CBO: Paying Docs at 2011 Rate Level Would Cost $316 Billion Over 10 Years

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By Steve Teske  

Maintaining Medicare's 2011 reimbursement rate for physicians would cost $316 billion over the next 10 years, according to a report issued Jan. 31 by the Congressional Budget Office.

CBO in a budget and economic outlook forecast also said Medicare spending, excluding money received from beneficiary premiums, would top $1 trillion annually by 2022, nearly double that expected in 2012, while Medicaid spending would reach $605 billion by 2022.

CBO said Medicare spending is expected to grow by an average of 6 percent annually over the next 10 years, with outlays reaching about $1.04 trillion in 2022, up from $560 billion in 2012.

Medicare spending would be reduced about $117 billion over 10 years as a result of a 2 percent spending cut mandated when the Joint Select Committee on Deficit Reduction failed to draft legislation to reduce the federal budget deficit (225 HCDR, 11/22/11), CBO said in The Budget and Economic Outlook: Fiscal Years 2012 to 2022.

The cost of maintaining 2011 Medicare payment rates for physicians was forecast for the period spanning 2013 to 2022.

Committee to Meet Feb. 1.

Physicians' Medicare reimbursement will be cut 27 percent March 1 unless Congress intervenes. A House/Senate conference committee charged with crafting legislation to cancel the cut and address expiring payroll tax and unemployment provisions is scheduled to hold its second public session Feb. 1 (15 HCDR, 1/25/12).

CBO also said there will be about $560 billion in unspent funding connected to the wars in Iraq and Afghanistan. Some lawmakers have suggested that this funding could be used to pay for a permanent Medicare physician reimbursement fix.

6 Percent Growth Annually.

CBO said Medicare spending is expected to grow by an average of 6 percent annually over the next 10 years. It projected Medicare outlays would reach about $1.04 trillion in 2022, up from $560 billion in 2012.

CBO says the single biggest driver of Medicare spending growth is the expected increase in the number of beneficiaries.

As a result, CBO projected that, under current law, Medicare spending would rise as a share of the gross domestic product from 3.8 percent in 2013 to 4.2 percent by 2022.

CBO said the single biggest driver of Medicare spending growth is the expected increase in the number of beneficiaries.

More Baby Boomers.

“Medicare caseloads grow at an average rate of 3 percent per year in CBO's projections, as members of the baby-boom generation become eligible for benefits at age 65,” the report said.

There were 48 million Medicare beneficiaries in 2011, a number expected to climb to 66 million by 2022, according to the report.

Spending per beneficiary, however, is expected to grow more slowly over the coming decade than historically, the report said. The growth in Medicare spending per beneficiary from 2012 to 2022 will average only 1 percent a year more than the rate of inflation, compared with an average of about 5 percent recorded between 1985 and 2007, CBO said.

“The projections of slower growth in per beneficiary spending through 2022 result from the anticipated influx of younger, healthier beneficiaries—which will bring down the average cost per beneficiary—and the constraining effects of the [sustainable growth rate] formula and the limits on updates to payment rates for other services,”the report said.

Effects of PPACA.

“Nevertheless, over the next 10 years, federal spending per beneficiary for Parts A and B is projected to grow by about 30 percent, while federal spending per beneficiary for Part D will double, largely because of a combination of rising drug costs and the more generous benefits enacted”in the Patient Protection and Affordable Care Act, it said.

Federal outlays for Medicaid totaled $275 billion in 2011 and are expected to drop to $262 billion in 2012, before rising and totaling $605 billion in 2022, CBO said.

But spending for the program is expected to climb again in 2013 and rapidly rise in 2014, 2015, and 2016 as a result of PPACA, the report said.

CBO said Medicare payments to providers other than physicians would be held to the rate of growth in inflation plus 1 percentage point as a result of PPACA.

By Steve Teske  

The report is available at http://www.cbo.gov/ftpdocs/126xx/doc12699/01-31-2012_Outlook.pdf.