WASHINGTON — The estimate for when the Medicare hospital insurance fund becomes insolvent — 2026 — has not changed over the past year, but more still needs to be done to forestall that result, experts said Wednesday.
“This is the closest the trust fund has been to insolvency since 1997,” Josh Gordon, director of health policy at the Committee for a Responsible Federal Budget, said at an online event sponsored by the organization. “And if we get to 2026 without doing anything, hospital spending would be cut by 9% that year, and then those cuts wind up growing kind of annually to about 22% by 2045, which is just a huge disruption that we certainly want to avoid.”
In addition, “total Medicare spending is projected to grow rapidly, from about 4.1% of GDP in 2021 to just above 6% by 2040,” Gordon continued — and that assumes “kind of a ratcheting down of provider payments to a level that would likely not be sustainable, meaning doctors and hospitals might stop seeing Medicare patients.” But the trustees also did an alternative calculation in which provider payments increased in a way more aligned with overall healthcare cost increases, and under that scenario, “they see Medicare spending growing to about 6.25% in 2040 — instead of 6% — and then 7.7% in 2070, and then even higher … I think that’s the kind of issue that we need to focus on, and of course, the sooner we act, the better off we all are because the less drastic changes we have to make immediately.”
$60.4 Billion Deficit
Gordon was responding to the report issued late Monday afternoon by the boards of trustees of the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund. The report found that in 2020, hospital insurance expenditures exceeded income by $60.4 billion “due to the large amount of accelerated and advance payments” which were expanded during the COVID-19 public health emergency. “These payments will be repaid in 2021 and 2022, resulting in a small deficit in 2021 and a surplus in 2022. After that, the trustees project deficits in all future years until the trust fund becomes depleted in 2026,” the report said.
The trustees also noted that their estimates “do not reflect the potential effects of Medicare coverage of Aduhelm [aducanumab], the Alzheimer’s disease drug that has been recently approved by the FDA. Given the uncertainty associated with these impacts, the trustees believe that it is not possible to adjust the estimates accurately before a coverage determination is made.”
The report included some concerns about the estimates for physician payment in future years. “Physician payment update amounts are specified for all years in the future, and these amounts do not vary based on underlying economic conditions, nor are they expected to keep pace with the average rate of physician cost increases,” the report said. “These rate updates could be an issue in years when levels of inflation are high and would be problematic when the cumulative gap between the price updates and physician costs becomes large.”
“If the health sector cannot transition to more efficient models of care delivery, and if the provider reimbursement rates paid by commercial insurers continue to be based on the same negotiated process used to date, then the availability, particularly with respect to physician services, and quality of healthcare received by Medicare beneficiaries would, under current law, fall over time compared to that received by those with private health insurance,” the trustees added. The trustees include Treasury Secretary Janet Yellen, Labor Secretary Marty Walsh, Health and Human Services Secretary Xavier Becerra, Acting Social Security Commissioner Kilolo Kijakazi, and Chiquita Brooks-LaSure, administrator of the Centers for Medicare & Medicaid Services; the two public trustee positions on the board are currently vacant.
Utilization Assumptions Are Key
The issue of price increases “is a really big deal,” said Michael Chernew, PhD, professor of health policy at Harvard and chairman of the Medicare Payment Advisory Commission (MedPAC), who was speaking for himself and not for the commission. “And there, it’s not so much that they’re assuming that the prices are going to be relatively flat. In fact, I think they’re pretty skeptical that they will be if you read the alternative scenario,” but they’re still required to do projections based on current law, in which the fee schedules for physicians are fairly flat.
“In the grand scheme of things, the noise and the challenge is all around the utilization assumptions,” Chernew said. “And assuming we’re not going to change the demographics much, we really have a challenge of how to have actual, realized utilization rise more slowly than the utilization growth assumed in this report,” with the big issue being around the Part B program, including both physician services and the new biologic drugs that are covered under Part B.
Gordon criticized the report’s treatment of the Medicare Advantage (MA) program, which is projected to cover about half of all Medicare beneficiaries within about 10 years. “The way the trustees present this report is very old school, and you lose sight of the fact that half of beneficiaries do have an insurance product that covers all of these parts together,” Gordon said, referring to the fact that MA includes both hospital and physician services. “I really do think that we have to have two discussions because we have to do something about MA as an insurance program, and then we also have to look at traditional fee-for-service Medicare … There’s a lot of delivery system reform that involves these discrete parts of Medicare.”
More Attention to APMs Needed
Alternative payment models (APMs) also need more attention, Chernew said in response to a question from MedPage Today. “The fundamental challenge in Medicare is how we deal with the growing volume, and you see that very clearly in this report, and there’s a lot that can be done with alternative payment models to address that,” he said. “Many people will say, ‘We haven’t saved a lot of money on alternative payment models so far; let’s do something else.’ But if something else involves lowering prices … all the pressures that the actuaries talk about are that the prices are not going to rise as slowly as projected.”
What needs to be done instead, therefore, is to reduce the volume of low-value care, “and alternative payment models give providers the flexibility to gain [financially] when they reduce low-value care, and we need to build better alternative payment models,” he said. “Even if you don’t put into your forecast that APMs will be the way out, I think in the end of the day if we’re going to get more efficient care, we’re probably going to need some aspect of payment reform, and I believe APMs — and better designed APMs — are central.”
Source: MedicalNewsToday.com
