Medicare Has Changed, Projections Not so Much

Medicare Has Changed,Projections Not so Much

Chapin White, Ph.D.Presentation at the American Enterprise InstituteJune 3, 2013

Center for Studying Health System Change – www.hschange.org

Pop Quiz Current Medicare spending slowdown is …

cyclical structural

ACA Medicare cuts are … reasonable not reasonable

Long-run Medicare fiscal imbalance is … #1 threat to our nation’s economic wellbeing based on questionable assumptions


Cyclical vs. Structural

Cyclical factors– recession

Structural changes– provider payment policy– cost reimbursement tight prospective rates– usual, customary, reasonable SGR


Excess Cost Growth Slowdown

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Source: Author’s calculations based on CBO projections (2012).


Are ACA cuts reasonable?

ACA reduces annual price growth by 1.1 percentage points

Trustees report says– current-law projections “not reasonable”– cuts “will not be viable” in the long run


What’s a Reasonable Hospital Price?

$0

$5,000

$10,000

$15,000

$20,000

Private, 2013

Medicare, 2013

Medicare, 2036

Medicare, 2086

Denmark, 2013 (est)

France, 2013 (est)

Germany, 2013 (est)

Inpa

tient

Hos

pita

l Pric

e pe

r Dis

char

ge

Source: Author’s analysis based on Stargardt Health Economics (2008).


Are the SGR cuts reasonable?

SGR calls for 25% cut in Medicare physician fees


What’s a Reasonable Orthopedist Income?

Source: Author’s analysis based on Laugesen and Glied Health Affairs (2011) and Lasser JGIM (2008).

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

U.S., no SGR cut U.S., with SGR cut UK Canada France


What’s a Reasonable Primary Care Income?

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

U.S., no SGR cut U.S., with SGR cut UK Canada France

Source: Author’s analysis based on Laugesen and Glied Health Affairs (2011) and Lasser JGIM (2008).


Short-run vs. Long-run Growth Short run

(2013-2022)– extrapolates recent

trends– heavy demographic

headwind– HI hanging on

Long run (2023-)

– growth spikes back up– assumes volume surges

reasonable?– HI trust fund takes a

nosedive

Fig. III.B5. Cumulative HI Taxes minus Expenditures(present value, trillions)


Long-Run Growth Assumption

Technology


What About Prices?

CMS sets “take it or leave it” prices Providers choose how much to supply ACA lowers price growth permanently

lower quantity lower spending


What the ACA Does to Prices

Quantity

PriceSupply


Cognitive Dissonance

Unfunded Medicare liabilities could sink the U.S. economy

But ACA cuts “will not be viable”?

Something that now seems unreasonable will happen– Medicare will consume huge resources, or– providers will make do with less

Medicare Has Changed, Projections Not so Much

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