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Medicare News
Health Care Providers to Bear Brunt of Medicare Cost
Over-Runs in Future
Administration adds feature automatically reducing
payments when costs exceed 45% of funding
 Feb.
4, 2008 The 2009 budget submitted today by President Bush will reduce
Medicare spending by $556 billion over 10 years and more than $10
trillion over 75 years. Most of this will probably be paid for by
reduced payments to health care providers due a unique provision the
administration has included to require automatic annual reductions in
fees when funding no longer covers 55 percent of the costs.
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About chart above:
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This is a line chart
titled, Health Care Spending Outpaces GDP Growth,
starting in 1960 and going thru 2006. The chart has two lines,
one for per capita health expenditures which states the average
annual growth is 8.8% and one for per capita GDP which states
the average annual growth is 6.1%. Both lines show an increase
in growth since 1960. |
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Following is a statement on Medicare included in
the budget package.
Preserving Quality, While Slowing the
Unsustainable Growth in Medicare
The Medicare
program, established in 1965, offers health care services to individuals
aged 65 and older and certain people with disabilities. In 2007, nearly
44 million people were enrolled in the Medicare program.
Medicare has
traditionally consisted of two parts: Hospital Insurance, also known as
Part A, and Supplementary Medical Insurance, also known as Part B. The
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)
reformed Medicare by providing new voluntary prescription drug coverage,
also known as Part D, which began on January 1, 2006.
In addition, the
MMA created the Medicare Advantage program, also known as Part C, which
offers greater choices and higher-quality care to beneficiaries through
competition among private health plans. These programs offer Medicare
beneficiaries additional coverage, more choice, and health care savings.
According to the
2007 Medicare Trustees Report, Medicares dedicated revenues from
designated payroll taxes and from premium payments covered 59 percent of
benefits in 2006. The remaining 41 percent was financed from general tax
revenues.
By 2030, dedicated
revenues are projected to finance only 47 percent of total Medicare
benefits, leaving 53 percent of program costs to be funded by general
tax revenues. This projected rate of growth in Medicare benefits is not
sustainable over the long run.
The Administration
is committed to reforming Medicare to ensure efficient and high-quality
care and to improve the fiscal sustainability of the program for the
future.
Currently, Medicare spending is growing at an annual rate of 7.2
percent. The 2009 Budget includes proposals to slow the annual rate of
growth in the Medicare program to 5.0 percent. Over five years, these
proposals are estimated to produce a total of $178 billion in savings.
Improving Fiscal Sustainability
The Administration
is committed to slowing Medicares rate of growth while also promoting
the delivery of high-quality services to program beneficiaries. For two
consecutive years, the Medicare Trustees have found that more than 45
percent of projected Medicare expenditures will require funding from
general tax revenue (rather than dedicated resources) within the current
or next six years.
Accordingly, the
Budget proposes legislation that will reduce Medicare spending by $556
billion over 10 years and more than $10 trillion over 75 years.
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A line chart
titled, Growth in Population Age 65 & Over, and shows the
percentage of U.S. population over the age of 65. The chart
shows a steady increase from 1950 where it was approximately 8%
and projects the percentage could increase to reach over 20% by
the year 2050. |
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In addition to
proposing specific reforms to reduce the unsustainable growth in the
near term, the Budget also proposes to address the long-term unfunded
obligation in Medicare by adding to the MMA funding warning an incentive
for Medicare reform.
Specifically, in
the year in which the 45-percent threshold is exceeded, provider
payments would be automatically reduced by four-tenths of one percent
per year. The provider payments would continue to be reduced by an
additional four-tenths of one percent per year as long as Medicares
dedicated funding sources cover 55 percent or less of program costs.
The provision is
intended to encourage the Congress and the Administration to reach
agreement on reforms needed to slow the growth in program costs.
Encouraging Provider Competition, Efficiency,
and High-Quality Care
Competition and
efficiency improve care for beneficiaries by encouraging quality and
lowering costs. The 2009 Budget proposes to adjust annual provider
updates to encourage implementation of best practices that will restrain
costs and improve efficiency. The Budget supports payment reforms for
providers, such as hospital value-based purchasing, that do not increase
Medicare spending and that encourage providers to administer
high-quality, efficient care.
In addition, the
Budget proposes incentives that encourage high-quality hospital services
and reduce medical errors. The Budget also proposes to introduce more
competition into Medicare by establishing competitive bidding for
clinical laboratory services and accelerating the transition to
competitive contracts for fee-for-service claims processing.
Aligning Medicare Payments with Current Costs
and Practices
Medicares payment
policies need to be updated to keep pace with evolution in health care
treatments and settings. The Budget includes proposals that ensure that
patients are served in the most medically appropriate and cost-efficient
setting for post-acute care, and that payments for medical equipment and
services do not exceed their costs.
Increasing Beneficiary Responsibility for Health
Care Choices
One reason for the
excessive growth in health care spending is the lack of knowledge
consumers have about their health care choices and costs. The Budget
proposes to encourage greater individual responsibility for health care
use and costs for high-income beneficiaries, who are most able to
contribute to the costs of their coverage. This will be facilitated by a
number of steps the Administration has taken already that increase the
transparency of health care costs and quality, and support greater
health care value for Medicare beneficiaries.
Improving Program Integrity
Medicare program
integrity efforts have yielded savings from the recovery of overpayments
and the collection of criminal fines and penalties from Medicare fraud.
The Budget proposes additional funds to address program integrity
vulnerabilities.
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