Medicare trustee report hangs on uncertain assumptions


Mon, Apr 23 2012

By David Morgan

WASHINGTON (Reuters) – Medicare, the U.S. healthcare program for the elderly, should be able to stave off insolvency for the next 12 years, depending on a number of financial and political assumptions that may prove unrealistic, officials and other experts said on Monday.

The annual report of the Medicare trustees predicted that the program’s key hospital trust fund will become exhausted in 2024, prompting Medicare to begin paying out only 87 percent of scheduled hospital benefits to tens of millions of future retirees and disabled beneficiaries.

With the fate of Medicare a hot-button election year issue for the program’s 49 million beneficiaries, the report is likely to become fodder for Democrats and Republicans as they battle for control of the White House and Congress.

The 2024 forecast is unchanged from a year ago and shows that the deterioration of $549 billion-a-year program’s finances has not accelerated since 2010.

But the outlook is based on assumptions that may be unlikely, including a scheduled 31 percent pay cut for doctors in 2013, which Congress is almost certain to override.

The forecast also assumes that a deficit-reduction agreement to slash Medicare spending by 2 percent a year can be sustained over the coming decade and that the U.S. Supreme Court will not overturn President Barack Obama’s healthcare reform law in June.

The trustees also said Medicare is on an unsustainable path over the long term that could cause expenditures to more than double as a percentage of the U.S. economy, from 3.7 percent now to 10.4 percent in 2086, under a worst-case scenario.

Officials said that even the most optimistic sections of the report underscore the need for reform.

“The sooner the policymakers address these challenges, the less disruptive the unavoidable adjustments will be … and the greater the likelihood that the solutions we adopt will be balanced and equitable,” said trustee Robert Reischauer.

Administration officials seized on the report as evidence that Obama’s Patient Protection and Affordable Care Act has strengthened Medicare by encouraging efficiencies, combating fraud and waste and eliminating unnecessary costs.


“Medicare’s in a much stronger position than it was a few years ago, thanks to the Affordable Care Act,” said Health and Human Services Secretary Kathleen Sebelius, who told reporters that an estimated $200 billion in Medicare savings from reforms had pushed the expected insolvency date back from 2016.

“This is an approach that will put Medicare on a stable trajectory without eliminating the guaranteed benefits that beneficiaries have counted on for decades or shifting tremendous new costs onto seniors,” she said.

But analysts said Medicare could be forced to begin paying only partial hospital benefits earlier if assumptions about physician pay, deficit reduction and the fate of reforms fail to pan out.

“Medicare is in trouble,” said Joseph Antos, an analyst at the conservative American Enterprise Institute. “Are we really holding the line? Absolutely not.”

Earlier on Monday, a new report from the nonpartisan Government Accountability Office raised new questions about Medicare’s ability to improve care delivery, reduce costs and combat waste.

The GAO said Medicare is spending $8.3 billion on a test project that is supposed to improve the quality of private health coverage but has mainly rewarded mediocre insurance plans.

The watchdog agency urged the administration to cancel the Medicare Advantage quality bonus payment initiative, a three-year project described as the largest-scale test to improve Medicare services to date.

The administration defended the program as a necessary effort to determine how best to improve quality and reduce costs in Medicare Advantage, which provides about one-quarter of Medicare beneficiaries with coverage from private insurers.

The demonstration project, designed to promote quality by awarding performance bonuses to private insurers that offer coverage through Medicare, was undertaken to test whether annual quality improvements could be achieved more quickly than under Obama’s healthcare overhaul.

“We think this is a really important step,” Sebelius said. “At the end of 2014, it will have accomplished just what the goal was, which is to give some financial incentives to those plans that are improving quality results.”

Medicare Advantage was adopted under George W. Bush as a way to bring market efficiency to the sprawling government program. Some of the largest providers of Medicare Advantage plans are UnitedHealth Group and Humana Inc.

But Medicare Advantage has proved to be more expensive than traditional Medicare.

Sebelius said that even with the costs of the quality test program, the administration has been able to reduce the cost of Medicare Advantage from 114 percent of the fee-for-service program to 107 percent over the past two years.

