23% reduction in government; that should about balance out the negatives created by the current administration.

  7. Chris Ewin, MD says:

    Dr. Mintz hit the nail on the head. Docs are running like the road runner away from Medicare. In primary care, patients will be using the ER or going to Walmart/Walgreens to get their primary care. Unfortunately, those advocating these “health reform” policies will not have to utilize the same avenues to get their “health care”.
    Dr. M ..are you a specialist or PCP?

  8. HD Carroll says:

    First of all, the Medicare actuary is not “behind the curve” on this – actuaries have been predicting this eventuality since payment reform was first instituted within Medicare in the early 80′s, and I am pretty sure this is not a sudden surprise to Rick Foster. Secondly, this is not his first wrangle with trying to testify to the truth in the face of political pressure. You may remember that he was threatened (well, his job) by political appointees within the Bush II administration if he told Congress the truth about what Medicare Part D was really going to cost at the time it was going through its final passage stages. Most of the time politicians “can’t handle the truth,” as the line goes.

  9. Don McCanne, MD says:

    It should be pointed out that this was not a deliberately deceptive report issued by the Trustees. They clearly understand the limitations imposed by the requirement that the report be based on current law, including PPACA. In fact, in a footnote in the report, they state, “At the request of the Trustees, the Office of the Actuary at CMS has prepared an illustrative set of Medicare trust fund projections under this theoretical alternative to current law.”

    The Trustees specifically requested an analysis by the Office of the Actuary based on more realistic assumptions.

    Our public stewards really do make every effort to serve in our interests.

  10. Brian H says:

    I don’t know which way people are leaning here, but it seems to me that you folks are upset that Medicare payments are being cut AND you’re upset that the deficit is ballooning. Well you can’t have both. Now, I understand that cutting Medicare payments by 30% over 3 years is unrealistic, but the cuts to medicare that were passed 20 years ago have never been enacted and Congress keeps kicking that can further and further down the road. At some point, Medicare spending has to go down or the country will.

    Personally, I blame all of you aging baby boomers. Take better care of yourself!!

  11. Frank Timmins says:

    Mr. Carroll, with regard to Part D, I was under the impression that it has actually cost less than what was originally estimated, at least to date. Did I misinterpret this?

    Brian H., the issue of Medicare payments being cut underscores the basic problem with the Medicare system. Any attempt to bureaucratically manage the health care costs of this country is doomed from the start. Healthcare is not something that can be budgeted from the top down. Because it is we are faced with the reality that less people will study medicine due to the fact there will simply be no financial incentive to do so. The services of the few who do study medicine will have to be rationed more and more. So the system leads to one of two choices, bankruptcy or stringent rationing. Which do you prefer?

    Actually, for the record, us “Baby Boomers” have not quite yet reached Medicare age. That eventuality has yet to hit the fan. In any case, the only true solution to Medicare is to somehow remodel the program using market based principles which would shift the responsibility of routine medical care back to the individual. That may even provide the incentive you suggest for us Baby Boomers to “take better care of ourselves”.

  12. Philip Weintraub says:

    08/05/2010

    Dear John,

    I was a little taken aback by the tone of your article. I can identify no surprises in the “2010 ANNUAL REPORT OF THE BOARDS OF TRUSTEES OF THE FEDERAL HOSPITAL INSURANCE AND FEDERAL SUPPLEMENTARY MEDICAL INSURANCE TRUST FUNDS (TRUST FUND).”

    With regards to PPACA (as amended), the implications are mostly positive with respect to the TRUST FUND especially with regards to transparency. The Trustees of the TRUST FUND clearly disclose the “Alternative Report” and their concerns regarding such a long-term projection of results. There is no ‘breaking news’ in this regard.

    It is also clear, in the long run, Medicare and Medicaid reimbursements to providers will converge. Private insurers will likely follow in ‘lock step’ right behind this convergence. Accordingly, providers will not be able-as they are today-to avoid accepting all patients.

    The post PPACA world is certainly not your father’s or your grandfather’s with regards to compensation of providers. The only surprise I read in your article is why fiscally conservative people do not applaud these developments and get over their anger of not being part of the solution.

