The latest Medicare report shows tens of trillions of dollars in unfunded promises, but Rick Foster, the program’s nonpartisan chief actuary, says it’s actually worse than that because the report counted savings from a planned 29 percent cut in doctor’s payments.
"That's pretty unlikely to happen,” Foster says. "Congress has overwritten smaller payment rate reductions every year in 2003 through 2011. And they're almost certain to override these again."
Robert Reischauer, one of the Medicare trustees agrees. "When faced with smaller reductions in the past, Congress blinked and cancelled the cuts," he said.
Both men appeared with others at a conference sponsored by the American Enterprise Institute in Washington, D.C., to discuss the latest report on Medicare's fiscal health.
Beyond the planned cuts in doctors’ fees, the new health care law will cut $500 billion from Medicare.
Foster and others worry that steadily falling reimbursements will make it more difficult for seniors to find anyone willing to treat them.
"Currently Medicare payment rates to physicians are about 80 percent of the private sector, private insurance rates," he says. They would go to 60 percent if the doctor payments were cut.
But that isn't the only spending cut the program faces, and Health and Human Services Secretary Kathleen Sebelius, another trustee of Medicare, argued last week that the new health care law has saved the program by reducing costs.
Skeptics say that assertion relies on controversial assumptions. For instance, a doctor's office may not function with the rhythms of an automobile production line, but the administration is assuming, and actually counting on, doctors and other providers adjusting to lower reimbursements by increasing their productivity or efficiency at the same rate manufacturers do. If they don't, the lower payments might well make it harder for seniors to find providers willing to treat them.
That is one reason Foster has more than a little doubt. "The productivity adjustments are unlikely to be viable in the context of today's health care world," Foster says. "If today's world continues without major change, they just, I don't see how they can work."
The administration has dictated that Medicare spending not rise faster than levels close to the GDP. If it rises faster than that, the new law has a failsafe -- a board that would have only one power, to arbitrarily lower reimbursements even further if spending gets too high.
“Their hands are tied, their feet are tied and they're gagged," Reischauer said, laughing. "You know, in the sense that they can't raise premiums, they can't change deductibles" -- they can only lower payments to providers.
House Budget Committee Chairman Paul Ryan told the Economic Club of Chicago on Monday that the president's plan "relies on a plan to control costs in Medicare that would give a board of 15 unelected bureaucrats in Washington the power to deeply ration care. This would disrupt the lives of those currently in retirement and lead to waiting lists for today's seniors."
Ryan has his own plan, which would give premium support for seniors to buy private insurance, which has drawn heavy fire from Democrats who charge seniors would have to pay too much out of pocket.
But one analyst with a similar idea says such plans have been around for years and can work well and even reduce costs by injecting competition.
Roger Feldman of the University of Minnesota says, "I calculated that competitive bidding would save 7.7 percent of Medicare costs."
That is certainly what Ryan is counting on. But as he says, this argument isn't likely to be settled until the 2012 elections.