Medicare quality and availability at risk, trustees warn

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The trustees of Medicare’s trust funds are warning that the quality and availability of services Medicare provides could suffer in the next decade unless doctors adopt more efficient models of care delivery, and Congress addresses the program’s long-term fiscal challenges.

Those messages were contained in the trustees 2024 annual report to Congress, issued May 6. The report notes that by law Medicare reimbursement updates are fixed, with no allowance for changes in underlying economic conditions, and aren’t expected to keep pace with the average rate of inflation in physician’s costs. This is in contrast to commercial insurers, who are able to periodically negotiate new reimbursement rates with providers.

“If the health sector cannot transition to more efficient models of care delivery and if the provider reimbursement rates paid by commercial insurers continue to be based on the negotiated process used to date, then the availability…and quality of health care received by Medicare beneficiaries would…fall over time compared to that received by those with private health insurance,” the report warns.

The report notes that for the past 60 years the nation’s health care spending has outpaced overall economic growth, although the gap has narrowed in the last 15 years. The report assumes the narrowing will continue. Nevertheless, it adds, “current…projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation,” and “such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers.”

Medicare is funded in part by two trust funds. The Hospital Insurance (HI) trust fund helps pay for inpatient hospital services (the Part A portion of Medicare), while the Supplementary Medical Insurance (SMI) trust fund helps offset costs for outpatient services (Part B) and prescription medications (Part D).

The report forecasts that the HI trust fund will be able to pay 100% of scheduled benefits until 2036, when its financial reserves will be depleted. After that it will be able to pay just 89% of total scheduled benefits.

It says the SMI trust fund is “adequately financed into the indefinite future,” because it gets its funds from beneficiary premiums and contributions from the U.S. Treasury, both of which are adjusted automatically each year to cover anticipated costs. But it adds that escalating SMI costs have been placing growing demands on beneficiaries as well as taxpayers.

American Medical Association President Jesse Ehrenfeld, MD. MPH, said in a written statement that the report adds momentum to calls for reforming how doctors are reimbursed. “As one of the few Medicare providers without an inflationary payment update, physicians have watched their payments (when adjusted for inflation in practice costs) decline 29% from 2001 to 2024,” he said. “These increasingly thin operating margins disproportionately affect small, independent, and rural physician practices, as well as those treating low-income or underserved communities.”

“This report continues the drumbeat of recommendations that all point out that the payment system is failing patients and physicians,” he added. “It would be political malpractice for Congress to sit on its hands and not respond to this report.”