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Medicare, a Long-Term Patient, Gets More Treatment in Budget Law

By Kerry Young, CQ Roll Call

November 5, 2015 -- Medicare, the federal program at the heart of the nation's fiscal anxieties, played a supporting role in the budget agreement President Barack Obama signed into law Monday.

Medicare, starting in 2017, will have to clamp down on hospitals' payments to recently acquired physicians' practices. The practices for the most part will no longer qualify for higher rates of Medicare reimbursement than independent physicians do. Hospitals have in recent years been using the acquisition strategy to expand the more lucrative area of Medicare services.

The budget law is only the latest example of Medicare on the legislative stage. Legislators and policymakers twiddle with the dials of Medicare, the biggest single purchaser of health care in the United States with $613 billion in expenses in 2014, so regularly that it's easy to lose sight of longer-term changes.

But government and the health care industry, thanks partly to the 2010 health care law, have made progress in taming the growth in the program. The trust fund for Medicare's hospital expenses, a barometer for the program's funding, is projected to be depleted by 2030. In 2009, the year before the health care overhaul was enacted, depletion was foreseen by 2017, according to a 2009 trustees report.

Lawmakers and health officials want to continue the momentum as aging baby boomers tax the nation's coffers. Despite recent success at containing costs, the long-term projections still look expensive.

"That means fighting for reforms that keep Medicare solvent, as we did in the Affordable Care Act, where we extended Medicare's solvency by more than a decade," said Sen. Barbara A. Mikulski, D-Md., in a July floor speech celebrating the program's 50th year.

Medicare growth rates began slowing before Congress passed the law known as Obamacare.

There's been "striking" deceleration since 2009, said Chapin White, a researcher at the RAND Corp. in a January paper. Medicare's spending per beneficiary traditionally has grown at an annual rate between 2 percent and 8 percent, White wrote. Prices were stable in 2010 and 2011 and they fell from 2012 through 2014, White said.

Two uncertainties about the slowdown justify skepticism about political arguments over health care cost management. One is uncertainty about how much credit the health care law deserves and the other is uncertainty about how long the slowdown in cost growth will continue.

"Experts are very divided on this point," said Tricia Neuman, director of the Kaiser Family Foundation's program on Medicare policy. "Some really believe this slowdown can be sustained."

Neuman said some experts see the changes in Medicare triggered by the 2010 law as a "ticket to success." But she added that other researchers have doubts. "They think that there is a cycle in spending and health care spending will start to rise again, as will Medicare spending."

The public tends to see the 2010 law as the vehicle that created health exchanges and insurance mandates. But it also provided $10 billion for a Center for Medicare and Medicaid Innovation to test ways to overhaul the nation's health care.

Shift in Practice

The center's work is a key part of federal officials' bid to shift away from the current fee-for-service approach that rewards doctors and hospitals for more tests and procedures without considering the benefits for patients and toward a system that pegs payment to the outcomes. Such a change would be a fundamental reorientation of medical practice.

The health care overhaul also reduced Medicare payments for many services, including hospital and home health care, as well as payments for insurers that act as middlemen in administering benefits through so-called Medicare Advantage plans. Lobbying groups are working hard to reverse or soften those reductions.

The Congressional Budget Office has estimated that a repeal of the law would increase Medicare expenses by $802 billion over a decade.

The reduced payments and the lobbying effort to restore them is part of the perpetual tussle between federal officials, including lawmakers, and the health care industry over Medicare.

"It has been an ongoing struggle and it likely will continue to be an ongoing struggle to some extent," Neuman said. "Whether or not the slowdown can be sustained depends on future policy choices."

Medicare's hospital trust fund may have found 13 extra years of solvency. But the program's fiscal future is far from secure, Neuman said.

Enrollment is expected grow by about a third, to 74 million in 2025 and to 114 million in 2080 from about 56 million now, according to Medicare trustees.

Many of the enrolled are expected to survive well into their 80s and to be battling multiple chronic diseases.

The cost of caring for them is the main source of anxiety about the sustainability of Medicare.

The Government Accountability Office has estimated that Medicare expenses will require $28 trillion more over 75 years than current sources of revenue would provide. By comparison, the Social Security gap is $13 trillion.

Social Security payment also can be more easily estimated, as they reflect static payouts and known population estimates. Medicare's costs aren't so easy to forecast.

"Medicare covers whatever health care is needed by the senior population, which could vary drastically," said Loren Alder, research director for the nonprofit Committee for a Responsible Federal Budget.

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