(Editing by Maureen Bavdek and M.D. Golan)

Sebelius Equates Civil Rights and Healthcare

Sebelius seeks civil rights support for U.S. healthcare law

Thu, Apr 12 2012

By David Morgan

WASHINGTON (Reuters) – A top U.S. administration official asked civil rights activists on Thursday to help defend President Barack Obama’s embattled healthcare law, saying the reform package faces an “enemy” determined to set American health policy back half a century.

The remarks in a charged election year come two months before the Supreme Court is expected to issue a ruling that could make or break the law.

Health and Human Services Secretary Kathleen Sebelius sought to cast the two-year-old reform law as a vital weapon against racial disparities that have long condemned U.S. minorities to higher infant mortality rates, shorter lifespans and limited access to medical services.

“The enemy is at the door and we know that they would like to dismantle these initiatives,” Sebelius told the annual convention of the National Action Network, a civil rights group led by the Rev. Al Sharpton.

“Healthcare inequalities have been one of the most persistent forms of injustice,” she said. “Now is not the time to turn back.”

Sebelius’ remarks were part of an administration campaign to promote the Patient Protection and Affordable Care Act during a turbulent election year marked by repeated calls for its repeal and a Supreme Court ruling expected in June that could declare all or part of the law unconstitutional.

Civil rights activists and the minority communities they represent are a key segment of Obama’s Democratic base, whose support he could need in great numbers to stave off a Republican challenge in November, especially if the high court strikes down his signature domestic policy achievement.

Research has long shown low-income Americans, including many minorities, have significantly less access to medical care and suffer disproportionate rates of childhood illnesses, hypertension, heart disease, AIDS and other diseases.


Designed to extend health coverage to more than 30 million uninsured Americans, Obama’s healthcare reform law has become a favorite target for Republicans mainly because of an unpopular provision that requires most Americans to have private health insurance by 2014.

“We’ve got folks who are committed to undoing … the important initiatives that we’ve made in the last few years,” Sebelius told her predominantly black audience without making a direct reference to Republicans or other opponents of reform.

“Frankly, they want to go back and undo Medicare and Medicaid from the mid-1960s. They want to roll us back years and years,” she added.

Medicare and Medicaid, the national healthcare programs for the elderly and poor, respectively, were created in 1965 in a period of social and civil rights reforms aimed at ending racial segregation and protecting the voting rights of minorities.

The civil rights movement of the 1960s led to monumental changes in American race relations that allowed Obama to be elected as the first black U.S. president in 2008.

The Republican-controlled U.S. House of Representatives voted last month to partially privatize Medicare and convert Medicaid to a block-grant program for states.

Sebelius called on religious leaders, health advocates and other minority leaders to help the administration educate the public about the healthcare law’s benefits.

The law, which does not come into full force until January 1, 2014, has already benefited minorities by extending private insurance coverage to young adults, providing free preventive services for those with insurance and banning coverage denials for children with pre-existing conditions.

“I’m here to ask you to help,” Sebelius said. “If we can begin to close the disparities in health, we begin to close disparities in other areas, too.”

(Editing by Todd Eastham)

White House Counts on Mandate

UPDATE 1-White House: no contingency plan if healthcare law rejected

Wed, Mar 28 2012

* Top officials have cited options in the past

* Analysts see vulnerabilities for Obama’s base

* Any action unlikely until after November vote (Adds quotes, details and background)

By David Morgan and Jeff Mason

WASHINGTON, March 28 (Reuters) – The White House said on Wednesday that it was not working on contingency plans for President Barack Obama’s signature healthcare law, in the event that the Supreme Court struck down all or part of the sweeping reforms.

After three days of landmark Supreme Court hearings that raised doubts about the law’s fate, White House spokesman Josh Earnest said the administration remains confident that the 2010 reform measure would be upheld when justices issue their ruling toward the end of June.

“There is no contingency plan that’s in place. We’re focused on implementing the law,” Earnest told reporters. “If there’s a reason or a need for us to consider some contingencies down the line, then we’ll do it then.”

A negative ruling from the court would be seen as a major blow to Obama in the middle of an election year, when Republicans are demanding the repeal of the Patient Protection and Affordable Care Act.

