AEI recently welcomed Paul Spitalnic , Medicare’s chief actuary, for a presentation of the Medicare Board of Trustees’ annual report. Unsurprisingly, data still suggest a bleak future for Medicare spending. Nevertheless, Spitalnic and his fellow panelists asserted that Medicare is not “doomed” so long as policy leaders, health care providers, and consumers are willing to make changes. In the words of panelist Stuart Guterman, the report is a warning sign. We need not drive off the cliff. We should simply turn the steering wheel.
Unfortunately, with an aging population, increasingly-expensive treatments, and an inefficient system, turning the steering wheel is easier said than done. For instance, the current “actuarial deficit” of Medicare’s Hospital Insurance (HI) trust fund is 0.68% of taxable payroll to remain solvent for the next 75 years. If nothing changes, the HI fund will run out by 2030. The longer we wait, the fewer options we have, and the more dramatic those options have to be, said Spitalnic.
The report also suggests that spending cuts may not be enough. For example, the recent Medicare Access and CHIP Reauthorization Act looks promising on paper, but may not last. The actuaries warn that the costs of providing physician services will grow more quickly than MACRA’s frugal payment updates. If MACRA and other cuts mandated by the Affordable Care Act are fully implemented, Medicare spending will eventually level off at 6.0% of GDP – but that risks a loss of access to treatments for many beneficiaries. If the full payment reductions are not implemented, Medicare expenditures could reach 9.1% of GDP by 2080, said Spitalnic.
To keep costs manageable, Medicare and the health care sector must focus on efficiency. According to Guterman, it is unproductive and dangerous to discuss whether Medicare should help the chronically ill and cover expensive, lifesaving care. After all, growing treatment costs and increased life expectancy speak to medicine’s success. Instead of looking for ways to spend less, said panelist Keith Fontenot, it is important to help providers become more productive, although he expressed skepticism that the full amount of the productivity increases mandated by ACA would be possible.
Antos pointed out that technological advancements have made higher-efficiency health care possible. Shared electronic medical records exist to help providers collaborate, to eliminate redundant medical testing, and to allow more holistic care. Complex diagnostic equipment can be run by less-skilled workers and free doctors’ hands for high-level tasks. Sadly, said Antos, these advancements are underutilized because of misaligned incentives.
Medicare’s system does not reflect the fact that health care is a “team sport,” said Antos. After all, it comprises two separate trust funds and three distinct “parts,” but most beneficiaries participate in all of Medicare’s offerings. The haphazard structure confuses beneficiaries, discourages doctor collaboration, and diminishes care quality.
Fortunately, asserted the panelists, each one of Medicare’s numerous problems can also be viewed as an opportunity. The report’s ominous predictions are not set in stone, and with the help of innovation, competition, and incentives, health care can increase its productivity.
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