The Sound Bite:

If doctors and hospitals are paid less, the outlook on Medicare's future is better. 

Fact or Fiction?

Fiction. Simply cutting payments to providers will not result in a brighter future for Medicare.

Cuts to providers may damage access to care. For example, some states with financial pressures from depressed revenues during the Great Recession have been cutting Medicaid payments to doctors and hospitals, and this has created shortages of physicians willing to accept new Medicaid patients. “Further depressing payment rates can only worsen the situation,” says Sara Rosenbaum, chair of the health policy department at George Washington University. She says some states cutting rates—such as South Carolina—already have severe Medicaid physician shortages.  

What is happening with Medicaid (the federal-state health program for the poor) provides a cautionary warning about what might happen to Medicare if rates were cut. Medicare payments are provided 100 percent by the federal government, which hasn’t reduced any reimbursements. But there is concern that if rates are cut in the future, fewer doctors would be willing to treat Medicare patients. 

However, there is widespread recognition that the system can be improved by figuring out how to provide payments only for quality care. The Affordable Care Act will provide bonus payments to hospitals, for example, when they reduce readmissions. Inflation in health care will keep rising at an unsustainable pace, unless the government is successful in focusing on paying for quality care, Health and Human Services Secretary Kathleen Sebelius told a Congressional hearing. “I think the assumption is that nothing changes in care…that we keep paying at the same not only rates, but keep saying for the same kinds of services,” she said. “ So if you assume that care delivery doesn’t change at all, that we keep paying for good care, the same that we pay for bad care, if we don’t have any changes in underlining care, if we don’t’ coordinate care, if we don’t have more home based patient based care….That trend line is probably accurate.” 

Sebelius said the goal is to find new ways of rewarding those who deliver high-quality efficient care that saves money. “I would suggest that what the Affordable Care Act does and what we have begun to do pretty successfully with the innovation center and the very enthusiastic support of a lot of health care providers across the country is look at where the best practices are…groups that have actually delivered very high quality care well below the trend line and capture that and then reach out to others to try to accelerate that change and use the enormous levers of the Medicare payment system to do just that to drive best practices.” 

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