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Major Changes to Conditional Payment Reimbursement Process for Entities that Have Accepted ORM

By , August 28, 2015 9:50 am
Article by Rafael Gonzalez, Esq. Vice President, Strategic Solutions HELIOS Settlement Solutions

Article by
Rafael Gonzalez, Esq.
Vice President, Strategic Solutions
HELIOS Settlement Solutions

iStock_000003223396XSmall_webAs those of you who follow us regularly on this blog know, on August 5, 2015, we anticipated that after the Center for Medicare and Medicaid Services (CMS)’ announcement of the transition to the Commercial Repayment  Center (CRC) for reimbursement of conditional payments (CP) directly from applicable plans (AP) who have accepted ongoing responsibility for medical (ORM), there would be major changes coming to the conditional payment resolution process. Sure enough, on August 25, 2015, CMS held a webinar to inform stakeholders on the new role of the CRC in the Non-Group Health Plan (NGHP) conditional payment recovery process.

In keeping with their July 1, 2015, and July 29, 2015 announcements, CMS again indicated that “as part of CMS’ continuing efforts to improve the Coordination of Benefits & Recovery (COB&R) program and claims payment accuracy in Medicare Secondary Payer (MSP) situations, CMS will be transitioning a portion of the NGHP recovery workload from the Benefits Coordination & Recovery Center (BCRC) to its CRC.” During the webinar, CMS announced that “effective October 5, 2015, the CRC will assume responsibility for the recovery of conditional payments where CMS is pursuing recovery directly from a liability insurer (including a self-insured entity), no-fault insurer or workers’ compensation entity (LNFWC) as the identified debtor.  In other words, the CRC will identify and validate recoverable conditional payments, issue conditional payment notices (CPNs) and demand letters, respond to disputes and appeals, receive payments and resolve outstanding debts, and refer delinquents debts to the Department of Treasury (DOT) for further collection actions.”

At the 8/25/15 webinar, CMS indicated that the BCRC will continue to maintain responsibility for “all data collection activity, including Mandatory Insurer Reporting (MIR) information. It will also continue to pursue recovery from the beneficiary directly and continue to seek recovery on cases that initiated prior to October 5, 2015 where an AP is the identified debtor. Therefore, the BCRC will continue to provide conditional payment letters (CPLs) when a beneficiary self reports that a LNFWC entity has primary payment responsibility for an illness, incident, or injury where Medicare has made a conditional payment. Such CPLs will include conditional payments on a Payment Summary Form,  will explain how to dispute payments made by Medicare, and will advise the AP how to move the recovery to final demand.”

In contrast, CMS also informed that “the CRC will be the one issuing CPNs when LNFWC entities indicate through MIR that it has ORM. The CPN will include conditional payment information on a Statement of Reimbursement (SOR) with items or services paid by Medicare it seeks to recover, will  explain how to dispute any item or service included in the SOR, and will advise insurers and entities what further actions need to be taken.”

During the webinar, CMS made it clear that “both CPLs and CPNs are not requests for payment. They are information provided to the LNFWC entity for an opportunity to ensure an accurate listing of conditional payments. Therefore, if an AP believes a medical claim should be removed from the CPL or CPN, a dispute may be filed with proper documentation to challenge such payment. A major difference between CPLs and CPNs however is that although there is no time limitation when responding to a CPL, the LNFWC entity must file the dispute within 30 days of the CPN date.”

Yes, you read that right! If the CRC sends a LNFWC entity a CPN seeking reimbursement for conditional payments Medicare believes to be related to the accident, incident, or injury, the AP has 30 days from the date of the CPN to respond or dispute such payments. “The AP may file a dispute by contacting the CRC in writing or through the Medicare Secondary Payer Recovery Portal (MSPRP). Disputes submitted to the CRC via the portal may only be submitted on the basis of relatedness and in response to a CPN; all other disputes must be submitted in writing. Yes, that means that if the LNFWC entity has more than one dispute in the same case, for example relatedness to the case and claims paid to the provider, the dispute must be submitted in writing, not through the portal.”

During the webinar CMS also clarified that upon filing a dispute, the CRC will review and evaluate the dispute. The CRC has the authority to remove any medical claim from the SOR if the CRC agrees with the LNFWC entity that such payment is not related to the claim at hand, or to the condition related to the claim at hand. “Any medical claim that remains in the SOR will then be included in the demand letter (DL). Any new medical claim that may have been received during the dispute and review process will also be added to the recovery amount and included in the DL.”

