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Chief Medicare actuary says Obamacare cuts unlikely to be viable in long-run

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On Monday, Obama administration officials were crediting his health care law with extending the solvency of Medicare for four years, to 2030, citing the latest report from the program's trustees. But at the end of the same report, the program's chief actuary warned that Obamacare's cuts to Medicare are unlikely to be sustainable in the long-run.

The trust fund is an accounting mechanism, so, on paper, it has been extended due to a combination of changes made by Obamacare and a broader slowdown of health care spending, the causes of which is a hotly debated topic among economists.

But Paul Spitalnic, the chief actuary for the Centers for Medicare and Medicaid Services, also cautioned that it would be hard to maintain the policies put in place by Obamacare, which are responsible for helping to extend the trust fund on paper.

"The Affordable Care Act is making important changes to the Medicare program that are designed, in part, to substantially improve its financial outlook," Spitalnic wrote. "While the ACA has been successful in reducing many Medicare expenditures to date, there is a strong possibility that certain of these changes will not be viable in the long range."

He explained that though Obamacare makes cuts to payments of medical providers, "the ability of health care providers to sustain these price reductions will be challenging, as the best available evidence indicates that most providers cannot improve their productivity to this degree for a prolonged period given the labor-intensive nature of these services."

He went on, "Absent an unprecedented change in health care delivery systems and payment mechanisms, the prices paid by Medicare for health services will fall increasingly short of the costs of providing these services. By the end of the long-range projection period, Medicare prices for many services would be less than half of their level without consideration of the productivity price reductions. Before such an outcome would occur, lawmakers would likely intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result. Overriding the productivity adjustments, as lawmakers have done repeatedly in the case of physician payment rates, would lead to substantially higher costs for Medicare in the long range than those projected in this report."

Obamacare, according to the Congressional Budget Office, is to spend more than $1.8 trillion over 10 years to expand insurance coverage -- spending that is supposed to be offset by a combination of tax increases and extracting savings from Medicare.

One of the misleading arguments that the Obama administration has been making since the debate over the passage of the law is that the the same dollars of savings could simultaneously be used improve the solvency of Medicare while paying for a new expansion of entitlements.

But as the CBO put it in Jan. 2010, "the majority of the [Hospital Insurance] trust fund savings under [the Patient Protection and Affordable Care Act] would be used to pay for other spending and therefore would not enhance the ability of the government to pay for future Medicare benefits."

Put another way, if Obamacare uses the money generated by its Medicare cuts to pay for expanding health coverage — as called for by the law — then it doesn't help Medicare's long-term finances. On the other hand, if Obamacare does use savings generated from Medicare cuts to pay for future Medicare benefits, then Obamacare will add substantially to the overall federal deficit.

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