My chart this week shows what a more realistic path for Medicare spending may look like. It compares the long-term projections of Medicare costs under the current law (“2011 Trustees Report”) with the CMS Office of the Actuary’s alternative projections (“2011 Trustees Report Alternative”). The latter projections were released as a “best estimate” of future Medicare expenditures, to address the “likely understatement of current-law projections.”
These projections primarily differ in their assumptions about the plausibility of drastic payment-rate cuts — if these cuts do not materialize, Medicare will cost tens of billions more each year than current law projects.
Current law includes provisions under the Affordable Care Act which tie physician payments to a Sustainable Growth Rate mechanism (SGR), which adjusts repayment rates in order to cap physician-related spending. Since 2001, physicians have been scheduled to receive at least a 5 percent reimbursement cut each year under SGR; this cut has been overridden by Congress every year except 2002.
In 2012, physician payments are scheduled to decrease by 29.4 percent — an update which is extremely unlikely to occur. So while the Board of Trustees are legally bound to incorporate these cost savings into their projections, the Office of the Actuary has formed a more realistic baseline which incorporates increasing physician repayments into the total cost of Medicare.
Under the current-law baseline, Medicare spending is projected to grow from 3.99 percent of GDP in 2020 to 6.25 percent of GDP in 2080; under the alternative scenario, Medicare spending is projected to grow from 4.31 percent of GDP in 2020 to 10.36 percent of GDP in 2080. In nominal terms, this is a cost underestimation of $2.7 trillion dollars by the year 2080.
Glad that you are reporting on this Veronique!
I assume that the $2.7 Trillion underestimation by year 2080 you mention in the last sentance is the amount for that one year, right?
What is the total amount of shortfall from 2012 to 2080? (The area between the two lines).
Of course they will not be able to cut doctor rates as they expect. If they do, the shortage of doctors will become the bigger problem.
Reply to this commentLinkReport AbuseMedicare is doomed without a complete change in attitude by the American public. Two quick examples.
I work in the medicare field, adjudicating appeals from beneficiaries and providers who have been denied payment by medicare or are otherwise involved in the medicare system.
One of my first appeals was from a gentleman who desired medicare to pay for a "stair lift" -- a device to carry him up and down the stairs because of arthritic knees. The problem was the chair lift was to be installed on his boat dock at Lake of the Ozarks. He argued that he liked to fish and it was difficult getting up and down the stairs to his fishing boat. He admitted that medicare had already provided him with a chair lift for his house but did not seem at all reticent in asking for another.
Also, under the current law, medicare premiums are "means based." For instance, your Modified Adjusted Gross Income (MAGI) on your 2009 return will determine the montly premium you pay for medicare in 2011: MAGI in 2010 will determine premium in 2012, and so on. If you have experienced a life changing event -- narrowly defined by regulation -- you may have your monthly medicare premium reduced. The IRS and SSA cooperate to make these determinations.
If the beneficiary is dissatisfied with the montly premium determination by SSA they can appeal to my office (one of 4 such offices in the US). We call these IRMA appeals--Income Related Monthly Adjustment Amount.
The standard montly premium for medicare, Part B is $110.50. Then, based on income and filing status, a premium is added. For instance, a couple, filing jointly, with a MAGI in excess of $170,000.00 but under $214,000.00 would pay an additional monthly premium of $44.20. There is a graduated scale for higher incomes and, at the top, if income is in excess of $428,000.00 the premium is an additional $243.00 per month for the entire calendar year.
It is not unusual to get appeals from individuals and couples with income in excess of $500,000.00, due to property sales or cashing in a retirement fund. Universally, they complain about having to pay this extra premium.
Currently, I have an appeal from a couple complaining about having to pay this $243.00 per month premium. Their income? In excess of $30 million dollars for the particular year.
This sense of entitlement is not from the sector of our population that have been raised in the welfare state. So, you can understand my belief that the system must ultimately fail unless fundamental attitudes are changed.
