Medicare and the Deathly Hollows: An Actuarial View

July 14, 2011
2:24 pm

Pardon the Harry Potter reference, but it seems somewhat appropriate given the dire point of view that permeated the House Budget Committee hearing yesterday on the future of the Medicare program.  Centers for Medicare and Medicaid Services (CMS) chief actuary Rick Foster testified that the program’s finances may be worsening at a more rapid rate than the Medicare trustees report.

He also pointed out that one of the possible remedies for Medicare’s fiscal challenges, provider payment cuts, will likely do more harm than good in terms of limiting patient access to healthcare.  Foster testified, “If at some point our payment rates to providers become significantly less than their cost of providing services, they either will be unable or unwilling to provide continued services.”

Foster’s testimony is particularly timely, given provisions in the Affordable Care Act that call for gradual reductions in provider reimbursement as well as the planned Independent Payment Advisory Board (IPAB) that is structured, as I pointed out in my testimony to the House Energy and Commerce health subcommittee yesterday, to focus on payment cuts to physicians.  Foster’s testimony underscores what is intuitive, that if the government continues to reduce Medicare’s already low provider payment rates, the number of physicians refusing to see new Medicare patients will increase.  Already, according to the American Medical Association, one in every three primary care physicians is restricting the number of Medicare patients in their practice.

Chief actuary Foster did, however, breathe new life into the concept of premium support – enabling Medicare beneficiaries to choose from a selection of private health plans competing on the basis of price , quality and value – saying “We’ve estimated for many years that competition among plans in a premium support setting like this could have advantages and lead to somewhat lower costs for Medicare. It can get you to the lowest cost consistent with good quality of care.”

Video from Foster’s testimony is shown below.

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