July 28—Echoing another recent government projection, the Medicare trustees concluded Monday that the program’s hospital insurance trust fund will last four years longer than projected in 2013.

The Medicare trustees, who include primarily senior Obama administration officials, concluded that the hospital insurance trust fund—the funding source for Medicare Part A—will remain solvent until 2030. The Congressional Budget Office concluded separately two weeks ago that solvency will extend to 2030.

The increased longevity was credited to lower-than-expected spending in 2013 for most categories paid by the fund, especially inpatient hospitals, and smaller-than-expected increases in utilization at inpatient hospitals, skilled nursing facilities, and home health agencies.

Despite the short-term good news, the trustees urged that “Congress and the executive branch work closely together with a sense of urgency to address the depletion of the” trust fund.

The projected extension in solvency came even though the trustees dropped from their calculations a deep cut in physician pay that is scheduled to occur next year as part of a cost-control measure established in the 1990s. Instead of including the cut—which is required by law—the trustees assumed Congress will keep delaying cuts that are called for by the sustainable growth rate formula, as it has done for 12 years.

The trustees assumed that physicians’ payment rates will increase at a 0.6 percent annual rate from 2016 through 2023.

Care Improvement Needed

The trustees also included in their calculations planned cuts to provider payments that are required by the Affordable Care Act. However, they warned that providers will need to find productivity improvements to prevent those cuts from harming patient care.

“The trustees believe that this outcome is achievable if healthcare providers are able to realize productivity improvements at a faster rate than experienced historically,” the report stated. “However, if the health sector cannot transition to more efficient models of care delivery and achieve productivity increases commensurate with economywide productivity, and if the provider reimbursement rates paid by commercial insurers continue to follow the same negotiated process used to date, then the availability and quality of health care received by Medicare beneficiaries would, under current law, fall over time relative to that received by those with private health insurance.”

Publication Date: Monday, July 28, 2014