News & Events

Wash Post Dec 11 09 CMS (Medicare) Report: Medicare cuts would threaten profitability of one in five hospitals, warning that many institutions might drop Medicare

By Lori Montgomery

Friday, December 11, 2009 2:42 PM

A Senate plan to cut Medicare to pay for an overhaul of the health system would threaten the profitability of roughly one in five hospitals and nursing homes over the next decade, according to a new analysis by the government official responsible for monitoring the popular health program.

In a report released Friday, Rick Foster, chief actuary for the Centers for Medicare and Medicaid Services, questioned the sustainability of many of the proposed cuts, which are the major source of funding in a plan to extend insurance to more than 30 million additional Americans.

A proposal to reduce payments to hospitals and other providers, to force them to adopt more efficient practices, could prove particularly problematic, Foster wrote, for institutions that serve large numbers of Medicare patients.

Foster called such efficiencies "difficult to attain" and warned that many institutions might drop Medicare, "possibly jeopardizing access to care for beneficiaries."

Moreover, Foster wrote, "simulations by the Office of the Actuary suggest that roughly 20 percent of Part A providers would become unprofitable within the 10-year projection period as a result of the productivity adjustments. Although this policy could be monitored over time to avoid such an outcome, changes would likely result in smaller actual savings" from the proposed spending cuts.

The report echoes concerns Foster raised last month about similar cuts in the House bill, but it offers a more specific warning about the potential magnitude of disruption in the health sector.

Democrats argue that Foster’s concerns are overstated: Doctors and hospitals rarely pull out of the vast Medicare program, they say, and providers themselves have agreed to these cuts in exchange for the chance to serve millions of new customers with insurance.

On Friday, Senate Finance Committee Chairman Max Baucus (D-Mont.), the Senate bill’s chief architect, focused on other aspects of the report, hailing Foster’s conclusion that the Medicare savings, if realized, would extend the financial life of the program by nearly a decade, and would reduce premiums and cost-sharing for beneficiaries by an annual average of nearly $500 per couple.

Republicans played up Foster’s conclusion that overall health spending in the nation would increase slightly under the bill.

"A report released last night by the administration’s own independent scorekeeper shows that the Democrat bill gets a failing grade," said Senate Minority Leader Mitch McConnell (R-Ky.). "This chief actuary is the person the administration depends on to give it straightforward, unbiased analysis of the impact the legislation would have. This is the official referee talking — so this is significant."