Medicare to Run Out of Funds by 2024, Government Says

It’s no secret that the shaky economy is having an adverse effect on both Social Security and Medicare the health insurance system for senior citizens, literally draining both programs’ funding sources much more quickly than had ever been anticipated. In addition, tax receipts that are less than expected and an ever increasing number of baby boomers hitting their retirement years are combining to give both systems a one-two punch that isn’t helping.

But how bad is it, really?

As of yesterday, the projection for when the Medicare hospital insurance fund for senior citizens runs out of money is in 2024 – five years earlier than last year’s estimate of 2029. Social Security funds are also projected to run out earlier than last year’s estimate as well – in 2036, rather than 2037. After that point, the government reiterated yesterday in a new report, payroll taxes only provide enough funding to pay partial benefits.

Medicare Payments to Decline 0.1%

Modern Healthcare is reporting that under a new rule issued by the CMS, Medicare inpatient payments to acute-care hospitals will decline by about $142 million – or 0.1% – during the 2011 fiscal year.

The new rule addresses payments rates and policies for inpatient services received by Medicare patients in roughly 420 long-term-care, and 3,500 acute-care hospitals. Richard Umdenstock, president and CEO of the American Hospital Association said, in a written statement that members of his organization were, “deeply disappointed with today’s proposal. Plain and simple: this policy will undermine hospitals’ ability to care for patients and communities across the country.”

The CMS is proposing a 2.4% annual inflation increase in Medicare payments in acute-care hospitals, which is only slightly higher than charges in the 2010 fiscal year, but it is also adding a negative adjustment of 2.9 percentage points in order to recoup estimate spending excesses that took place in the 2008 and 2009 fiscal years due to changes in hospital coding practices. With these two adjustments, and other factors that may affect spending, the agency has come up with the estimate of a decrease of 0.1% in 2011.

When researching documentation and coding trends under the Medicare severity diagnoses-related groups (MS-DRGs) earlier this year, the Medicare Payment Advisory Commission found that hospitals were more accurate with their coding procedures with resulted in the receipt of higher payments. However, while hospitals may have been getting more money, the coding changes did not “…reflect increases in patients’ severity of illness,” said the agency, explaining the reasoning behind recouping payments.

Umbdenstock countered with the belief that hospital patients really are getting sicker, saying, “Hospitals supported the move toward a more refined payment system that would better characterize patient severity, yet CMS’ coding offset distorts any improvements to payment accuracy.”

Like acute-care facilities, long-term care hospitals will also receive adjustments, though their inpatient Medicare payments are expected to increase by $41 million, about 0.8%, in the 2011 fiscal year.

It is not yet known whether any kind of coding policy will affect the cost of health care coverage for Medicare patients.