The 2016 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds Report came out today. 

Bottom line:  the Trust Fund faces insolvency in 2028, two years earlier than was projected in last year’s report.

But Centers for Medicare and Medicaid (CMS) Services Acting Administrator Andy Slavitt is spinning as if he is taking a LA-based Soul Cycle class.  In Andy’s world “…the Medicare Trustees projected that the trust fund financing Medicare’s hospital insurance coverage will remain fully funded until 2028, 11 years longer than they projected in 2009 before the passage of the Affordable Care Act….Per-Medicare beneficiary cost growth continues to be exceptionally low.”   I guess this is what the “Acting” in “Acting Administrator” refers to; acting like all is well when, faced with the pesky math, it’s obvious that the whole shebang is sliding into a fiscal quagmire.  (Slavitt also supposes that most people won’t actually read the 267-page tome.) 

Important to note that Medicare and Medicaid are the primary drivers of the federal government’s scourge of improper payments.  Government-wide (not all agencies are capable of or willing to measure and report their improper payments, so the numbers are conservative) the Treasury lost $137 billion in 2015 (an increase from the previous year as well) due to improper payments, according to Government Accountability Office .  Medicare fee-for-service (FFS) losses (Parts A & B) lost $43.3 billion in 2015.   

The program needs long-term structural reform, of that there is no doubt.  But the latest data is particularly galling given the fact that the CMS has at its disposal right now a tested and highly successful tool for recovering those losses and both agency officials and members of Congress, including some of its most fiscally conservative members, are actively undercutting and shredding this highly successful program, the Recovery Audit Contracting (RAC) Program.  Read about it here and here and here. 

At no cost to taxpayers, private sector auditors scour Medicare claims after they are paid for patterns of abuse, overpayments (as well as underpayments).  The RACs identify providers who have remitted error-ridden or fraudulent claims and recover the overpayments on behalf of the Medicare Trust Fund.  The auditors are paid directly from the recoveries, no appropriations.  The enabling statute limits these auditors to reviewing only 2 percent of providers’ claims, even though private sector insurers have the ability to review 100 percent of providers’ claims at any time.  (Taking a page from CMS’s Andy Slavitt’s Official Spin Manual, that means that 98 percent of Medicare claims would not be subject to review by RACs and overpayments wouldn’t be subject to any recoveries). 

In January, 2016, under pressure from providers, who were finally forced to start reimbursing Medicare Trust Fund for the overpayments, CMS moved to limit the scope of these audits even further, reducing the number of documents RACs can look at to a paltry 0.5 percent. 

Still, stunningly, even when reviewing only 2 percent of claims, the RACs were returning $1 billion per quarter to the Trust Fund.  In fiscal year 2012, when RACs were operating at capacity, the Medicare FFS improper payment rate had dropped to 8.5 percent.  Tellingly, as the RACs became increasingly sidelined, the rates climbed to 10.1 percent in FY 2103, and 12.7 percent in FY 2014.  That is no accident.   
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When it comes to recovering improper payments, CMS has become utterly captive to the demands of big hospitals, some physicians, durable medical equipment providers, and home health providers, who are being permitted to plunder a mismanaged and struggling federal entitlement program to the tune of tens of billions of dollars in medically unnecessary services annually. 

And members of Congress are willfully turning a blind eye to the practice.  Remember that when you hear them talk about Medicare’s impending insolvency.