Medicare Report: Obamacare Bad for Seniors

The Obama administration’s Centers for Medicare & Medicaid Services (CMS) has issued a new report with dire news for America’s seniors. Obamacare’s smoke and mirrors budgeting gimmickry has real world consequences that will cause more than seven million seniors to lose their current Medicare coverage and could force as many as 15% of hospitals, skilled nursing facilities, and home health agencies out of participation in the Medicare system altogether. 

On page 9 of the report, Richard Foster, CMS Chief Actuary, warns that the payment rates for Medicare Part A providers such as hospitals, skilled nursing homes and home health agencies, are linked to increased, “unrealistic” economy-wide productivity standards that will be difficult if not impossible to achieve — likely reducing payments below overhead costs.

From the report:

It is important to note that the estimated savings shown in this memorandum for one category of Medicare provisions may be unrealistic.  The PPACA introduced permanent annual productivity adjustments to price updates for most providers (such as hospitals, skilled nursing facilities, and home health agencies), using a 10-year moving average of economy-wide, non-farm productivity gains.  While such payment update reductions will create a strong incentive for providers to maximize efficiency, it is doubtful that many will be able to improve their own productivity to the degree achieved by the economy at large. 

Over time, a sustained reduction in payment updates, based on productivity expectations that are difficult to attain, would cause Medicare payment rates to grow more slowly than, and in a way that was unrelated to, the providers’ costs of furnishing services to beneficiaries.  Thus, providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibly jeopardizing access to care for beneficiaries).  Simulations by the Office of the Actuary suggest that roughly 15 percent of the Part A providers would become unprofitable within the 10-year projection period as a result of the productivity adjustments.

Page 9 of the report also reveals that funds from the new 3.8% Medicare tax (“unearned income Medicare contribution”) are not paid into the Medicare trust funds:

The Reconciliation Act amendments introduced a new 3.8 percent "unearned income Medicare contribution" on income from interest, dividends, annuities, and other non-earnings sources for individual taxpayers with incomes above $200,000 and couples filing joint returns with incomes above $250,000.  Despite the title of this tax, this provision is unrelated to Medicare; in particular, the revenues generated by the tax on unearned income are not allocated to the Medicare trust funds.

The Democrats’ primary stated purpose for the passage of Obamacare was to reduce costs.  The report also estimates a $311 billion rise in health care costs over the next 10 years. 

“This Obama Administration report confirms that Washington Democrats’ government takeover of health care fails to deliver the one thing the American people wanted out of reform: lower costs,” House Republican Leader John Boehner (R-Ohio) said of the new CMS report.  “According to his own administration’s analysis, the health care law the President signed one month ago today would violate his pledge to ‘bend the cost curve’ and force millions of seniors off their current Medicare coverage.”

“This is in addition to what we already know about how this new law is squeezing employers with job-killing tax hikes and leaving middle-class families to brace for higher premiums,” Boehner added.  “Washington Democrats refused to wait for this critical analysis to be completed before forcing their job-killing health care bill through Congress, and now we know why.”

Republican Study Committee Chairman Tom Price, M.D. (R-Ga.) points out that Obamacare’s $311 billion increase in national health care expenditures will be much higher in the likely event that Congress would intervene on the Medicare cuts — and Medicaid patients will suffer more limited access to medical care.

“The real increase in spending is almost certain to be even higher than the reported balance of $311 billion because the new health care law relies on unlikely future cuts to Medicare,” Price stated. “The news on Medicaid is no better. The administration chose to put more than half of all newly insured individuals under their plan into Medicaid. Unfortunately, this report confirms that the influx of new Medicaid enrollees will have serious trouble gaining access to care because the program does not cover the costs associated with its patients.”

“The only way to make quality health care both more affordable and more accessible is to put patients in charge,” Price said.  “When Washington controls things that should rightly be handled by patients and their families, you get bureaucratic decisions that ignore cost signals and the individual needs of individual patients. One size does not fit all in health care. This report is yet another indication that ObamaCare must be repealed and replaced with true patient-centered health care reforms.”

Rep. Dave Camp (R-Mich.), top Republican on the House Ways and Means Committee, also weighed in on the gravity of this new report.

“This report confirms Americans’ worst fears about the health care law: it will increase health spending, increase federal control over our health care system, cut benefits for millions of seniors and jeopardize access to care for seniors and the disabled,” Camp said.  “This is a bad law and, according to this analysis, seniors have the most to be concerned about when it comes to the future of their health care.  I don’t think the Democrats’ health care bill would have passed if Congress and the American people had this analysis before the vote.”