    Kind regards,

    Phil

    Philip Weintraub
    MSc, Public Health, DLSHTM

  13. HD Carroll says:

    Mr. Timmins, I am not certain which sources to which you refer on the cost of Medicare part D “to date.” Foster’s original range went to $534 billion for the 2004-2013 initial 10 year period (the benefit didn’t really get going till 2006, but there were some tiny bits in 2004-05), while the official Congressional figure touted was $395 billion, with $400 billion the political “line in the sand” at the time of passage. As of this 2010 Trustees report, adding up the “actual” through 2009 with their latest estimates for 2010-2013, I total $503 billion in total benefits for part D (includes value of employer subsidy, but that was always part of the “total cost” of the program). I cannot say whether the actual cost from beginning to “today” is less than some original set of projections, but it would appear that Foster’s upper bound is closer to the reality. If you have counter figures, I am open. My point has to do with what was happening at the time in terms of hiding input from the only true expert resources that the government has on the subject matter. The actuaries can be wrong, but they should at least be listened to and not shut off from public discourse.

  14. Protonius says:

    1. First, a response to the Brian H’s above-comment:

    (a) Brian, if you’ve figured out a way to not only stay totally healthy at all times, and to live a long and fruitful life, and to never need medical care, and to somehow also not age, please let us know your secret.

    Otherwise, assuming that you at some point will also enter “the latter years” of your life — and that you’re not so wealthy (or uniquely-connected) that none of this vitally relevant debate means a whit to you — you may all too viscerally suddenly realize that your own words will come back to do far more than bite you. And then, as you “take the pain-pill” (Thanks, Obama!) — if even that is made available to you, which itself is questionable — instead of being able to receive the critically-needed restorative medical care that you beg for but which the authorities will deny you, then what would you like the final entry on your medical chart to say?

    (b) And as for your view of the rest of us who, even despite our best efforts, DO age and at times need medical care, what, in your compassionate wisdom, would be your preference — that we, fellow humans in need, instead opt to “save the nation’s economy” — all by ourselves, as though our sacrifice is the solution — by kicking the bucket?

    Would that be your solution — i.e., cut all seniors’ (and why stop there?) medical-care lifelines — as a way to offset the monumental, and orders of magnitude larger than just the Medicare system, impact of all the political and economic favoritism, malfeasance, incompetence, and worse, or even just plain bad judgement, that arguably suffuses much of the decisionmaking-process at the highest levels of government, as to how this nation is being run?

    (c) “At some point, Medicare spending has to go down or the country will”: False comparison. There are other — massive and long-term on-going — expenditures that are bankrupting (in addition to Obama’s having the private Federal Reserve Banks create interest-sucking fiat-dollars out of thin air) this nation; why isn’t cutting, or downwardly-revising, those expenditures being properly addressed?

    What’s that, you say — this is the first that you’re hearing about undeclared, continuing, American WARS in two nations, with a third one possibly waiting to be initiated in the near future?

    According to the website http://www.costofwar.com, as of August 5 the total dollar-cost, to the U.S., of the wars in Iraq & Afghanistan has already reached $1,061,124,021,661, and the amount is still increasing. Might it not be reasonable food for thought to consider shifting THAT money over to caring for the health of the American people, seniors included?

    Well, I guess that gets into the debate as to whether or not those wars — plus what some observers predict may soon be the next one — are justified. But what about fighting to preserve and extend our lives here at home too? Isn’t THAT a goal worth fighting for?

    Oh, and what was that I hear — you never heard of the more than $8 billion dollars that somehow went “missing” during Bush II, or the more than newer $8 billion dollars that, according to news reports, recently also went “missing” during the current Obama Administration?

    Medicare spending — and expenditures for all medical care even apart from Medicare — is increasingly costly, and that is a problem. But, unless we (or you) want to throw everyone — whether they’re over 65 or not — “to the wolves”, surely there are minds bright enough in this nation to come up with far better (and more humane) solutions than that one.

    America, and all Americans, deserve better.

  15. Rachel says:

    God help us…because clearly our government won’t.

  16. Jim Morrison says:

    John,
    surely you know the trustees’ report has to be based on current law. why the hysterics?

  17. Jeanne says:

    I just saw the trustees on C-span. They were all gloating and patting each other on the back and warning that their marvelous projections would only come true if the country sticks to the affordable healthcare law the democrats passed. They know the people don’t like it. They know that if the Republicans get the majority then they won’t fund Obamacare. This bunch of trustees is a sham. They were all appointed to make some rosy projection, so that if (probably when) the democrats are the minority they can wave this trustees report around and show how America voted itself out of medicare.

