Medical Device Daily Washington Editor

WASHINGTON — The Medicare Trustees report, issued earlier this week, painted a dire picture of a program becoming "unsustainable" — that wording provided by Mike Leavitt, secretary of Health and Human Services. But reaction to the report suggests that politics will play a role in any program fixes, as it is in most healthcare debates and decision-making these days.

Despite indications that Medicare will consume more than 10% of GDP by the time most of the Baby Boom cohort passes into history, congressional critics and others decried the report's conclusions as a scare tactic designed to give fiscal conservatives the upper hand.

According to the report, the Hospital Insurance (HI) trust fund, which finances Medicare's Part A hospitalization benefit, "is already expected to pay out more in hospital benefits this year than it receives in taxes and other dedicated revenues." And current projections call for the HI fund to hit zero in 2019.

The analysis says that the fix for this impending deficit should be "an immediate 122% increase in the payroll tax, or an immediate 51% reduction in program outlays or some combination of the two."

At present, employees pay 1.45% of their income for the HI fund, an amount that employers must match.

Projections indicate that funding for doctor's services under Part B and the prescription drug benefit under Part D will rise from 1.3% of GDP last year to 4.7% at the end of the 75-year projection — that is, by 2081.

The report points out that a number of factors could move these projections either up or down.

Among these factors are breakthroughs in medical science and development of blockbuster drugs, both of which can reduce or increase costs. The report also notes that changes in "preferences of the population for particular kinds of care" might also exert unforeseen effects on costs.

The report notes also that the most important assumption specific to Medicare is that "healthcare cost inflation, which has historically exceeded the growth in GDP on a per-capita basis by more than two percentage points annually, will gradually decline over the 75-year projection period until it simply equals GDP growth at the period's end."

On the other hand, Americans have exhibited "a strong propensity over the past half century to increase the share of [national] income spent on healthcare," according to the report.

"But if it does not do so soon, then the bleak fiscal picture portrayed in these reports will be bleaker still," the trustees conclude.

According to the Medicare Modernization Act of 2003, the Trustees must make this report whenever projections indicate that 45% or more of Medicare funding will have to come from non-dedicated sources.

Rep. Pete Stark (D-California), chairman of the House Ways and Means Committee's health subcommittee, blasted the 45% figure as "an arbitrary threshold designed to scare people."

Max Baucus (D-Montana), who chairs the Senate Finance Committee, said that the report may "prompt the president only to propose slashing Medicare spending rather than to focus on the underlying [cost] factors."

Ron Pollack, executive director of Families USA (Washington), also characterized the 45% threshold as "completely arbitrary," describing the Medicare financing picture as a "so-called problem."

MA to be offset for Medicare shortfall

On Wednesday at a hearing of the Ways and Means health subcommittee, Stark said he will offer a bill to cut funding for Medicare Part C, known as Medicare Advantage (MA).

The hearing was held to address the Trustees report, and several federal agencies and other bodies, including the Medicare Payment Advisory Commission, have indicated that MA plans receive, on average, 12% more than doctors providing services under Part B.

The move is sure to meet opposition from the Blue Cross and Blue Shield Association (Chicago), which published a study the day of the hearing that said MA cuts could trim enrollment by about one-third, or 3 million, forcing enrollment back to traditional fee-for-service care.

The BCBS study said the hardest-hit states would not include California. Almost 200,000 beneficiaries, each in Ohio and Pennsylvania, would lose coverage, as would more than 170,000, each in Texas and Michigan.

New HIT bill making rounds

Last year's healthcare information technology (HIT) bills died with the 109th Congress, but a bipartisan effort may revive the prospects for federal funding of the effort to pull doctors into the Digital Age.

Reps. Charles Gonzalez (D-Texas) and Phil Gingrey (R-Georgia) presented the National Health Information Incentive Act (H.R. 747), which had been offered in the 109th Congress. In its current form, H.R. 747 would provide doctors' practices with a boost of the tax write-off for HIT to $250,000, up from $100,000. For practices of fewer than 10 doctors, the bill makes grants and loans available.

Gingrey described doctors' offices as "woefully behind" the curve for IT adoption, adding that a bank's automated tellers "shouldn't be more advanced than our medical records."

Justin Barnes, VP of marketing and government affairs at Greenway Medical Technologies (Carrollton, Georgia), said that the bill "addresses the cost barriers for physicians, and this is a step in the right direction on the part of Congress." Greenway, which helped craft the bill, is a provider of HIT software for medical practices.