Are the cuts in Medicare provider payments sustainable? They may be because they are implemented together with a major expansion in coverage that will generate new revenues for providers.

For example, we have estimated that hospital revenues under the health reform bill would increase by $35 billion over the 2010 through 2019 period, despite the cuts in Medicare and Medicaid payments ($169.4 billion). These cuts would be more than offset by an increase in utilization of health services for newly insured people ($108 billion), and reduced uncompensated care ($96 billion). (Care now provided free to the uninsured will become reimbursed as these people become covered).

Thus, hospital revenues increase by $35 billion over 10 years. Once we figure in the cost of providing additional services for the newly insured, hospital net income would decline by $52 billion over that period (reflects lower payment to cost ratio for people who become covered under Medicaid). This is a reduction in hospital margin of about 7.8 percent over 10 years.

Physicians do quite well under reform, even though the bill does not include the fix to the sustainable growth rate SGR formula. (Under current law, physicians will see a reduction in Medicare payment levels of 21 percent under the SGR unless Congress acts.) Revenues from utilization for newly insured people and reduced uncompensated care would result in a net increase in physician revenues of $134 billion over ten years, with an increase in net income of $80.9 billion (1.7 percent increase). This reflects the cost of services provided to newly insured people and an increase in reimbursement for primary care physicians under Medicaid.

If we add to this the revenues from correcting the SGR, which we expect to see under a separate bill, physician revenues would increase by an additional $228 billion over 10 years, resulting in a $309 billion (6.5 percent) increase in physician net income. (In fact if the federal cost of correcting the SGR is included with the health reform bill, health reform will increase the federal deficit by up to $150 billion, rather than reduce it.)

So, on average the analysis suggests that providers would be able to sustain the Medicare cuts, although some individual hospitals and physicians will see significant effects. Go to www.lewin.com to download the slides from our April 1 webinar for more info.

It's a bit hard to shed tears for AMA members when the AMA endorsed the legislation James Rohack is now upset about. It would have been helpful if the AMA had demanded in return for it's backing real, measurable and enforceable savings to offset the drastic impact of reversing the physician cuts -- and he and everyone knows those cuts remained in the bill to make sure CBO would come up with the "right" number. Everyone also knows that ultimately the cuts will be reversed in some other peice of legislation, and Congress will, with a straight face, claim that doesn't add to the cost of the health legislation.

As for the Board, the legislation assures that it can't come up with any serious reforms of Medicare, just proposals to control payments to providers.

So if the we follow the letter of the law Medicare patients will be treated by fewer but more disgruntled docs. But if experience is any guide, the payment cuts will be less severe or non-existant, and the cost-curve and deficits will continue to turn upwards. This is reform? This is good for Medicare?

Until Congress permanently repeals the broken Medicare physician payment formula, the security and stability of Medicare will be threatened for seniors and their physicians. As we talk about a path to financial stability for Medicare, it’s clear that continuing with the same-old solution of short-term fixes to annual Medicare physician payment cuts based on budgetary gimmicks is not really saving money because it’s making the cost of permanent reform of the payment formula even more expensive for taxpayers in the future. Here’s one scenario to illustrate my point: This year, the cut is 21 percent and the cost of real reform is $210 billion. If Congress continues to enact short-term patches funded by budget gimmicks, in 2015, physicians will experience a cut of 32% and the cost to freeze Medicare payments to physicians will have risen to $417 billion. Permanent repeal of the payment formula this year remains lawmakers best chance to ensure that physicians will be able to care for seniors now and into the future – and to help set the program on honest financial footing when lawmakers truly address Medicare’s overall fiscal health.

The new law also created the Independent Advisory Payment Board, which is designed to wring savings from the system by reducing payments for health care professionals starting in 2014. This unduly puts physicians in double jeopardy – subject to cuts from both the payment formula and now from IPAB. The scope and authority of IPAB clearly must be addressed in future legislation so that it does not have unintended consequences for patients who rely on physician care.

Medicare is forecast to be bankrupt in 2017. As a result, there is no question that the government will be putting more controls on Medicare spending. They will have to set a budget that government can afford. Our population is aging and as a result the demand for health care by our seniors will increase but the government will have to limit care. The result will be rationed care for the elderly and long waiting lists. It is already the case that one in three new Medicare eligible patients is having a difficult time finding a doctor because of the low reimbursement rates they receive from CMS. I think the ultimate goal of the President is a program of "Medicare for All."

There can be no glide path to financial stability unless Congress creates one -- ie a real and enforceable budget for Medicare as a bipartisan group of budget experts proposed.