Obama’s re-election prospects already face substantial challenges. A new Reuters/Ipsos poll shows that two-thirds of Americans, including a majority of Democrats, disapprove of his performance on another big issue: high gas prices.

The healthcare law and its unpopular individual mandate, which requires most Americans to have health coverage beginning in 2014, came under sharp scrutiny from the high court’s five conservative justices.

Doubts about its future deepened with tough courtroom questioning about whether the mandate exceeds the government’s constitutional authority.

Reform advocates contend that the mandate is vital to the law’s main objective of extending healthcare coverage to more than 30 million uninsured Americans.


Administration officials have spoken openly about possible contingencies in the past.

At a Reuters Health Summit last May, Health and Human Services Secretary Kathleen Sebelius said there would be a number of ways to expand health coverage if the mandate were overturned.

“There are all kinds of sign-up possibilities, auto enrollment and a variety of strategies,” she said.

But analysts say the week’s proceedings may have left Obama in too fragile a position to speak publicly about contingencies.

The White House could undermine his political base by openly preparing for defeat, particularly on the mandate, which is interwoven with popular consumer protections including a measure guaranteeing healthcare access for people with pre-existing conditions.

“They can’t risk having the president look like he’s folding, or giving up, or anything like that,” said Joseph Antos of the conservative American Enterprise Institute.

If the court struck down the law or its main provisions, analysts say the White House would likely postpone any decision on how to move forward until after the Nov. 6 general election.

They add that the loss of the mandate alone could leave the healthcare law at the mercy of congressional gridlock months after the election and raise doubts about the administration’s ability to usher key reforms into place by a Jan. 1, 2014, deadline. (Editing by Xavier Briand)

Healthcare spending will reach 1.8 Trillion

By David Morgan

WASHINGTON | Tue Feb 7, 2012 8:32am EST

(Reuters) – Government spending for Medicare, Medicaid and other healthcare programs will more than double over the next decade to $1.8 trillion, or 7.3 percent of the country’s total economic output, congressional researchers said on Tuesday.

In its annual budget and economic outlook, the non-partisan Congressional Budget Office said that even under its most conservative projections, healthcare spending would rise by 8 percent a year from 2012 to 2022, mainly as a result of an aging U.S. population and rising treatment costs. It will continue to be a key driver of the U.S. budget deficit.

Medicare, the federal healthcare program for the elderly, accounts for about half the projected growth, with Medicaid at roughly one-third and the remainder attributed to new federal subsidies to help lower income Americans purchase insurance under President Barack Obama’s 2010 healthcare overhaul.

Spending is expected to dip this year to $847 billion, from $856 billion in 2011, because extra federal money to help cash-strapped states pay for Medicaid ended last July. The healthcare program for the poor, Medicaid is jointly funded by federal and state governments.

But researchers warned that the longer term prospects for rising healthcare spending could have dire consequences for the U.S. deficit when combined with the cost of Social Security, if current revenue levels remain unchanged.

“The resulting deficits will increase federal debt to unsupportable levels,” the CBO report said.

“To prevent that outcome, policymakers will have to substantially restrain the growth of spending for those programs, raise revenues above their historical share of GDP, or pursue some combination of those two approaches.”

The data present the latest sobering news for Obama and lawmakers in Congress, who have spent months wrangling over how best to reduce a federal deficit that is expected to hover above $1 trillion in 2012 for the fourth year in a row.

The report is likely to feature prominently in the 2012 presidential campaign, where Republicans Mitt Romney and Newt Gingrich are vying for the support of fiscal conservatives to win the party nomination and face Obama in the November general election.

CBO also cited the cost of granting physicians a long-term reprieve from a Medicare reimbursement mechanism that is scheduled to impose a 27 percent pay cut on doctors in March.

The report said keeping physician payments at current levels through 2022 would cost the federal government $316 billion, up from last year’s CBO estimate of $290 billion.

Lawmakers in Congress are trying to reach a deal on a one- or two-year “doc fix” under Medicare.

Foregoing reduced payment rates would cost the government $9 billion in 2012 and $19 billion 2013. The charge would rise sharply in later years to $47 billion in 2022 and $15 billion in additional debt service costs.

(Editing by Michele Gershberg and Eric Beech)