NCPA - National Center for Policy Analysis

Great Uncertainty on Medicare Cuts

August 6, 2010

Top administration officials say that the Obama health care law has dramatically improved Medicare's finances.  "Medicare's Hospital Insurance Trust Fund is now expected to remain solvent until 2029, 12 years longer than was projected last year," says Treasury Secretary Timothy Geithner. 

But he also conceded that is easier said than done.  "As we know the future is uncertain, these are very long range projections.  And those reforms require that we achieve very substantial improvements in efficiency and productivity." 

The trustees report openly expressed some skepticism about those savings, saying there is "great uncertainty" about the assumptions on Medicare cuts: 

  • For instance, the health care law assumes some $200 billion in savings from productivity gains alone.
  • The trustees called that "far from certain."  

Those and other assumptions draw fire from several directions, including John Goodman, President, CEO and the Kellye Wright Fellow of the National Center for Policy Analysis.  He says extending the life of Medicare would be good news.  "The problem is it's all a fantasy.  It's based on assumptions that are so unrealistic that Medicare's own actuaries put out a separate report today, and I've never seen that happen before." 

In fact, the office of the actuary of Medicare, a nonpolitical watchdog, issued a separate 18-page report questioning many of the assumptions used to justify $575 billion in cuts to Medicare:   

  • They quote an analysis saying cuts to providers -- quote -- "could jeopardize Medicare beneficiaries access to mainstream medical care...."
  • In the next two decades, they say cuts could also force into the red 25 percent of hospitals, skilled nursing facilities and home health care agencies.
  • And many, they say, "would have to withdraw from providing services to Medicare beneficiaries." 

The actuaries talked with several prominent health economists, and all of them believe that the payment reductions were unsustainable. 

"Half the funding for health reform is paid for by cutting spending on elderly," says John Goodman, "and the way they're going to cut spending is by squeezing the doctors and squeezing the hospitals."

Source: Jim Angle, "Great Uncertainty on Medicare Cuts," Fox News, August 5, 2010. 

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