Can we prevent Medicare bankruptcy?
Recently, the Congressional Budget Office shed light on a looming problem for those who rely on Medicare for Part A services – the money will run out in just 10 years.
The Medicare Hospital Insurance Trust Fund, which is used to cover hospital, skilled nursing facility, nursing home, hospice and home healthcare, is largely funded from the Medicare payroll tax, which comprises 89% of Trust Fund income. This means our workforce needs to grow and earn increased wages in order to continue to contribute tax dollars to sustain the Trust Fund. Otherwise, lawmakers need to find money to sustain the program elsewhere.
Although HI Trust Fund income is expected to increase by 5% annually, expenditures are expected to increase more rapidly – at an annual rate of 6%. If current laws remain in place, expenditures are projected to outpace income in 2026 – causing the program to be bankrupt.
Compounding Medicare's fiscal concerns are projections that point to a drastic increase in the incoming number of program beneficiaries. The number of baby boomers enrolled in Medicare is expected to increase by 36% over the next 10 years, and by 2029, 20% of the U.S. population will be older than 65.
The typical Medicare beneficiary will also change over the next decade. Beneficiaries are more likely to live with chronic conditions and disabilities than in previous years. The rates of high-blood pressure, heart disease, diabetes, cancer, stroke and lung disease are all expected to rise among the elderly population, with the percent of Medicare beneficiaries living with three or more chronic conditions expected to rise from 26% in 2010 to 40% in 2030. This increase in chronic conditions is due in part to higher rates of obesity combined with longer life expectancy. For example, in 2010 only one in four beneficiaries were obese, compared to a projection of nearly half in 2030.
Combine an increase in beneficiaries with rising life expectancies, higher rates of chronic conditions, inflating medical costs and billing waste, and Medicare spending will rise significantly. Brookings reports that total lifetime spending per Medicare beneficiary will increase by 70 percent by 2030, doubling overall spending in the program from $507 billion in 2010 to $1.2 trillion in 2030.
It's clear that the younger workforce cannot contribute enough in Medicare payroll taxes to sustain the program in its current form.
Worse yet, these demographic and health trends are occurring in an environment of decreased program oversight and rising rates of improper Medicare billing, causing a rapid recipe for disaster. What can be done now to prolong the life of the Medicare program?
The problem of wasted Medicare dollars is a big one. According to the Office of Management and Budget, Medicare Fee-For-Service has the highest amount of improper payments across the entire government for each of the past six years. In fact, the rate of waste among Medicare dollars has increased from 8.5% in 2012 to 12.1% in 2015. New government estimates show that in 2015, Medicare lost a shocking $43.3 billion predominantly due to improper billing by providers.
Given all the pressures on Medicare today, the most effective way we can prolong the lifespan of the Trust Fund is to continue and expand oversight of Medicare billing. For example, the Recovery Audit Contractor Program has already returned $10 billion in wasted taxpayer dollars to the Trust Fund since it began post-payment audits in 2010. Lawmakers credit this work with extending the Trust Fund's solvency by two full years.
Unfortunately, intense pressure from provider groups has caused the RAC Program to be scaled back and even paused, preventing the return of improper Medicare payments at the same rate of previous years. In 2014, the RAC Program restarted on a very limited basis, with auditors able to review less than half of the problematic billing issue areas CMS had previously approved. The pause and limited restart has cost Medicare billions in unrecoverable misbillings.
Recovery auditors have consistently proven to be an effective and efficient tool for recovering improperly paid Medicare dollars. Allowing special interest pressure to limit RAC review capabilities now when Medicare has been losing more than $40 billion annually is not prudent. For example, in 2013, RACs returned $3.75 billion back to Medicare, however, due to RAC program scale backs, recoveries in 2014 dropped down to $2.39 billion.
If we can't get the RAC program back on track to recover misspent taxpayer dollars and prolong the life of the program, our only other option is to secure additional funding elsewhere to bolster the program. But with the country's debt nearly doubling since the financial crisis, and now projected to reach 86 percent of GDP by 2026, finding new resources could prove difficult.
Let's not wait until the situation is so dire that we will be realistically considering what it will mean to lose a program that so many vulnerable Americans rely on for their health coverage. We need to get the RAC program back up and running at previous levels to recover improper Medicare payments and help efforts to prolong the program.
Kristin Walter is the spokeswoman for the Council for Medicare Integrity.