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From Health Law Daily, November 19, 2015

ACA’s impact on future Medicare costs remains uncertain

By Mary Damitio, J.D.

The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) implemented various measures to improve Medicare’s costs and reduce out-of-pocket expenses, appearing to have dramatically reduced the program’s long-run cost projections. However, a brief released by the Center for Retirement Research at Boston College cautions that such long-term projections are inherently uncertain because they depend on legislated payment reductions, which may not be sustainable.

ACA. While the ACA has helped reduce long-run aggregate and per capita health cost projections, it is uncertain whether the projections are accurate. The ACA included approximately 165 provisions aimed at reducing costs, eliminating fraud and abuse, increasing revenues, and developing research and technological enhancements. Since the ACA’s provisions were enacted, the Medicare Trustees Report official cost projections declined dramatically as a percentage of Gross Domestic Product (GDP) between the 2009 and 2015 reports. It is also projected that beneficiaries will spend a smaller percentage of their Social Security benefits on out-of-pocket expenses as a result of the ACA.

OACT. However, CMS’ Office of the Actuary (OACT) has warned that the ACA’s impact may be overstated. As a result, beginning in 2010, the OACT issued a set of alternative projections if the ACA’s payment reductions are not sustained. The OACT’s alternative projections for Parts A and B show a substantial increase in expenditures are a percent of GDP. According to the brief, the differences between Trustees Report and the OACT’s projections are attributable to changes in physicians’ payments enacted by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (P.L. 114-10) and the ACA’s provisions for productivity adjustments (Section 3401), and the Independent Payment Advisory Board (Section 3403). These payment-reducing provisions could lead to such low payments that providers would stop accepting Medicare. As result, payment rates would then need to rise in order to retain participants in the program.

Uncertain future. However, a review of the different projections over the past six years shows that gap between the two appears to be narrowing due to the fact that the OACT’s alternative projections have decreased while the Trustees’ projections remained steady. However, the authors note that a substantial gap in cost rates remains between the two projections, which demonstrates the continued uncertainty about Medicare’s future costs.

Companies: Center for Retirement Research at Boston College

MainStory: TopStory HealthCareReformNews CMSNews PartANews PartBNews PartCNews PartDNews PhysicianNews

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