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The Medicare Reform Act: Smoke And Mirrors For Patients And Physicians

An interesting debate occurred in the Washington Post between Michael Leavitt, former secretary of Health and Human Services and a member of the Medicare Board of Trustees from 2005 to 2009, and Dr. Don Berwick, the director of CMS.

Michael Leavitt wrote a scathing article criticizing President Obama’s Medicare Reform Act calling it an illusion. Don Berwick wrote a rebuttal to Michael Leavitt’s article.

Michael Leavitt starts off his article by stating: “Despite the report from Medicare’s trustees this month that the hospital insurance trust fund will not be depleted until 2029, 12 years later than was predicted just last year, Medicare is no better off than it was a year ago. “

The Medicare Trustees Report was strange. Nothing was done to change anything and all of a sudden, the hospital insurance fund was extended 12 years. I thought it was funny arithmetic.

Medicare Trustees is supposed to be an organization independent of the administration. Shortly afterward, Richard Foster, Chief Actuary for Medicare, who is independent of both the Medicare Trustees and the administration, wrote an “Alternative Report.” His report received little coverage in the traditional media.

I wrote an article about Mr. Fosters report.

The Medicare Chief Actuary Alternative Report: Richard Foster

After the Medicare Trustees Report was published, Richard Foster the Chief Actuary for Medicare warned “the projections in a Medicare Trustees Report “unreasonable” and “implausible.”

He encouraged everyone to ignore the report and view instead an “Illustrative Alternative” report. He said, “The projections shown in the report do not represent the “best estimate” of actual future Medicare expenditures.”

Noting that the formal Trustees report assumes Medicare physician fees will be reduced by 30% over the next three years, Chief Actuary Richard Foster says that’s “implausible.” In addition, the Trustees report assumes Medicare fees will fall below Medicaid rates by 2019 and fall further and further behind private payment rates in future years, as the following chart shows:”


  •  In his April 22 report, Richard Foster laid out the implausible aspects of the math. President Obama has used funny arithmetic to get his healthcare reform bill passed with a promise of budget neutrality. Foster said;
  • Cuts in Medicare spending of $575 billion over the next decade.
  • 7½ million members of Medicare Advantage plans to lose their coverage and cause another 7½ million to face higher premiums and benefit cuts.
  • About one in seven facilities — hospitals, skilled nursing facilities, home health agencies, and hospices — to become unprofitable and possibly drop out of Medicare altogether.
  • Many doctors to quit seeing Medicare patients entirely.
  • The public no longer believes President Obama and his projections. They understand his motives.”

President Obama constantly claims his healthcare reform law will “Bend the Cost curve” According the Chief Medicare actuary report it will bend the curve in the wrong directions.

In his rebuttal, Dr. Don Berwick uses the Medicare Trustees Report as a given truth to defend President Obama’s healthcare reform law.

“The Medicare Board of Trustees estimated last month that the Affordable Care Act produces savings that extend the life of the Medicare Hospital Insurance Trust Fund for 12 years, to 2029. The actuary of the Centers for Medicare and Medicaid Services (CMS), an independent office, reached the same conclusion.”

Dr. Berwick has misquoted Richard Forster, the chief actuary of the Centers for Medicare and Medicaid Services.

Dr. Berwick goes on to say, the Congressional Budget Office has estimated that the law will reduce the federal deficit by more than $100 billion over the next 10 years and more than $1 trillion in the following decade.

Those real savings help today’s and tomorrow’s Medicare beneficiaries.

The problem with that statement is that is what the CBO said before the bill was passed. The CBO was given assumptions by Nancy Pelosi, Harry Reid, and President Obama.

After the bill was passed in May 2010, the CBO revised the estimate. Rather than decreasing the deficit, it will increase the deficit by $115 billion dollars over ten years.

The problem begins with double counting. The Congressional Budget Office estimates that the health law will reduce Medicare spending by about $450 billion over 10 years. But all of those savings, plus massive tax increases, are used in the new law to pay for an expansion of Medicaid and a new entitlement program to subsidize insurance premiums for low-income households.

Dr. Berwick explained the double counting away by pointing out that Medicare cuts can be used to improve the government’s capacity to finance benefits in the future or to pay for another entitlement.

If there are cuts to Medicare payments of $450 billion dollars over 10 years how are Medicare benefits going to improve. The CBO and Medicare’s actuary said the $450 billion dollars could not be used for both Medicaid and Medicare. More importantly, congress has already committed those funds to other projects.

Dr. Berwick says this is not double counting. It sounds like double counting to me.

“Some, including Leavitt, claim these savings are “double counted.” This argument is inaccurate and oversimplifies what is really going on.”

The government accounting rules opaquely cook the books and increase the deficit. Medicare’s estimated saving is credited to the Medicare Trust Fund. The Medicare Trust Fund buys treasury bonds. The government uses the bond proceeds to fund other projects. When Medicare needs the money, they sell the treasury bonds. The government prints more money without congressional approval. The increased funds will then pay for Medicaid expansion.

It is double counting.

Many Americans have a hard time following these manipulations.

I must warn President Obama and Dr. Berwick that Americans’ are interested now. There is a developing mistrust for the administration and the increasing budget deficits. The mistrust is growing especially since nothing is being accomplished except bigger government control over the healthcare system.

This is all smoke and mirrors with patients and physicians being the victims.

*This blog post was originally published at Repairing the Healthcare System*

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One Response to “The Medicare Reform Act: Smoke And Mirrors For Patients And Physicians”

  1. With each passing month, public support for the president’s health care law diminishes. Indeed, his overreaching and overpromising will be one reasons for the GOP’s success in November. Fewer and fewer folks believe that costs will be controlled. Who will care for the 33 million newly insured when we already have a primary care physician shortage? How will the public respond to a vigorous enforcement of comparative effectiveness research, who’s purpose is to deny expensive care of questionable benefit? Remember Mammogate? Finally, does anyone truly believe that medical quality will improve? Physicians understand the fallacy of pay for performance and other pseudo-quality initiatives.

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