Reply to this commentLinkReport AbuseI wouldn't be so concerned about the doctor shortage. As soon as that shortfall becomes a problem and as soon as Obamacare is functionally in place (2014 or so), your compassionate legislators on both sides of the isle will demand mandatory participation in Medicare/Obamacare for practicing physicians. Sure, many US docs will quit, but there are lots of foreign doctors who would love to practice here. Nothing against foreign docs, but you can even ask one--the quality of foreign medical schools has a wider variance on whole than do US schools.
Of course Republicans will be less strident about mandatory participation (perhaps fines instead of jail terms for negligent Drs.), but just like Conservatives and Labour in Britain differ over finer details of NHS, leaders of both parties offer full-throated support of the socialized product. If you think Republicans in this country are any different, then I commend your optimism.
I'd still advise you save up a rainy-day fund anyway just in case you need to do some medical tourism in the future for competent, routine care.
Reply to this commentLinkReport Abusetcmcelroy, no need to use the future tense. Where I work, the Mass. Board of Registration in Medicine requires that all MDs practice "non-discrimination" against patients. We are all obliged (amoung other things) to provide wheel chair ramps, interpreter services sufficient to satisfy the patient (including illegals, and provided at my cost) and to accept all public insurance, including Masshealth in all of its ugly varieties, and Medicare. The rule--which is not a legislative statute, but a bureaucratic fiat--is not rigorously enforced, but it is there, and it can be used against any of us any time that the Board wants to make one of us squirm.
Reply to this commentLinkReport AbuseNot surprised...Docs I talk to in Florida think this is fantasy...even liberal docs. I like that, "non-discrimination"...sounds so benign, very social justice and equality chic.
Reply to this commentLinkReport AbuseDr. Robert:
Makes me wonder why you folks practice in Massachusetts. It's got to be the most onerous place to practice medicine in the entire country. My hat's off to you--you're a lot more dedicated than I would ever be putting up with that.
It reminds me of a response to one of Ms. de Rugy's posts earlier in the week, when someone suggested physicians be compelled to accept Medicare (and I assume Medicaid) as a requirement to continued licensure. I suppose that can be done (is done, in Massachusetts), but then, I don't think that's what this country is about. It's anti-capitalist and reeks of totalitarianism. Granted, it might have been on of them there trolls, but for a moment I thought I had wandered onto the site of the "Daily Worker."
For some reason, people (including certain conservatives, alas) have it in their heads that physicians are not only supposed to work for relative peanuts (when you consider the time, training, expense, and sacrifice that goes into the making of physicians--not to mention the continued time, training, expense, and sacrifice thereafter--it's relative peanuts compared to, say, your all-important government drones, many of whom are approaching the salary levels of your average internist), but that they should (and will) do it with great big smiles on their faces. Oh--and they also expect that such services be provided flawlessly absolutely every time; if not, they have hordes of trial attorney ticks waiting in their shrubbery for plump white coats to bleed.
So yeah, go ahead and cut Medicare 30%--if anyone thinks that won't affect physicians' services, I'd check their pupils: they're probably on something.
Maybe it's class envy, but folks seem to have no problem with professional entertainers, sports figures, Kardashians, and Jersey Shores trash raking in millions for their frivolities. They'll scream bloody murder about a $40 copay but happily drop a couple hundred bucks on a rock concert. They'll smoke and drink like fiends (and gladly finance such vices) but curse to high heaven those evil drug companies that provide them the medications that treat what ails them.
It's a crying shame the way medical care is financed in this country. Unfortunately, it's gotten this way through the sclerotic bureaucracy and the efforts of well-intentioned fools. For example, the diagnosis and billing codes for Medicare alone are so byzantine there is an entire industry now to help hospitals and medical professionals deal with them (which costs money that gets passed on to patients and taxpayers).
People need to realize, no matter what becomes the ultimate fix, quality medical care costs a lot to provide. We've found many wonderful ways to keep people healthy and alive longer, but the technology, personnel, and research devoted to doing so is expensive. They may be able to finagle (or mandate) cheap health care, but something will give. They'll get what they pay for. Believe it.
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