Dive Brief:
- The Medicare Board of Trustees has released its annual report on the status of Medicare's trust funds, including the Medicare Part A hospital insurance (HI) fund.
- The report finds that the HI trust will remain solvent through 2030—a four-year improvement over the Trustees' estimate from last year. Part B premiums are expected to remain steady in 2015.
- The Trustees are also using a new model that ignores potential cuts to physicians' Medicare payments under the Sustainable Growth Rate (SGR) formula and instead assumes Congress will replace the cuts with a 0.6% annual raise for doctors.
Dive Insight:
Medicare's improving solvency is directly tied to the recent slowdown in healthcare spending—specifically, a downturn in inpatient service utilization. The new report suggests the HI fund will achieve surpluses through 2022 before plunging into deficits, and that Medicare spending will rise from 3.5% of GDP to 5.6% of GDP by 2040 thanks to an influx of baby boomers into Medicare.
The Trustees did not indicate whether the recent decline in healthcare spending is more attributable to a depressed economy or Obamacare reforms. But they did note that adhering to ACA cost-cutting measures would garner substantial future savings compared to the alternative. Report authors also cited employers' growing use of high-deductible health plans (HDHPs) and narrower provider networks as the likely reason for lower medical inflation in the private market.
Strikingly, the Trustees are no longer assuming that physician pay cuts under Medicare's SGR formula will actually occur—not surprising considering that Congress has reversed these cuts every year since 2003 through temporary "doc fixes." The new model assumes an average pay raise of 0.6% per year, which reflects Congress' actions over the last decade and paints a more realistic picture of Medicare spending.