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Political fiction of "Trustees’ report" too much for CMS actuary

You remember last week when the supposed “good news” was released – Social Security wasn’t in as dire shape as we’d been told and Medicare was going to be fine too?  Yeah, since ObamaCare passed and the doc fix was sure to be implemented, not to mention the half trillion in cuts to Medicare, why we were on the road not only to solvency but to deficit reduction.

And the yearly bit of political theater played out as planned:

The normal process with the annual Trustees’ Reports is for the Trustees to develop and publish the best available projections for the future finances of Social Security and Medicare. The respective Social Security and Medicare actuaries then sign a pro forma blessing of those projections, which is tacked to the back of the report when released to the public.

“Pro forma” is the key.  Usually, whether they believe the rosy projections or not, their signatures appear on the report.

But this year, one of them just couldn’t do it in good conscience.  The Medicare Chief Actuary just couldn’t sign his name to the fiction without adding a memo of his own.

The actuary’s alternative memo explains that “the projections in the report do not represent the ‘best estimate’ of actual future Medicare expenditures.” Worse than that, they are not even in the ballpark of reasonability. The official 2010 Trustees’ Report tells us that total Medicare expenses will be total 6.37% of GDP by 2080. The CMS actuary’s alternative memorandum explains that 10.70% of GDP is a more reasonable estimate for that year – though one that is roughly 68% higher.

The two reasons the actuary cites are the “doc fix” – a formula the actuary describes as "clearly unworkable and almost certain to be overridden by Congress” (both the Obama administration and leaders in Congress are on record opposing them – yet there they are in the report on the “plus” side of the ledger).

The other assumption the actuary dismisses as unrealistic is the assumption that future program cost will be contained by “downward adjustments in annual price updates reflecting in turn the assumption that health service productivity growth will parallel “economy-wide productivity.”  The actuary flatly states there is no evidence to support this assumption and, on the contrary, much to call it deeply into question.

E21 notes:

This is a key point; the glowingly optimistic projections in the official Trustees’ Report assume that we as a nation will be content to have 40% of our medical facilities go under within the next 40 years, and that we will happily accept these severe constraints upon beneficiaries’ access to health care. If that is not in fact the societal will after the enactment of health care reform, then the official cost estimates should be tossed into the nearest receptacle.

Bad though all of this is, none of it is actually the worst gimmick in the official report’s advertised improvement in Medicare solvency. That involves the double-counting of Medicare savings. Earlier this year, Congress passed a health care bill containing various new Medicare taxes and constraints on program expenditures. Such savings are assumed in the official report to extend the solvency of Medicare. But Congress chose instead to spend the savings on a new health care entitlement.

Remember, the Trustees’ report, like CBO projections, must be based on current law.  So they must include the assumptions contained within those laws.  What the actuary says very bluntly is the assumptions are a fantasy and that the reality of the situation is far from that included in the report.

“(T)he financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range. . . or the long range. . . . I encourage readers to review the ‘illustrative alternative’ projections that are based on more sustainable assumptions for physician and other Medicare price updates.

You can read that “illustrative alternative” here.  Needless to say the Trustees’ report, as published, belongs on the same shelf in your library as “The Wizard of Oz.”

~McQ

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11 Responses to Political fiction of "Trustees’ report" too much for CMS actuary

  • I wonder when – and even if – this administration will ever tell the truth regarding the cost of health care.  Some will come in defense of Obama telling us this report is not Obama speaking.  This is true but it is also true that it represents his administration’s position regarding health care costs.

    Throughout the Health Care debate we heard Obams time and again tell us the same old story that if we like our health care coverage, we can keep it; the Health Care plan will bend the cost curve down; Health Care costs will be deficit neutral; etc.; etc.; ad nauseum.   Virtually every single point driven home by Obama regarding the proposed Health Care program was a lie.  And if this Health Care Program is the centerpiece of his administration, how can we believe him on anything, at anytime.

    Joe Wilson’s outburst calling Obama a liar from the House floor was a massive understatement.

  • Virtually every single point driven home by Obama regarding the proposed Health Care program was a lie.  And if this Health Care Program is the centerpiece of his administration, how can we believe him on anything, at anytime.

    It would be foolish.  But it always was.

  • Right on up there with “The oil from the Deepwater Horizon disaster is gone!”
     
    From now on this administration should just publish their documentation with the “insert your desired miracle here” line empty for the country to pen in what they want – it’s EXACTLY the way Obama’s campaign ran, with everyone inserting their expected miracle into their need for Hope and Change.

  • I’m not sure which bothers me more:

    1.  That the government is lying to us, or;

    2.  That the media, which has a self-appointed role as watchdog*, goes along with it.  Why is this information not trumpetted in the NYT or the WaPo, and seen on ABC, CNN, Fox, heard on NPR, etc?   The answers are obvious: reporters lack the skill set to understand anything much more complicated than 2+2=4, and they are wedded to a lefty ideology that sees massive government entitlement programs as absolute necessities in the America they want.  No sense talking about gloom ‘n’ doom, is there?  We’ll muddle through somehow because WE MUST.

    —-

    (*) Actually, I don’t scoff at this.  For democracy to work, people HAVE to be informed, and somebody has to dig up and provide the information.  Leaving this to the government… Well, it’s just a plain bad idea.

  • Did I read that right?  Is this dust-up over a projection on what the percentage of GDP costs will be in 2080?  You’ve got to be kidding me.  I could easily say that the costs will be 0% of GDP in 2080 b/c our government is likely to collapse in on itself out of its own weight long before then.
     
    Projections 5 years out are difficult, 5-10 years merely rosy projections, 10-20 little better than guesses,
    20-30 wild ass speculation, 30+? like predicting in 1950 that we’d all be using flying cars by the year 2000.

    • ScottHProjections 5 years out are difficult, 5-10 years merely rosy projections, 10-20 little better than guesses, 20-30 wild ass speculation, 30+? like predicting in 1950 that we’d all be using flying cars by the year 2000.

      They’re not difficult at all… if you have no interest in incorpating real-world data.  If you confine yourself to predicting what you WANT to be true, it’s easy as pie.

    • I think it is more of a “can we use real numbers instead of fictitious ones” dust-up. It has gotten so out of hand that one of the authors of the latest volume of fiction can’t find it in himself to pretend anymore.

  • Why I’m Not Hiring When you add it all up, it costs $74,000 to put $44,000 in Sally’s pocket and to give her $12,000 in benefits.

    Now, adding to the insanity, there is ObamaCare.
    Every year, we negotiate a renewal to our health coverage. This year, our provider demanded a 28% increase in premiums—for a lesser plan. This is in part a tax increase that the federal government has co-opted insurance providers to collect. We had never faced an increase anywhere near this large; in each of the last two years, the increase was under 10%.