A Few Myths and Troubling Truths about Medicare
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A Few Myths and Troubling Truths about Medicare | AARP, Medicare, Medicare Cuts, ACA, Affordable Care Act, Healthcare Spending, David Certner

David Certner

Coming off this latest political season, one in which Medicare was a hot potato topic, seniors are more concerned … and quite possibly more confused … than ever before about their health benefits.

In 2011, Medicare had:

• an income of $530 billion,

• expenditures of $549.1 billion,

• year-end assets of $324.0 billion, and

• 48.7 million Americans on the roles.

Source: 2012 Medicare Board Trustees Report

Truths, half-truths and myths have swirled through the landscape as politicians on both sides of the aisle made their case for re-election or to unseat the incumbent. With the help of AARP, the nonprofit, nonpartisan organization representing more than 37 million members age 50 and older, Medical News looks at issues plaguing one of the nation’s largest … and most popular … entitlement programs.


Long-Term Solvency

“The primary challenge that we face is that we have a growing senior population, and healthcare costs in general have been going up much faster than inflation,” said David Certner, legislative policy director for AARP. “Medicare is affected by the high cost of healthcare.”

In 2011, the first of the baby boom generation turned 65. From now through 2029, members of this demographic segment will hit 65 at a rate of about 8,000 per day. However, the Medicare Board of Trustees anticipates the program will exhaust the hospital insurance (HI) trust that funds Medicare Part A in 2024.

Medicare Part A expenditures have exceeded income annually since 2008. As for the trust for Supplemental Medical Insurance (SMI), Medicare Parts B and D, the trustees stated in the 2012 annual report that it is adequately financed since premium and general revenue income are reset each year to match expected costs. That said, the trustees noted costs for Parts B and D have increased rapidly, averaging annual growth of 5.9 percent for B and 7.2 percent for D over the last five years.

Although under current law, the projected Part B growth is 4.9 percent, just under the projected annual rate of 5 percent growth for the U.S. economy. The Medicare trustees said this figure is unrealistic since it assumes a physician fee reduction of almost 31 percent. “If lawmakers override this reduction, as they have for 2003 through 2012, the Part B growth rate would instead average 7.6 percent,” the trustees reported. Part D has an estimated annual increase in expenditure of 8.8 percent through 2021.

A ‘best case’ scenario has Medicare expenditures rising from 3.7 percent of the gross domestic product (GDP) in 2011 to 6.7 percent by 2086. A worse case scenario with continual overrides of physician fee decreases and higher-than-anticipated increases for other health services could mean expenditures hit a crippling 10.4 percent of GDP by 2086.


ACA Cuts Medicare Drastically

AARP, along with the American Hospital Association (AHA) and American Medical Association (AMA), supported passage of the Affordable Care Act. “We played a big role in protecting the guaranteed benefits but also added benefits,” said Certner, explaining ACA closed the gap in Part D benefits and added cost-free preventive care.

With a focus on coordinated care and prevention, Certner pointed out ACA should help lower costs by avoiding or better managing costly chronic conditions. Under the new law, Medicare enrollees now receive an annual wellness exam, as well as a number of screenings and vaccines at no charge.

As for prescription drugs, Certner said this is an area with potential for even more savings. “Prescription drugs, we know, are one of the fastest-rising components of healthcare, particularly brand name drugs,” he said. He said there has been a greater shift of people to generic drugs through a multi-pronged effort including public education, mechanisms within Part D to encourage higher adoption rates, and through legislation to help speed generics to market.


But What about the $716 Billion in Cuts

It might be more apt to call the $716 billion, spread over 10 years, ‘savings’ rather than ‘cuts’ to the program. “Guaranteed benefits are not touched at all,” Certner said. Instead, the savings between 2013 and 2022 come from a number of pots including reduced increases to providers, particularly hospitals; a crackdown on fraud and abuse; and cuts in overpayments to insurance companies through the Medicare Advantage program, which has historically cost more than standard Medicare.

Certner pointed out the hospitals, which bear a significant portion of the $716 billion burden, agreed to the plan and also supported ACA. He noted the smaller-than-planned increases in Medicare reimbursements are partially offset by increased coverage in the general population.

However, as Mother Jones pointed out in post-debate coverage during the presidential campaign, “There's no way to cut a bunch of money out of anything and guarantee that it will have no effect whatsoever.”


ACA Fixes the Healthcare System

“There’s no question that the ACA extended the trust fund for Medicare,” Certner said, but added much more work must be done to address costs. “Saving money in the system while improving benefits is critical to improving the financial stability of Medicare,” he stated. “While the bill took some steps, I think everyone thinks more can be done to address the high cost of healthcare.”

With the dust of this most recent presidential election beginning to settle, the fact remains that whoever sits in the Oval Office for years to come will be tasked with finding ways to drive down healthcare costs while building up quality and efficiency.

“What the debate is about in Washington is really about federal health spending,” said Certner. For that reason, much of the discussion centers on cost-shifting measures. One example, he said, is to raise the eligibility age for Medicare. “But somebody is picking up the cost. That cost will either be shifted to employers or states or individuals,” he pointed out. “We’d like to get back to a debate about how we can actually reduce healthcare costs.”


AHA Sues Federal Government for Unfair Medicare Practices

On Nov. 1, the American Hospital Association (AHA) filed suit against the U.S. Department of Health and Human Services citing a failure of the federal agency to meet its financial obligations to hospitals for services provided to some Medicare patients. Four hospital systems also joined the suit.

At the center of the issue is disputed payments uncovered by recovery audit contractors (RACs) where it was deemed hospital care could have been provided in an outpatient facility or department rather than billed as inpatient services. In these cases, the RACs don’t dispute that the care was reasonable and necessary … only that it could have been as effectively delivered in a less expensive setting. However, the AHA asserts conclusions about whether or not to admit a patient are often complicated for Medicare patients because of advanced age and chronic conditions, which can make the physician’s decision about where to treat all the more difficult.

The AHA statement noted, “Hospitals and doctors are now routinely being second-guessed about these difficult treatment decisions by government-sponsored recovery audit contractors. RACs, which are paid primarily on the basis of how much Medicare funding is taken back from hospitals and physicians, review these care decisions years later without ever seeing or talking to the patient. Not surprisingly, when hospitals appeal these questionable decisions, they prevail at least 75 percent of the time.” 

Rich Umbdenstock, president and CEO of the AHA, said, “What the federal government is doing is wrong, unfair and a clear violation of federal law. Doctors and nurses provide the best care possible using their medical judgment and training. Allowing government auditors to second-guess these difficult medical decisions about where to best treat a patient years later based on a cold record and then refuse to pay for that care is indefensible.”

The AHA is asking the court to overrule this nonpayment policy and reimburse hospitals that have been denied payment in the past.  The AHA filed suit in the U.S. District Court for the District of Columbia. For a copy of the complaint, visit www.aha.org.

AARP, ACA, Affordable Care Act, David Certner, Healthcare Spending, Medicare, Medicare Cuts

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