Medicare Spending Forecast

Bad as the Trustees Report is, the reality is likely to be ever worse.

In the Affordable Care Act (ACA) of 2010, Congress required a reduction in the inflation update for hospitals and other non-physician providers of services, reflecting economy-wide productivity improvement, which the Medicare actuaries estimate at about 1.0 percent annually. So, as an example, instead of an inflation update of 3.2 percent each year, hospitals and others will get 2.2 percent more per billed service….

The payment restrictions on physicians are even tighter…. [D]octors will get pay increases of just 0.75 percent each year in the future (which is well below expected price inflation) if they agree to participate in alternative payment models, and only 0.25 percent if they don’t.

The trustees’ illustrative projection [shown below, eventually] assumes the updates keep up with the historical experience of input cost growth and productivity improvement. 

Source: James Capretta, AEI

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