Health reform begins savings for Medicare


The new health overhaul law is starting to produce savings for Medicare and will eventually add more than a decade of solvency to the program’s trust fund, the Obama administration said in an upbeat report released Monday.

Medicare will save about $8 billion by the end of next year, and as much as $575 billion over the rest of the decade, the report said.

“This reflects the priority we put on acting quickly to secure Medicare’s future,” Health and Human Services Secretary Kathleen Sebelius told reporters. “We are going to ensure that seniors and Americans with disabilities get more value when they go to the hospital or to see a doctor.”

Release of the analysis comes ahead of the official annual financial checkup for Social Security and Medicare from program trustees, due later this week. Monday’s report provides support for the administration’s position that the health care law strengthens health care for seniors, but the trustees’ report could well call attention to deeper problems, as has happened in the past.

Republicans have argued that spending cuts called for in the health care law will undermine Medicare, and the government’s own nonpartisan analysts have questioned whether some of the reductions are politically sustainable. Polls show that seniors are more skeptical of the health overhaul than younger people, a political dilemma for Democrats in the fall congressional elections.

Sebelius dismissed speculation that a future Congress would roll back the cuts. “We are optimistic … that the will of Congress to move in this direction is more sustainable than it’s ever been,” she said.

The report says savings from the cuts will help to lower seniors’ monthly premiums by nearly $200 annually by 2018.

Medicare spending will keep increasing, only not as fast. Under the health care law, spending will rise by 5.3 percent a year on average over the next decade, compared to 6.8 percent without the cuts.

The Medicare trust fund will remain solvent until 2029, a gain of more than a decade from 2017. However, critics say trust fund solvency will only improve on paper, since actual savings from the Medicare cuts would have been spent to provide coverage for more than 30 million uninsured Americans.

The single biggest slice of the Medicare cuts is from reductions in projected payment increases to hospitals and other providers over the next 10 years. That’s followed by cuts to private insurance plans that now cover about 1 out of 4 seniors. Nonpartisan government experts say those so-called Medicare Advantage plans are overpaid when compared to the cost of care in traditional Medicare.

But the insurance industry says the cuts will mean steep premium increases for millions of seniors in the plans. That could trigger an exodus, with seniors returning to traditional Medicare. Cuts to the private insurance plans start right away, while reductions to providers phase in more gradually.

Some of the savings are expected to come from efforts to improve quality and combat fraud.

For example, a program to reduce hospital readmissions due to preventable infections and other problems is estimated to save $8 billion over 10 years. Regulations for that program were issued Friday.

And a new, team-based approach to providing medical care for seniors is estimated to save $5 billion over the same period, by keeping patients with chronic health problems healthier and avoiding hospitalization. — AP