Does Medicare Save Money Under Health Care Reform?

 With elections just around the corner, any chance to talk about the potential success of health care reform is being voiced loudly.

Making no exception, politicians recently pointed to this year’s Medicare trustee report, which the White House touted in a statement as having showed “how the Affordable Care Act (ACA) is helping to reduce costs and make Medicare stronger.”

For example, the trustees estimated that “the Medicare hospital trust fund will run out of money in 2029, some 12 years later than they estimated last year.” They also found that because of ACA changes under current budget rules, Medicare’s unfunded 75-year liability has fallen to about $30.8 trillion from nearly $37 trillion in the previous audit.

Although politicians would like to point out the $6.2 trillion in savings ACA may create, they “turned around and plowed these “savings” into their new middle-class health-care entitlement.” But according to the Wall Street Journal, that’s not the biggest problem.

Some of the rhetoric “ignores the extraordinary companion analysis by chief Medicare actuary Richard Foster, which repudiates this conclusion and is the most damning fiscal indictment to date of the Affordable Care Act.” Essentially, “Mr. Foster, who has been Medicare’s chief actuary for 15 years, disowns the previous 280-odd pages” by asserting in the reports final appendix that “the law as written bears little if any relation to the real world.”

As a result, he acknowledged that the trustee estimates “do not represent a reasonable expectation for actual program operations in either the short range . . . or the long range.” Consequently, “he directs readers to a separate “alternative scenario” that his office drew up using more realistic assumptions.”

Mr. Foster explains in the appendix that “the Medicare “cuts” that was wrote into ACA exist only on paper and were written so they could pretend to reduce the deficit and perform the miracles the trustees dutifully outlined.” He points out however, that with the “exception of cuts in Medicare Advantage, those reductions will never happen in practice.” Another one of the “shortcomings Mr. Foster highlights is the 30% cut in physician payments over the next three years that Democrats have already promised to disallow, and Republicans will most like do the same.”

In addition, Mr. Foster also stated that “cranking down Medicare’s price controls for hospitals and other providers,” which ACA calculates as “savings,” is also “extremely unlikely to occur.”

From these factors, Foster noted that “costs will simply rise for private patients, or hospitals will refuse to treat seniors insured by Medicare.” But since Congress “will never allow that to happen, under ACA the “cost curve” will not be bent as the politicans hope.” According to Mr. Foster, this means that “Medicare’s share of the economy will rise 60% between now and 2040, while under the trustees report that it would “only” rise by 35%.”

Ultimately, Foster’s comments should disturb many, and highlight how the “have deliberately written the law, so that the real costs are disguised and hard for taxpayers to figure out.”

Despite claims that ACA will help reduce health care spending, patients and taxpayers cannot afford to wait to find out what happens, and when Medicare’s chief financial actuary for the past 15 years is concerned about the impact, Americans should be too.