Today’s headlines on Coronavirus in America: cases surging, states reversing re-opening, nearly half adult population is without a job, and data on Medicare nursing home facility cases and deaths. The federal Medicare Hospital Insurance program (Part A) already faces challenges serving an aging population, increasing enrollment, and rising costs with funding overwhelmingly dependent upon tax revenue in the form of income and payroll taxes. In comparison, Medicare Supplementary Insurance and Prescription Drug Programs (Parts B and D essentially providing physician, outpatient, and medication) are financed through beneficiary premiums and general revenues.
On April 22, 2020, the Board of Trustees issued the Annual Medicare Report 2020 on its financial operations and actuarial status. The Medicare Program reportedly covers 61.2 million beneficiaries with total expenditures of $796 billion in 2019, and the lengthy Report details a substantial amount of information on its past and estimated future financial operations. The Report maintains that Medicare cost projections are “highly uncertain, especially when looking out more than several decades… No one knows whether future developments will, on balance, increase or decrease costs.” The Report also is concerned that certain features of current law—such as, care delivery models and provider reimbursement rates—may result in some challenges for the Medicare program. “If the health sector cannot transition to more efficient models of care delivery and if the provider reimbursement rates paid by commercial insurers continue to be based on the same negotiated process used to date, then the availability, particularly with respect to physician services, and quality of health care received by Medicare beneficiaries would, under current law, fall over time compared to that received by those with private health insurance.” The Report insists that Medicare “still faces a substantial financial shortfall that will need to be addressed with further legislation. Such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers.” In conclusion, the Board projects that Hospital Insurance tax income and other dedicated revenues will not cover expenditures, does not meet short-range financial adequacy or long-range close actuarial balance, and the Report calls for substantial changes to meet these challenges:
- Expenditures will increase in future years at a faster pace than either aggregate workers’ earnings or the economy overall and that, as a percentage of GDP, spending will increase from 3.7 percent in 2019 to 6.5 percent by 2094 (based on the Trustees’ intermediate set of assumptions).
- If the relatively low price increases for physicians and other health services under Medicare are not sustained and do not take full effect in the long range as assumed in the illustrative alternative projection, then Medicare spending would instead represent roughly 8.5 percent of GDP in 2094.
- Growth under either of these scenarios would substantially increase the strain on the nation’s workers, the economy, Medicare beneficiaries, and the Federal budget.
- The Part B and Part D accounts in the SMI trust fund are expected to be adequately financed because income from premiums and general revenue are reset each year to cover expected costs. Such financing, however, would have to increase faster than the economy to cover expected expenditure growth.
- The sooner solutions are enacted, the more flexible and gradual they can be. The early introduction of reforms increases the time available for affected individuals and organizations—including health care providers, beneficiaries, and taxpayers—to adjust their expectations and behavior.
- The Trustees recommend that Congress and the executive branch work closely together with a sense of urgency to address these challenges.
Although lawmakers have never allowed the assets of the Medicare Part A to become depleted, look at what is going on around you especially trends in population, labor and taxes, and now glimpse into the horizon: What would affect the zealousness with which the federal government enforces Medicare Secondary Payer Section 111 Civil Money Penalties and recovery of conditional payments? Other than cost control and tax revenue, the tool available to Medicare is enforcement through payment efficiencies, preventing fraud, waste and abuse, and eliminating overpayments. Enforcement of Section 111 reporting seems to fall squarely into Medicare’s means to solve short and long term financial goals.
Plant the seeds. Be proactive. Create winning compliance strategies in line with best claims handling procedures and business judgment rule.
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