Provisions of the new Affordable Care Act, coupled with other payment changes, will save Medicare nearly $8 billion over 2 years and extend the solvency of the Medicare Trust Funds by 12 years, according to a new report from the Centers for Medicare and Medicaid Services.
The immediate savings come from cuts to Medicare Advantage payments, competitive bidding for durable medical equipment, changes to how Medicare pays for advanced imaging services, productivity improvements in the hospital, and efforts to reduce waste, fraud, and abuse. These changes are expected to save $7.8 billion for the Medicare program by the end of next year.
The report, issued Aug. 2, analyzes cost-cutting provisions that CMS has already implemented or will be implementing soon.
“For too long, we've paid too much for health care, gotten too little in return, and watched the situation get worse each and every year,” Health and Human Services Secretary Kathleen Sebelius said at a press conference to release the report.
“The Affordable Care Act is already putting our health care system on a new course, bringing down costs while improving the quality of care and giving all Americans more value for their dollars,” she said.
Ms. Sebelius noted that the new law will protect Medicare beneficiaries by maintaining current benefits and adding new ones such as free preventive care and the eventually closing the Medicare Part D prescription drug doughnut hole.
Over the long-term, CMS officials estimate that Medicare savings will exceed $418 billion by 2019. Some of those savings will come from reducing hospital readmissions and hospital-acquired infections, bundling payments for end-stage renal disease care, promoting Accountable Care Organizations, and improving quality reporting by physicians.
CMS also expects the establishment of the Independent Payment Advisory Board (IPAB), which will recommend payment changes aimed at slowing growth in Medicare spending, to contribute to those savings by cutting Medicare costs by about $23 billion by 2019.
Many physician groups have been critical of the board, saying that Congress has placed too much authority in the hands of an unelected body. Under the Affordable Care Act, the IPAB's recommendations will take effect unless Congress passes legislation that meets the same budgetary targets.
Ms. Sebelius said that she expects private insurers to follow the federal government's lead in implementing some of these payment changes as they prove effective in the Medicare program.