Health and Human Services Secretary Kathleen Sebelius announced Thursday that Medicare will remain solvent through 2029.
The annual Medicare Trustees' Report shows an extension of 12 years from projections last summer which indicated solvency through 2017.
Flanked by Treasury Secretary and Managing Trustee Tim Geithner, Labor Secretary and Trustee Hilda Solis and Commissioner of Social Security and Trustee Michael J. Astrue at a press conference, Sebelius said the rosier outlook is the result of the landmark Affordable Care Act (ACA), passed earlier this year, as was well as other reforms in Medicare designed to reduce costs and ferret out fraud.
"We are committed to delivering the kinds of reforms to help increase quality and lower costs through our new CMS Innovation Center and quality reforms," said Sebelius. "In addition to the provisions of the new law cited in this report that will help make Medicare stronger, there are other important reforms going into effect that will help bring down costs and reduce fraud and waste in the system."
According to the report, the largest amount of projected savings under the Affordable Care Act comes from lower annual increases in the prices Medicare pays for services by hospitals, skilled nursing facilities, home health agencies and most other providers. It also projects lower payments to private Medicare Advantage health plans.
In addition, the program will benefit from a slight increase in revenue as a result of an increase of 0.9 percent of single taxpayers earning higher than $200,000 and married couplkes earling higher than $250,000, which directly benefits the Medicare Hospital Insurance Trust Fund. Since these earning levels are not indexed, an increase in the number of taxpayers affected by this additional payroll tax is expected over time.
According to information from the Centers for Medicare & Medicaid Services, Medicare provided health insurance coverage to 46.3 million people in 2009. Total Medicare expenditures were $509 billion and income was $508 billion, with expenditures slightly lower than projected in last year's report.
The new outlook compared with last year – when the trust fund was projected to run dry in 2017 – is largely based on revised estimates of projected cost increases. CMS currently projects costs to increase by 6.4 percent of the Gross Domestic Product by the end of the long-range, 75-year projection period. Last year, those costs were projected to increase steadily (and rapidly) to more than 11 percent of the GDP in 2084.
In praising the new report, new CMS Administrator Donald Berwick also offered a note of caution.
"These favorable changes depend critically on a specific ACA provision, which will slow the rate of growth in Medicare payments to most categories of providers by about 1.1 percent annually in anticipation of improvement in productivity," he said. "It is important to note that the effect of these adjustments will reduce payment rates over time, and it is possible that providers would not be able to slow their cost growth correspondingly."
That said, Berwick noted his experience as a physician leads him to believe these results are achievable.
"I have seen firsthand the substantial improvements in quality and cost-effectiveness that can be achieved by healthcare providers," he said. "As a result of this provision, providers will have strong financial incentives and many other supports to find more efficient ways to care for patients that not only reduce costs but more importantly improve quality."