This is pretty funny, if mining the Trustees report on Medicare for big laughs is your cup of tea.
Economist and cheerleader Paul Krugman is ever so excited about the projected cost savings in the new report:
In other words, the Medicare actuaries believe that the cost-saving provisions in the Obama health reform will make a huge difference to the long-run budget outlook. Yes, it’s just a projection, and debatable like all projections. And it’s still not enough. But anyone who both claims to be worried about the long-run deficit and was opposed to health reform has some explaining to do.
Opponents of ObamaCare have some explaining to do? All they need to do is cite the actuary's opinion, found at the end of the Trustees report. The comedy gold (my emphasis):
...the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range (as a result of the unsustainable reductions in physician payment rates) or the long range (because of the strong likelihood that the statutory reductions in price updates for most categories of Medicare provider services will not be viable).
To rephrase slightly the Excited Prof, in other words the Medicare actuaries don't believe that the cost-saving provisions in the Obama health reform will make a huge difference to the long-run budget outlook.
The actuary presents a much less encouraging but more realistic alternative scenario:
And here is the conclusion of the alternative scenario analysis, for those whose hearts are still fluttering at the huge cost savings attributable to Obama's hard-won reform (my emphasis):
The immediate physician fee reductions required under current law are clearly unworkable and are almost certain to be overridden by Congress. The productivity adjustments will affect other Medicare price levels much more gradually, but there is a strong likelihood that, without very substantial and transformational changes in health care practices, payment rates would become inadequate in the long range. As a result, the projections shown in the 2010 Trustees Report for current law should not be interpreted as our best expectation of actual Medicare financial operations in the future but rather as illustrations of the very favorable impact of permanently slower growth in health care costs, if such slower growth can be achieved. The illustrative alternative projections presented here help to quantify and underscore the likely understatement of the current-law projections shown in the 2010 Trustees Report.
In other words, the actuaries ran the numbers on the Team Obama dream, then ran numbers that are a bit more reality-based.
I KID YOU NOT: We have yet to see Paul Krugman update or modify his post to note that it is perpendicular to reality. However, he did have time to post this tutorial a day later:
How To Read A CBO Report
One thing that has been overwhelmingly obvious in the discussion of Paul Ryan’s roadmap is that lots of people who should know better — including, alas, reporters at the Washington Post — don’t know how to read a CBO report. They think you can just skim it and get the gist; and people like Mr. Ryan have taken advantage of that misconception.
What you need to realize is that the CBO is the servant of members of Congress, which means that if a Congressman asks it to analyze a plan under certain assumptions, it will do just that — no matter how unrealistic the assumptions may be. CBO will tell you what’s going on, but it will do so deadpan, doing nothing in terms of emphasis or placement to highlight the funny business.
So how do you spot that funny business? One way is to go through the whole thing with a fine-toothed comb...
Thanks for the tips! I guess that guidance does not apply to the Medicare Trustees report. But here is an extended snippet from the section titled "Statement of Actuarial Opinion", which (I'm just thinking out loud here) is the sort of thing one might take a moment to read before assuring the world that "the Medicare actuaries believe that the cost-saving provisions in the Obama health reform will make a huge difference to the long-run budget outlook".
Further, while the Patient Protection and Affordable Care Act, as amended, makes important changes to the Medicare program and substantially improves its financial outlook, there is a strong likelihood that certain of these changes will not be viable in the long range. Specifically, the annual price updates for most categories of non-physician health services will be adjusted downward each year by the growth in economy-wide productivity. The best available evidence indicates that most health care providers cannot improve their productivity to this degree—or even approach such a level—as a result of the labor-intensive nature of these services.
Without major changes in health care delivery systems, the prices paid by Medicare for health services are very likely to fall increasingly short of the costs of providing these services. By the end of the long-range projection period, Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services would be less than half of their level under the prior law. Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems for Medicaid enrollees, and far below the levels paid by private health insurance. Well before that point, Congress would have to 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 Congress has done repeatedly in the case of physician payment rates, would lead to far higher costs for Medicare in the long range than those projected under current law.
For these reasons, the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range (as a result of the unsustainable reductions in physician payment rates) or the long range (because of the strong likelihood that the statutory reductions in price updates for most categories of Medicare provider services will not be viable). I encourage readers to review the “illustrative alternative” projections that are based on more sustainable assumptions for physician and other Medicare price updates. These projections are available at http://www.cms.gov/ActuarialStudies/Downloads/2010TRAlternativeScenario.pdf.
For heaven's sake - the chief actuary pleaded with readers to ignore the phony numbers based on the statutes and look at realistic projections, but Krugman, the Sherlock Holmes of CBO reports, couldn't figure it out.
LEST YOU DOUBT: The WaPo was able to crack the Medicare code:
The Medicare program's chief actuary was far more skeptical, contending that the report's predictions "do not represent a reasonable expectation" of its finances. In a two-page letter accompanying the trustees' report, Richard S. Foster, a non-partisan official who has been the Health and Human Services Department's top financial expert on Medicare for 15 years, said he doubted that health-care providers will become as efficient as the new law envisions. As a result, he said, the program is unlikely to slow payments for treating patients as much as the law anticipates and, as a result, will be unable to save as much money.
And the AP:
In what amounted to a dissenting opinion, top Medicare actuary Richard Foster warned that the report's financial projections "do not represent a reasonable expectation" for the hospital fund for America's elderly.