On Friday, the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) released a memo outlining the short-range and long-term financial effects of the House-passed bill (H.R. 2) to strengthen Medicare for seniors and fix the Medicare payment formula for doctors.

Notably, the memo confirms what the Congressional Budget Office (CBO) and other experts, such as the American Action Forum’s Douglas Holtz-Eakin, have stated – the House bill will save taxpayers money and put the Medicare program on a more sustainable path.  As we have noted previously, CBO has confirmed that while there is an upfront cost the bill will result in a net deficit reduction by the end of the second decade, and that savings from the structural Medicare reforms “would increase rapidly in the second decade” (though CMS notes it would cost less in the near-term 10-year window than CBO’s estimate).  Moreover, Douglas Holtz-Eakin estimated that the two Medicare reforms in the bill would save $230 billion in the second decade alone.

As for the CMS Actuary memo, here are a few key takeaways as noted by the House Energy & Commerce Committee:

  • Extends the Solvency of the Medicare Program.  “Under the provisions of H.R. 2, the fund would be depleted one year later, in 2031.”
  • Reduces Medicare’s Actuarial Deficit.  “Over the 75-year period, the actuarial deficit would be reduced from the current-law estimate of 0.87 percent of taxable payroll to 0.78 percent under H.R. 2.”

Some critics of the bill have latched onto the Actuary’s conclusion that more than three decades into the future, in 2048, payments to physicians would begin to decline.  But it begs the question: Why worry about payment levels in 2048 when the Medicare program itself will be insolvent by 2031?  That’s like complaining about the drink prices in the bar on the Titanic – after it sank. 

Indeed, the Actuary’s report notes that Medicare’s Hospital Insurance trust fund is scheduled to go bankrupt in 2031.  Long before 2048, and one hopes long before 2031, both parties will need to work to preserve, strengthen, and ultimately solve Medicare’s financial problems to ensure the program is there for generations of seniors to come.  And, of course, any such reform would necessarily take into account physician payments to preserve access and quality for beneficiaries.  The good news is that Republicans have proposed these types of common-sense Medicare reforms for years, including in this year’s House-passed budget.

This reform bill, however, is just the beginning of our efforts.  It represents the first real entitlement reform in decades, and experts have confirmed that it will save taxpayer dollars over the long term.  As Speaker Boehner has said, that’s “a big win for the American people.”