Medicare Trustees Cast Doubt on ObamaCare Health Savings

By Matt Cover | May 13, 2011 | 5:59 PM EDT

President Barack Obama embraces Health and Human Services Secretary Kathleen Sebelius, left, and House Speaker Nancy Pelosi of Calif. in the East Room of the White House after signing the health care bill into law on March 23, 2010. (AP File Photo/Charles Dharapak)

( – The 2011 annual report from the Medicare Board of Trustees casts doubt on the ability of the ObamaCare health reform law to achieve significant health care costs reductions, stating it is “very uncertain” whether the sweeping reform will succeed in reducing health care costs.

The report, released Friday, said that an improved financial outlook reported for Medicare depended on the ability of ObamaCare’s cost-savings experiments to bear fruit – an outcome the Trustees found unlikely.

The Trustees said that Medicare expenditures were scheduled to rise from 3.6 percent of GDP in 2010 to 5.6 percent in 2035 and to 6.2 percent in 2085, if ObamaCare’s reforms fully pan out. If they do not, Medicare could account for as much as 10.4 percent of GDP by 2080.

“The financial projections shown for the Medicare program in this report continue to represent a substantial, but very uncertain, improvement over those prior to 2010 as a result of the Affordable Care Act,” the report states.

The report explains that if the reductions in hospital payments envisioned by ObamaCare fail to spur greater efficiency – because hospitals cannot increase efficiency any more – then they will simply refuse to treat Medicare patients.

Also, if Congress continues to stop planned reductions in physician payments – known as enacting a ‘doc fix’ – then Medicare costs will continue to rise.

“For these reasons, it is important to note that the actual future costs for Medicare are likely to exceed those shown by the current-law projections in this report,” the trustees say.

ObamaCare purports to reduce health care costs in two main ways: by forcing providers to implement efficiencies in the short term through gradual and predictable reductions in Medicare payments and by instituting broader health care delivery reforms over the long term. The Medicare Trustees report casts doubt on both approaches.

In the case of the short-term payment reductions, the Trustees report says that they are likely to cause hospitals to lose substantial amounts of money, forcing them to shift costs onto non-Medicare patients or simply refuse to treat Medicare recipients.

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“In this case, the lower Medicare payment rates would result in negative total facility margins for” health care providers, the report states. “Providers could not sustain continuing negative margins and would have to withdraw from providing services to Medicare beneficiaries, merge with other provider groups, or shift substantial portions of Medicare costs to their non-Medicare, non-Medicaid payers.”

In the case of the long-term, systemic reforms envisioned – but not specified – by the ObamaCare reform, the Trustees said the future of those reforms were also “very uncertain” because they did not actually exist.

“The ability of new delivery and payment methods to significantly lower cost growth rates is very uncertain at this time, since specific changes have not yet been designed, tested, or evaluated,” reads the report.

The report said it would be “imprudent” to assume that these promised reforms would have enough of an impact to “significantly” affect steadily rising costs.

It states, “Hopes for success are high, but it would be imprudent to assume that improvements in efficiency can be made of the magnitude needed to align with the statutory Medicare price updates, until such enhancements are proven.”

A senior administration official told that it would have to be a “different world” for ObamaCare’s long-term cost savings to materialize.

“Suppose there’s a different world, however, suppose there’s a world where there’s much more integration of care, where doctors talk to each other, they have electronic health records, they don’t have to order this test because they knew it was just ordered three days ago.

“In a world like that you can get much more efficiency than in the world we have,” said the administration official.

When asked how confident he was that this “different world” would ever actually exist, the official said that some changes would come about “out of necessity” but that it was “less clear” if they would reduce costs.

“I think the different world will in fact come about, I think, out of necessity,” said the official. “I don’t think the country will be able to afford year-after-year, decade-after-decade of a health care system that’s less efficient than it could be.”

“It’s less clear exactly what it will look like and how we will get there,” said the official. “And it’s also less clear how much difference it will make in the cost of health programs such as Medicare.”

The official explained that while greater efficiency would almost certainly be realized, health care technology – and the higher costs associated with it – would also continue to progress.

“Over the long term, health care costs have been driven in significant part by new and better health care technology,” said the administration official. “Nobody’s going to stop inventing these things; we’re all going to want them for ourselves and our loved ones. So there will still be cost factors in the future.