Too Good to be True? Trustees Report on the Medicare Trust Fund for 2014
It was greeted as great news that the Medicare Trust Fund has moved its bankruptcy out 4 years from 2026 to 2030 according to the Trustees Report on the Medicare Trust Fund released on July 28, 2014. Is this news too good to be true? After thinking about this favorable Report, it is very unusual that such an actuarial study would change that quickly in one year. Some major assumption must have been altered. After reviewing the study, the change that led to the great increase in the years until bankruptcy was the assumption that the low level of healthcare inflation, noted in the last couple years, would continue to occur in the near term. With these words on page 3 of the Report, that is what the Trustees assumed. ‘The Trustees are hopeful that U.S. health care practices are in the process of becoming more efficient as providers anticipate a future in which the rapid cost growth rates of previous decades, in both the public and private sectors, do not return. Indeed, the Trustees have revised down their projections for near term Medicare expenditure growth in response to the recent favorable experience.’ The Trustees are hopeful and because of that, they make such a drastic change in their projections about the health of our Medicare program? Wow, hope is an amazingly rational basis for changing an estimate! What is also concerning is that the report was released 2 months later than last year’s Report and that the physician cuts, contained in the law but always overridden by Congress, are in the estimates at full value. One could surmise that the report was delayed for these several months and the physician costs were included because the initial assumption change about the lower healthcare costs would have moved the bankruptcy date out much too far making it much more likely to draw attention and more profound skepticism.
Harry Pukay-Martin
