CMS says more Medicare savings needed

May 3, 2012

Healthcare reform could save Medicare $200 billion, but it's not enough, CMS officials fear. Find out what else is required to guarantee the program's long-term health.

The Patient Protection and Affordable Care Act (PPACA) could save the Medicare program more than $200 billion and Medicare recipients another $59.4 billion through 2016, according to a new report by the Centers for Medicare and Medicaid Services (CMS). It will also extend the life of the Hospital Insurance (HI) Trust Fund for nearly a decade, according to the report, but more work is needed to ensure long-term solvency.

A recent Medicare Trustees Report shows that although the HI Trust Fund is solvent for at least another decade thanks to provisions in the PPACA, the program’s expenditures exceed its income and will continue to do so until its predicted asset depletion in 2024. Without the legislation, the HI Trust Fund would be depleted by 2016, according to the report. But without further action by Congress, projected HI Trust Fund revenue will cover only 87% of the estimated costs in 2024 and 67% of projected costs by 2050.

The American Medical Association (AMA) says the new report illustrates why more action is needed to stop looming Medicare cuts.

“Medicare physician payments have been nearly frozen for a decade, while the cost of caring for patients has increased by more than 20%,” AMA Chairman-elect Steven J. Stack, MD, said in a statement. “When that drastic payment gap is combined with the ongoing threat of devastating cuts, an access to care crisis for patients becomes a serious concern.”

The AMA will work with Congress to address issues in the Medicare physician payment formula, he added.

The majority of consumers polled recently by Harris Interactive say they believe that doctors and hospitals should be paid based on quality and results, not the volume of care provided. In the same poll, most consumers say they approve of cutting the price Medicare pays to pharmaceutical companies for drugs and trimming fees to doctors and hospitals, but they would not support higher taxes or increased out-of-pockets contributions, such as copays and deductibles, to rein in Medicare costs. Eighty-three percent of survey respondents in the poll agreed that Medicare-which is expected to consume 17.5% of the federal budget by 2020-needs big changes to stay affordable and sustainable, but they say they would rather the changes didn’t come at a personal sacrifice for taxpayers and consumers.

CMS says that Medicare savings under the PPACA are a result of $68 billion in reductions of excessive Medicare payments to private insurers who operate in Medicare Advantage, $7.8 billion in estimated savings for cracking down on Medicare fraud and abuse, and $85 billion in savings through reformed provider payments designed to improve productivity. The CMS report also estimates $10 billion in savings through 2013 from improving patient safety by reducing hospital-acquired conditions and preventing hospital readmissions, and another $41 billion in savings in other areas including adjusted premium subsidies and changes to benefits.

Several initiatives are under way already through the efforts of CMS’ new Innovation Center to build a foundation for long-term healthcare reform, the report adds, including a transformation of primary care. Model initiatives include a 10% incentive payment Medicare began paying in 2011 to primary care-focused physicians for services to “tilt the balance towards primary care” and create a basis of efficient and coordinated care.

The CMS report also details collaborations between payers and primary care practices to support patient-centered primary care nationwide. Participating practices will receive funding for advanced primary care functions plus a share of net savings generated by the initiative, in return for offering patients 24-hour access to personalized care plans. This model will launch in mid to late 2012 and involves about 75 practices per market caring for about 330,000 patients. Models also are under way or planned involving primary care practice at community health centers, multipayer collaborations for primary care practices, and home healthcare options.

In addition, CMS has announced a final rule to prevent Medicare fraud by ensuring that only qualified, identifiable providers and suppliers can order or certify certain medical services, equipment, and supplies for Medicare recipients. The rule is expected to save taxpayers nearly $1.6 billion over the next decade.

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