Critics of the Medicare trustees' report on the positive impact of the Affordable Care Act (ACA) on Medicare's solvency, the subject of last Thursday's blog, have seized on an analysis by CMS's chief actuary, Mr. Richard Foster. It is true that Mr. Foster offers a more pessimistic "alternative scenario" of the impact of the ACA than the trustees used. But you know what? Mr. Foster agrees that that the ACA makes a "marked improvement" in Medicare's fiscal outlook.
Let me explain. Both the trustees and Mr. Foster agree that most of the improvement in Medicare's long-term fiscal outlook is due to changes in payments to hospitals and other non-physician providers under Medicare Part A. This improvement is unaffected by the Medicare SGR formula, which affects only payments to physicians. (I'll get back to the SGR later.)
According to the Congressional Research Service, Congress' decision to adjust Medicare payments to hospitals to reflect productivity gains is based on an analysis by the expert Medicare Payment Advisory Commission:
"Medicare's payment systems should encourage efficiency and Medicare providers can achieve efficiency gains similar to the economy at large. This policy target links Medicare's expectations for efficiency improvements to the productivity gains achieved by firms and workers who pay taxes that fund Medicare."
Where do trustees and Mr. Foster disagree? Mr. Foster doubts that hospitals and other non-physician providers will be able to achieve the required productivity gains, and he expects that Congress eventually will over-ride them. The trustees assume they will remain in place.
However, as Robert Greenstein from the Center on Budget and Policy Priorities points out, even if one accepts Mr. Foster's more guarded view of the ability of the health care sector to improve its productivity, the Medicare program is still better off.
"... even under the trustees' 'illustrative alternative' projection, which assumes that only 60 percent of the ACA’s savings are achieved in the long run (the scenario that Medicare actuary Richard Foster prefers), half of the long-term shortfall has been closed by this one piece of legislation."
On this, Mr. Foster agrees. He writes that, "In the likely event that the productivity adjustments are eventually overridden, the cost rate would be significantly higher than under current law. Even so, the alternative scenario projections would represent a marked improvement over the estimates in the 2009 report."
Now, let's get back to the SGR. I have covered this ground before, but the SGR cuts are not the result of the ACA. They were enacted by Congress and signed into law in 1997. The trustees' report only deals with the changes created by the ACA itself, not the inherited legacy of a law passed 13 years ago. The ACA didn't solve the SGR problem, but it sure as heck didn't create it or make it worse.
I've said it before, and I'll continue to say it until the cows come home. The SGR formula has to go. ACP will not rest until it does. And Congress and CMS will need to accurately account for the increased spending that will result.
But I stand by my view that the trustees' report - and Mr. Foster's "alternative scenario" - demonstrate that Medicare's fiscal outlook is markedly better because of the ACA. The only disagreement is over how much better.
Today's question: Do you disagree with the notion that the health care sector should "achieve the same kind of productivity gains by firms and workers who pay taxes to fund Medicare?"