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ACA cost cutting means Medicare won’t go broke till 2030

By Jennifer Bresnick

Depending on your perspective, there’s some good news and some bad news for healthcare providers and patients who rely on Medicare for their financial and physical health: cost cutting measures encouraged by the Affordable Care Act (ACA), the transition to pay-for-performance reimbursement, and slower growth of overall healthcare spending means that the nation’s largest payer has extended its shelf life.  The main hospital insurance fund won’t run dry until 2030, four years beyond projections announced in last year’s report.

“The Medicare Hospital Insurance trust fund is projected to be solvent for longer, which is good news for beneficiaries and taxpayers,” said Marilyn Tavenner, administrator of the Centers for Medicare and Medicaid Services (CMS). “Thanks to the Affordable Care Act, we are taking important steps to improve the quality of care for Medicare beneficiaries, while improving Medicare’s long-term solvency.

“Specifically, we have made major progress in improving patient safety, decreasing hospital readmissions, and establishing new payment models such as accountable care organizations aimed at reducing costs and improving quality,” she continued.  “These reforms slow the rise in health care spending while improving the quality of care for beneficiaries.”

Over the past four years, per capita Medicare spending growth has averaged 0.8% annually, much slower than the average 3.1% increase in per capita GDP and national health spending over the same slice of time.  Due to the slower growth, the report predicts that the 2015 premium, to be determined later this year, will remain at the same level as it did in 2013.

The report makes no mention of the EHR Incentive Programs as part of the infrastructure behind improvements in care quality or the role of health IT in reducing unnecessary readmissions and cutting the length of expensive hospital stays.  Widespread health IT adoption has contributed to an increase in Medicare’s accuracy rate when paying claims, an American Medical Association (AMA) report found in 2013, with error rates much lower than its private payer peers.

With 68% of Medicare patients accounting for 93% of spending, mostly due to the inordinate burden of multiple chronic diseases on the healthcare system, the move away from fee-for-service payments has produced rapid and noticeable results.  Medicare accountable care organizations (ACOs) saw a shared savings of more than $380 million in their first year of operations, including lower-than-anticipated spending resulting from better care coordination, integrated delivery, and population health management.

These improvements, stemming from the financial motivations inherent in accountable care reimbursements, will be vital for the future of Medicare, the report says.  “If the health sector cannot transition to more efficient models of care delivery and achieve productivity increases commensurate with economy-wide productivity, and if the provider reimbursement rates paid by commercial insurers continue to follow the same negotiated process used to date, then the availability and quality of health care received by Medicare beneficiaries would, under current law, fall over time relative to that received by those with private health insurance.”

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