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Medicare provider rates: is less more?

Welcome to VoteFacts.  Back in June of 2010, President Barack Obama had this to say about the Medicare provider cuts that are a very important part of the deficit reducing process of his new health care reform law:

"These are cuts that would not only jeopardize our physicians pay, but our seniors health care."

In fact, he delivered a similar sentiment on the campaign trail back in 2008:

"It turns out that Senator McCain would pay for part of his plan by making drastic cuts to Medicare - $882 billion dollars worth...  So what would Senator McCain's cuts mean for Medicare at a time when more and more Americans are relying on it... If you rely on Medicare, it would mean fewer places to get care... you'll receive fewer services, you'll get lower quality care.  I don't think that's right."

Here is the problem, in order for his new health care law to reduce the deficit, as promised, the very cuts that he was speaking of are required.  Here is the data from the Center for Medicare and Medicaid Services (CMS) and the Congressional Budget Office (CBO):

• The savings rate from the new health care law assumes that the sustainable growth rate (SGR) mechanism that constrains Medicare physician payment rates will go back into effect in 2010, at which time physicians would be facing an approximate 21% cut in payments.   CRS, Page 4

CBO reported budget deficits would be reduced if the new health care law remains unchanged throughout the next two decades. However, the law would maintain and put into effect a number of provisions that might be difficult to sustain over a long period of time. Whether any of its provisions - and if so, which ones - might be changed in the future is not for CBO to judge.  CBO, Para 6

As described in more detail below, in our view the scheduled physician payment reduction is implausible, and there is a strong likelihood that the productivity adjustments will not be sustainable in the long range. It is reasonable to expect that Congress would find it necessary to legislatively override or otherwise modify the reductions in the future to ensure that Medicare beneficiaries continue to have access to health care services.   CMS, Pages 1-2

This is what they say about what those cuts could mean for current  seniors when it comes to things like access and quality of health care:

•  Over time, unless health care providers could alter their use of inputs to reduce their cost per service correspondingly, Medicare's payments for health services would fall increasingly below providers' costs. Providers could not sustain continuing negative margins and would have to withdraw from serving Medicare beneficiaries or shift substantial portions of Medicare costs to their non-Medicare, non-Medicaid payers.  CMS, Page 217

• The new health care law restrains the rate of increase in payment rates for many providers of Medicare services to less than the expected rate of increase in the cost of the providers' input... However, it is unclear the extent to which providers will achieve greater efficiencies in the delivery of health care and the extent to which cost pressures will instead reduce access to care or diminish the quality of care (relative to the situation under prior law) outcomes that might increase pressure on the Congress to increase payments to providers. It is also unclear whether and how the Congress would respond to such pressure if it arose and what effects the response would have on total federal health care spending, revenues, and deficits.  CBO, Pages 28-29

• [A] combination of policies... has led CBO to project that the growth rate of Medicare spending (per beneficiary, adjusted for overall inflation) will drop from about 4 percent per year, which it has averaged for the past two decades, to about 2 percent per year on average for the next two decades. It is unclear whether such a reduction can be achieved through greater efficiencies in the delivery of health care or will instead reduce access to care or the quality of care (relative to the situation under prior law).  CBO, Page 9

• Under current law, the Medicare provider payment rates would eventually fall to 26 percent of private health insurance levels by 2086 and to less than half of the projected Medicaid rates.  CMS, Page 8

We have addressed the "Will the new health care law reduce the deficit" question here before.  However, we  want to ask our your thoughts on whether price controls on Medicare is okay with you, even though it risks access for seniors?

A few previous Medicare provider cut posts include:

Obama and $716 billion in Medicare cuts

Paul Ryan plan includes exactly the same cuts as Obama's plan

Roughly 15 percent of Medicare providers will end participation in Medicare original post date:
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Fact = 100% - 92% True
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