Medicare Alternative Scenario
Friday, June 7 2013
The big story this week with regard to Medicare has been that the Trustees report pushed back the expected date of exhaustion by two years, to 2026. But the Trustees are legally obligated to make these projections based on current law, assuming that current laws are not changed. Therefore, the actuaries also compile an illustrative alternate scenario. As the Trustees report notes, “the actual future costs for Medicare are likely to exceed those shown by the current-law projections in this report, possibly by substantial amounts.” The reason: the projections are based on what is called a Sustainable Growth Rate formula, which determines how much physicians are compensated under Medicare. This formula, however, requires deep cuts, and legislators, fearing that doctors will refuse to treat Medicare patients, nearly always waive the adjustments before they are implemented. Lawmakers have overridden the SGR requirements every year since 2003, and instead of decreasing the amount paid to physicians, Medicare has increased it. The Alternative Scenario also assumes that productivity adjustments won’t save as much and that upcoming cost-cutting measures mandated by the Affordable Care Act won’t be met. The chart below shows the general revenue contributions to Medicare, expected to be $27.3 trillion are more likely to amount to $36.2 trillion.