So where do we go from here?: The future solvency of medicare

This is the last of a five part series on medicare.  Please join "Health on the Horizon" on Facebook.

Kaiser Family Foundation: Health Reform and Medicare’s overview of key provisions

One of the loftiest concerns looming over the health of the nation is the potential, and very real, threat of medicare insolvency.  Prior to the implementation of the PPACA, the Medicare Trust Fund A (which funds hospitalization) was due to no longer have sufficient funds to cover all patient hospital care by 2017.  Since its passage, the life of this fund has increased to 2029.  This is due to shifting the overpayments that have been made to Medicare Advantage (the private alternative) back to traditional Medicare.  While this provision in the PPACA gives us some relief in the short-term, it stands as a warning that the future of our senior populations is in dire straights if we don’t make some difficult choices.

According to Barbara Dickman, a volunteer representative for the Pennsylvania’s AARP and sat on the legislative counsel for 2 years, the 2010 Healthcare Reform law has begun to address the long-term solvency of Medicare.  However, there are many elements of the law that need to be allowed to work in order to give the program the security it needs.  She explains, “The law calls for providers to be more efficient with the money given to them from Medicare by examining how physicians get paid. Furthermore, it will set up the Independent Payment Advisory Board which will analyze the growth of national health expenditures.  This law also provides for means to target weeding out waste, fraud and abuse.”

First of all, there will be incentives for primary care services by providing a 10% bonus payment to providers if at least 60% of their medicare allowed charges in the prior period were for primary care as opposed to specialized or emergency care, which is more expensive.  More focus will be given on keeping patients well and preventing hospital readmissions where costs are higher.  To do this, a Medicare pilot program will be launched which will look at bundling payments.  In other words, physicians will be paid a set amount to treat a specific condition and not for each individual test and procedure.  Electronic medical records will play a big role by prevention of duplicated services and enhance the ability of physicians to share records and tests.

According to the Dartmouth Institute for Health Policy and Research’s infamous “Atlas Project”, 30% of Medicare dollars are wasted.  Weeding out waste and abuse is essential to lowering overall healthcare costs.  This includes money spent on such things as duplicated and unnecessary care.  The PPACA calls to develop a database to capture and share data across federal and state programs.  Funding has also been increased for anti-fraud activities and steeper penalties for those who commit fraud.    

Furthermore, another important aspect of enhancing the longevity of medicare is the medicare payroll tax on high income earners which will begin in 2013.  This will be a .9% medicare tax increase on individuals making $200,000 and couples making over $250,000.

In the end, because of the reforms put in place, the Kaiser Family Foundation projects that the growth of medicare spending on a per person basis is expected to be slower than those of private insurance plans.  For now it is a start, but now we need to ask ourselves, "Where do we go from here?"