  18. Dennis says:

    I do so hope that those who believed in, and voted for the ‘Fundamental Change’ scam that PrOBama spewed during his campaign are satisfied…

    Apparently, they have NO CONCERN regarding the current viability or longevity of Social Security, Medicare or Medicaid, as at the rate of cancerous growth, that this CHANGE, that Barak BOHICA Obama has set in motion, is progressing at, none of these programs will exist when THEY need them, let alone for those who need them NOW, such as myself…

    Hell for the Chief !!! He’s most certainly earned it !!!

    BOHICA ( Bend Over, Here It Comes Again ), does it make sense now ??? If you self-serving leftist weenies think that we ‘The UNITED States of America’, can afford even one more day of this socialist agenda known as PrObama, think again, YOU’VE BEEN SCREWED, and so have all of those who DID NOT vote for this South Side Huckster.

    May God Help Us All, and May God have mercy on his miserable soul…

  19. Art says:

    This isn’t bending the cost curve; this is falling off the cliff.

  20. [...] NCPA’s John Goodman points out, for the first time in history, Foster went so far as to produce an alternative scenario—a [...]

  21. Erik Ramirez says:

    Have we forgot that it was the now “Loyal Opposition” who brought us to this point and now refuses to lend a hand or a shovel to get us out of the position they put us in. Why all the Obama Hate? There is more than enough blame to go around.

    The more those in power divide us the easier it will be to conquer us.

    And let’s face it Doc’s. You’re going to be making less money in the future, we all are except those in power. That is why Medicare reimbursements have been kicked down the road. The AMA is a powerful lobby.

    As Frank put it:
    “we are faced with the reality that less people will study medicine due to the fact there will simply be no financial incentive to do so.”

    I guess there is no such thing as altruism with doctors anymore. You know, the Love of Healing. What happened to that? I guess the doctor patient relationship is based on money now. LONG LIVE THE MARKETPLACE!!!

  22. Maggie says:

    I have prayed from the first time I laid eyes on this man in the WH that no one would believe all those lies he told us. But, there were too many taken in by his smooth talking, along with the lies that made them believe him. I will continue to pray that somehow and some way we will survive as the United States of America that we have known and enjoyed immensley for all these years. God help us all and God Bless America!

  23. Donald Devine says:

    John, Thanks. Yours are always short, sweet and to the point but this beats them all. This will appear in our 8/25 edition. Keep up the great work. We can’t do without you. Don [Donald Devine, editor ConservativeBattleline On Line

  24. Al Peden says:

    I gave a paper a year ago last March to the Office of the Actuary, Center for Medicare and Medicaid services. Rick Foster was there. I asked him why he was not at the White House health care planning meeting being held at the same. Apparently, they did not want to listen to him then. And they’re still not listening, in spite of his long tenure and unexcelled expertise in health care financing. Frankly, I hope those voting for the health care “reform” are trounced in November. We need the sanity and thoughtfulness of true leaders, like Rick Foster, in our health care policy.

  25. John R. Graham says:

    These politicians are cunning. They have “fixed” the “doc fix” every few months for the last decade. But why? In Canada, for example, the provincial governments couldn’t care less that there is a shortage of doctors, medical technology, and capacity in hospitals. Denying people access to medical services is how they pretend to keep costs down.

    But Canadian provincial governments keep people in partial ignorance of their situation by outlawing alternatives. If law-abiding people cannot exercise options, they will not waste time learning about those options.

    In the U.S., however, Medicare beneficiaries and providers observe superior access in the private environment, so the political class cannot fool the people like it can in Canada.

    However, this is coming to an end. Even with the “doc fix”, Medicare beneficiaries are having more trouble finding doctors. Therefore, the Key Success Factor for the political class is that ObamaCare reduces everyone’s access to medical services concurrently, so the gap in access between government-insured and privately insured widens no further.

    Unless Congress repeals ObamaCare, we will see that “doc fixes” will eventually become a thing of the past, IMHO.

  26. Stan CH says:

    Brian H blaming the “Baby Boomers” for not taking better care of themselves denies that we are entering our 50s, 60s and the population bubble is still growing. Our generation stimulated more growth and prosperity than any generation before or since. Brian must resent the boomers for being born (?). We will have to work into our 70s to keep the country afloat because there won’t be enough qualified workers to fill all the gaps as we retire. Mark my words, as the boomers burn out (better than fading away) the country will be in more trouble than it is now, much, much more. Subsequent generations lack the work ethic needed to keep the country on solid ground. Brian, thank the boomers for the life style you enjoy, and the opportunities we have stimulated.

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