Published 5/1/2009
James B. Rickert, MD

Medicare: Running out of time and money

The crisis is coming—with no easy fix in sight

The early months of 2009 have drawn us much closer to the heart of our nation’s looming Medicare crisis. In January, President Barack Obama told reporters, “The big problem is Medicare, which is unsustainable…This, by the way, is where there are going to be very difficult choices and issues of sacrifice and responsibility and duty.” He returned to that message in a recent address to a joint session of Congress, saying, “To preserve our long-term fiscal health, we must also address the growing costs in Medicare…”

Recent data illustrate both a deepening of the challenges facing Medicare and a hastening of what some have called its “day of reckoning.” The current recession has reduced both the country’s economic output and the tax dollars that support programs such as Medicare and Medicaid. In addition, the cost of medical care has continued to grow relentlessly and now threatens to overwhelm the nation’s ability to continue to provide care to tens of millions of previously insured citizens, among them the poor and elderly.

The problems with Part A
Although not unexpected, the most worrisome news first surfaced in December 2008. Richard Foster, chief actuary for the Centers for Medicare & Medicaid Services (CMS), reported that statistical models on the effect of the current recession on tax revenue indicated that Medicare’s hospital payment trust fund could be exhausted by as early as 2016—3 years earlier than previous estimates. Even more troubling, these projections are based on only a short period of negative economic growth.

Once this trust fund is depleted, only current payroll tax revenues will be available to pay hospitals under Medicare Part A. Initially, these revenues will be sufficient to cover only 78 percent of hospital charges; in subsequent years, this percentage will continue to decline sharply. To immediately correct this imbalance, either payroll taxes must increase 122 percent (from 2.9 percent to 6.44 percent) or program spending to hospitals must be cut in half.

After reading such staggering statistics, one quickly realizes that sweeping reforms are needed to preserve both Medicare and the nation’s hospitals.

Part B isn’t any better
The economics of Medicare’s program for reimbursing physicians are no better. According to a recent CMS analysis, even if the 21 percent reduction in Medicare payments to physicians mandated under the current sustainable growth rate (SGR) formula does occur in 2010, overall payments to physicians under Medicare are expected to decline by only 7 per­cent. Between 2010 and 2018, overall payments to physicians are expected to rise between 4 percent and 9 percent annually.

Medicare payments to physicians will continue to outstrip the expected growth in the gross domestic product (GDP) and consume an increasing share of the nation’s wealth and federal budget (Table 1). The federal government cannot continue to pay doctors a continually larger percentage of the federal budget as projected under all current analyses of Medicare. In absolute dollar terms, Medicare paid physicians $178 billion in 2007, and even with the required SGR cuts, these payments are expected to balloon to $415 billion by 2017.

The terrible price tag
Current efforts in Washington, D.C., to solve this pending Medicare disaster involve a complete overhaul of the nation’s healthcare system. President Obama has said that he hopes to solve the Medicare funding problem as part of a larger effort to solve the country’s systemic healthcare crisis.

In 2008, per capita healthcare costs crossed the $8,000 annual threshold for the first time. Unless changes are made, these costs are expected to reach $9,700 by 2013 and to top $13,000 by 2018. Healthcare spending is projected to rise from 16.2 percent of GDP in 2007 to 17.6 percent in 2009 and to top 20 percent of GDP by 2018 (Table 2). Total spending, without changes to our system, will rise from $2.4 trillion in 2008 to an unimaginable $4.4 trillion in just 9 years.

These accelerating costs are already profoundly impacting the health of the nation. According to a new Kaiser Family Foundation poll, 53 percent of Americans say that their household has cut back on needed health care during the past 12 months. Detailed findings reveal that more than one third of those surveyed went without a needed doctor’s visit, one in five did not fill a prescription, and 15 percent cut pills or skipped doses to make prescriptions last longer. A plurality of the public responded with cost concerns when asked what “healthcare reform” meant to them.

This poll reinforces the dis­tress­ing truth that the United States is already paying a terrible price for its current healthcare system. Fortunately, serious efforts are now underway to fix, not just Medicare, but the entire system.

As physicians, we should be aware that any effort at reform will include reducing what administration officials have called “the crushing cost of health care.” As orthopaedists, we should expect to be key players in reforming this system. This expectation should include the realization that, as highly paid specialty physicians, we must expect reimbursement reductions. We cannot expect that reimbursements will be lowered for everything but our services, and we should realize that policy makers are likely to protect reimbursements for primary care doctors by reducing payments for more expensive procedures.

James B. Rickert, MD, is an orthopaedist in private practice. He can be reached at jbrickertmd@comcast.net

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