The legislation adds to Part D rather than focusing it on those who really need it.

And the legilsation's "savings" come from payment controls on providers (including the 21% cut for docs that will never happen). If the savings do happen there will be shortages. If -- more likely -- they don't there will be more debt for our kids. There is no reform to speak of.

The health reform legislation signed into law by President Obama will strengthen Medicare for its beneficiaries, extend the fiscal solvency of the program, and begin to change the health care system to one that delivers better access to care, improved quality, and greater efficiency. Some have characterized these changes as Medicare cuts, arguing that they represent a decline in benefits and a harmful reduction in provider payments. In fact, everyone will continue to be guaranteed all of Medicare’s basic benefits, and all providers will have the opportunity to be rewarded for delivering high quality, efficient care.

For beneficiaries, the law includes several important provisions designed to reduce costs for prescription drugs, expand coverage for preventive care, and provide more help for low-income seniors. This year, beneficiaries falling into the Part D “donut hole” will receive $250 rebates -- and out-of-pocket costs will continue to fall in subsequent years until the donut hole is closed in 2019. The law expands the number of covered preventive services, including annual wellness visits, and eliminates cost-sharing for those services. Prescription drug copayments for certain dual eligible individuals are also waived.

The way hospitals and other health care providers are paid will be changed to focus more on the quality and effectiveness of care that patients receive, and new initiatives aimed at improving the organization and delivery of care promise to improve care coordination and effectiveness, as well as slow cost growth. In doing so, the Medicare savings that will come from improved productivity and reduced overpayments will help sustain the fiscal solvency of the Medicare Hospital Insurance Trust Fund and reduce both beneficiary premiums and the program’s draw on tax revenues relative to what is currently projected. The CBO estimates that the law will extend the solvency of the Part A Trust Fund by nine years, to 2026. Recent Commonwealth Fund analysis shows that Medicare cost growth will slow from 6.6 percent annually to 5.2 percent under reform.

In short, the health reform law will improve benefits for Medicare beneficiaries, extend the fiscal solvency of the program, reduce pressure on the federal budget, and begin to orient the health care system for high performance. These important reforms will move us away from the fragmented, inefficient, and poor-quality system that now undermines the health and health care of far too many Americans. Medicare beneficiaries, who depend particularly on access to high-quality health care, stand to benefit substantially from these changes.

Oh, that it were true that all of Medicare’s problems were solved by recent health reform legislation. However, no clear thinking person with the least bit knowledge about the depth of Medicare’s problems will have any optimism such a statement is true.

Cuts in payments to medical providers: mark me down as skeptical on this one. As Secretary of Health and Human Services I carried budgets containing a fraction of the reductions required under the new law. I was scolded by members of the appropriations committees for considering such uncaring and illogical cuts. It is interesting that finally the members of the committee have now started using the words “reduction in the growth rate.” When they were against such action (before they were for them), the word was CUT. Am I the only one that finds it ironic that Congress chose to strip the SGR fix out of the final bill because it was too controversial? Paying for expansion of government spending today by pretending somebody will reduce spending in the future has become a time honored tradition in Washington.

One part of the health reform legislation I do have optimism about is the new emphasis on value based purchasing. However, to solve Medicare’s problems will require more than demonstration projects. Only the elimination of the fee for service payment system will create a pathway of reform. However, the presence of the new authorities in the legislation gives me hope providing consumers with information about the cost and quality of their care, rewarding value rather than volume may be part of our future. These provisions were not controversial in a partisan sense. In fact, many of the demonstration projects were developed by the previous administration.

Medicare’s problems are deep. Real reform will require big scale change. This bill is small-ball value demonstration projects attached to a massive expansive of the same-old problems.

Most people, including most people in Washington, DC, have no idea how bad Medicare's financial picture is. But it is all there in last year's Trustees Report. Looking indefinitely into the future, the unfunded liability in Medicare is $89.3 trillion -- more than six time the size of the US economy. This year, the government is using about one in seven general revenue dollars to cover the cash flow deficit in Social Security and Medicare. By 2020, they will need one in four dollars. By 2030, one in two.

That means, in order to balance the budget at current tax levels, by 2020 the government will have to stop doing about one in every four (other) things it has been doing. By 2030, it will have to stop doing one in every two (other) things it currently does.

All over the developed world, the left basically knows only two ways to control health care costs -- squeeze the providers and ration care. ObamaCare promises to start by squeezing the providers. Then it will inevitably turn to overt rationing. Neither approach will work.