Medicare Actuary Questions Obamacare Savings

Administration officials can always be counted on to praise President Obama's health care law. But Rick Foster, the chief actuary of Medicare, offers an unvarnished assessment of how the new law affects 47 million Medicare recipients, as well as the federal deficit.

"There is a strong likelihood that the cost projections in the new trustees report under current law understate the actual future cost that Medicare will face. A strong likelihood," he says. "I've gone so far as to say that I don't think it's a reasonable projection of what will really happen."Rick Foster made a rare public appearance at the American Enterprise Institute Friday to discuss the latest projections of Medicare which are required by law.

The single greatest uncertainty in the projections are the cuts to Medicare that the administration is counting on to pay for new benefits.The Obama plan assumes health care can accomplish the same kinds of increased efficiency, or productivity improvements, usually seen on production lines -- like manufacturing cars. But few analysts believe that is possible. Joe Antos, a scholar at AEI, says, "they're productivity improvements if productivity happens. If productivity doesn't happen, they're still cuts."

And Foster adds that, "every single expert we talked has told us they did not think these productivity adjustments were viable. They thought they just would not work."

Why? For one thing, a visit to your doctor is not like a production line -- patients want time to describe their symptoms or get treated for them. "They're usually customized for an individual patient's needs," says Foster. But the administration simply assumes care will be more efficient -- because it wants to spend less and use the money elsewhere. Over time, that means Medicare would pay less and less -- and its payments would drop to one-third of what private insurance would pay. "That by itself says these would not be viable," says Foster. "You can't pay somebody a third of the going rate and expect to get them to be willing to treat your patients."

Even Thursday's report from administration trustees carried several cautions about the cuts to Medicare. But some analysts remain convinced Medicare will be stronger. Paul Van de Water is a senior fellow at a liberal group called the Center on Budget and Policy Priorities. He says it's, "all but impossible to do anything but to draw good news from this report."While a former health care official in Republican administrations, Gail Wilensky, remains deeply skeptical. "It just seems way too much like Alice in Wonderland," she says.

The actuaries at Medicare are the nonpolitical guardians of government health care spending and are seen as stubbornly independent.And they are warning that the assumptions the administration is relying on to fund its health care policy may create enormous problems for Medicare -- just as tens of millions of baby boomers start retiring.