June 24, 2018
Dive
Brief:
- In a new
report on Medicare spending and financing, Kaiser Family Foundation said
Medicare made up 15% of total federal spending in 2017 and that is
expected to grow to 18% by 2028.
- The
Medicare Part A trust fund will be depleted by 2026, which is three years
earlier than KFF’s 2017 projection.
- Payments to Medicare Advantage
(MA) plans for Part A and Part B benefits almost doubled between 2007 and
2017 from 18% ($78 billion) to 30% ($210 billion).
Dive
Insight:
Medicare
benefit payments have skyrocketed over the past decade. Payments totaled $425
billion in 2007 and grew to $702 billion in 2017.
However,
the pace of Medicare per capita spending slowed. Between 2010 and 2017 the
average annual growth in Medicare per capita spending was 1.5% compared to 7.3%
between 2000 and 2010. KFF said the lower growth rate came from the Affordable
Care Act’s lower provider and plan payments, as well as the influx of healthier
baby boomers aging into Medicare.
In
comparison, the report found that private health insurance spending growth
increased by 3.8% in seven years. This percentage is not better than Medicare,
but does show an improvement over the previous decade, which likely points to
payers using benefit design, prior authorization, alternative payment
contracts, cost-cutting policies and other levers to bend the cost curve.
KFF
predicted that Medicare per capita spending will increase in the coming years.
The report predicted Medicare per capita spending will grow to an average
annual rate of 4.6% over the next decade as Medicare enrollment continues to
grow. Other factors include rising healthcare prices and the increased use of
services and intensity of care.
Recent
congressional action, such as repealing the ACA’s individual mandate penalty and
shuttering the Independent Payment Advisory Board,has
hurt Medicare Part A trust fund’s short-term outlook and will lead to higher
Medicare spending, the report said.
KFF
noted that proposals to address the Medicare spending and funding issues, such
as restructuring benefits and putting more costs on individuals, cannot alone
solve the long-term financial challenges. The report said national leaders
should consider revenue options,
including increasing the Medicare payroll tax and other taxes.
Of
course, any talk about issues with Medicare funding will worry doctors, who
often feel the brunt of payment cuts and benefit changes. Doctors already feel
the pain from payment cuts this decade and may next find their Medicare
payments need to pay for more services. This may mean an increase in
uncompensated care and bad debt if Medicare beneficiaries face more
out-of-pocket costs.
Medicare
already pays less than private payers. Cost-shifting, or hospitals making
up for lower public payer reimbursements by negotiating higher payments from
private insurers, is one way hospitals have made up for the lower public
insurance payments. A recent National Bureau of Economic
Research report on cost-shifting found that Affordable Care Act
cost containment strategies resulted in hospitals negotiating 1.5% higher
average private payer reimbursements to offset the cuts from public payers.
If
hospitals and providers feel the pain of further Medicare cuts, you can expect
to see health systems continuing to look at other ways to gain leverage in
negotiations with private payers, such as both horizontal and vertical merger
deals.
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