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July 14, 2017

IPAB likely will not be triggered until 2021, Medicare trustees say

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    The Independent Payment Advisory Board will not be triggered this year and the Medicare hospital insurance trust fund will remain solvent through 2029, according to the Medicare trustees' annual report.

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    The latest projections assume the Affordable Care Act (ACA) and MACRA will continue to be implemented. While the Trump administration has shown support for MACRA, the White House and GOP lawmakers are currently working on a bill to repeal and replace the ACA.

    About IPAB

    IPAB is a yet-to-be formed 15-member panel of health care experts established under the ACA that would make annual cost-cutting recommendations for Medicare if program spending exceeds a target growth rate. The growth rate is calculated using Medicare per capita data from the current year, the two previous years, and projections for the next two years. The approach has been widely opposed by both health care industry groups and Republican lawmakers, who say it improperly cedes Congress' legislative authority to the executive branch.

    If triggered, the panel's recommendations would take effect unless Congress enacts an alternative that achieves equivalent budgetary savings.

    Latest projections

    Though some economists had expected the Medicare per capita growth rate to exceed its target in 2017, the Medicare trustees in the latest report estimated that will not occur until 2021.

    The trustees said the target growth rate in Medicare spending for 2017 was 2.87 percent, while the actual growth rate was 2.14 percent. The report projected that Medicare's hospital insurance trust fund—which helps pay hospital, hospice, home health services, and nursing home costs—will be depleted by 2029, which represents a one-year extension in the program's solvency compared with estimates in last year's report.

    The report projected that Medicare Part B premiums, which cover physician office visits and other outpatient costs, will remain stable next year.

    HHS attributed the constrained growth rates in part to lower-than-expected spending in 2016 coupled with lower-than-expected inpatient hospital spending and hospital insurance deficit in 2017. Medicare in 2016 covered 56.8 million beneficiaries and expenditures totaled $678.7 billion, up from 55.3 million beneficiaries and $647.6 billion in expenditures in 2015.

    According to Kaiser Health News, senior administration officials also said the ACA's accountable care organizations and the shift toward value-based payment models likely helped slow Medicare spending growth. The latest Medicare insolvency date is 12 years later than estimates had projected before the ACA's enactment, Modern Healthcare reports.

    Report raises cost, provider access concerns

    Despite the improved outlook, the Medicare trustees warned that Medicare costs are projected to rise from 3.6 percent of gross domestic product (GDP) in 2016 to 5.6 percent of GDP in 2041, in part because of the aging baby boomer population and rising health care costs.

    The report projected that Medicare Part D expenditures per enrollee would grow by an average of 6.4 percent annually over the next five years, in part because of specialty drug costs.

    The report also warned that the current payment model could prompt Medicare providers in future years to leave the program, causing access to care issues for beneficiaries. The report noted that under MACRA, physician payment rate updates are not tied to economic changes or cost increases, and as such will increase by 0.5 percent annually through 2019 with no payment update from 2020 through 2025.

    The trustees wrote, "Absent a change in the delivery system or level of update by subsequent legislation, access to Medicare-participating physicians may become a significant issue in the long term " (Dickson, Modern Healthcare, 7/13; Rappleye, Becker's Hospital CFO Report, 7/13; Galewitz, Kaiser Health News, 7/13; Medicare trustees report, 7/13).

    Get our 22 strategies for improving margin management

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