CMS also indicated at the webinar that if no dispute is received following a CPN, or if after dispute, the SOR contains one or more medical claims Medicare believes to be due, the CRC will issue a DL to the AP. The DL will include “basic information regarding the case, an updated SOR with a final listing of the items or services Medicare expects reimbursed, and an explanation of how to appeal any items and or services the LNFWC entity believes should be removed from the SOR.”

As we blogged on April 24, 2015, as a result of the Strengthening Medicare and Repaying Taxpayers (SMART) Act, LNFWC entities are now afforded a formal multilevel appeal process. It includes an “initial determination” (the MSP recovery demand letter), a “redetermination” by the contractor issuing the recovery demand, a “reconsideration” by a Qualified Independent Contractor (QIP), a hearing by an administrative law judge (ALJ), a review by the Departmental Appeals Board’s Medicare Appeals Council (MAC), and judicial review. Therefore, if after dispute, a LNFWC entity still believes an item should be removed from the SOR, then such AP may appeal same using this process.

As a result of technical difficulties throughout the presentation and not being able to answer all of the questions, issues, and concerns from those attending, CMS concluded the webinar by indicating it will hold another webinar on September 17, 2015.

Considering these significant changes, their potential impact on your claims, and effect on your bottom line, if you haven’t already, this is a perfect time to make sure that your Mandatory Insurer Reporting data is accurate, that your ORM process is working smoothly, that your transition to ICD-10 is on track, and that your MSP vendor is ready for these changes. Now more than ever, all liability insurers, self insured, no-fault insurers, and workers compensation entities must prepare themselves for a new conditional payment reimbursement world, a world in which if such applicable plan has accepted ongoing responsibility for medical, Medicare will no longer wait for settlement, judgment or award to seek reimbursement of conditional payments made related to the claim, but will seek reimbursement, possibly more than once, while the claim is still open. Whether such conditional payments exist before or after October 5, 2015, Helios Settlement Solutions is prepared to assist clients communicating, disputing, and appealing such conditional payments with the Commercial Recovery Center, as well as the Benefits Coordination Recovery Center. As we have been doing successfully for years, our Conditional Payments Resolution team is ready to continue to help clients with cases where CMS is pursuing recovery from the self insured, liability insurer, no-fault insurer or WC entity directly.  As always, we will continue to monitor these issues and be sure to report on any changes, including items discussed in CMS’ planned September 17, 2015 webinar.

After Transition to Commercial Recovery Center, Business as Usual? Or Are Changes Coming?

By , August 5, 2015 9:37 am
Insurance LawPost by Rafael Gonzalez, Esq.
Vice President, Strategic Solutions, Helios

On July 29, 2015, the Centers for Medicare and Medicaid Services, Office of Financial Management, Financial Services Group (CMS) announced that on Tuesday, August 25, 2015 at 2:00 PM EST, it will hold a webinar on the new role of the Commercial Repayment Center (CRC) in the Non-Group Health Plan (NGHP) conditional payment recovery process. To register, please visit https://event.webcasts.com/starthere.jsp?ei=1071085.

As CMS previously informed on July 1, 2015, the July 29, 2015 announcement again indicates that “as part of CMS’ continuing efforts to improve the Coordination of Benefits & Recovery (COB&R) program and claims payment accuracy in Medicare Secondary Payer (MSP) situations, CMS will be transitioning a portion of the NGHP recovery workload from the Benefits Coordination & Recovery Center (BCRC) to its CRC.” The announcement makes it clear that “effective October 2015, the CRC will assume responsibility for the recovery of conditional payments where CMS is pursuing recovery directly from a liability insurer (including a self-insured entity), no-fault insurer or workers’ compensation (WC) entity as the identified debtor.”

Once the transition is complete to the CRC, will it be business as usual? Or will things change? Will CMS begin pursuing recovery directly from liability insurers (including self-insured entities), no-fault insurers or workers’ compensation (WC) entities as the identified debtor more frequently? Perhaps on a consistent manner? Will CMS also begin to pursue pre-settlement conditional payments directly from NGHPs on cases where no-fault  insurers or workers’ compensation entities have reported to CMS that they have Ongoing Responsibility for Medicals (ORM) for specific care?

We do not know the answers to these questions, but when coupled with the July 1, 2015 announcement that effective January 1, 2016, CMS will add an additional limitation to Medicare claims payments where insurers or workers’ compensation entities have reported to CMS that they have ORM for specific care, it is becoming increasingly clear that CMS’ claims processing contractors will use Mandatory Insurer Reporting (MIR) information provided by the insurer or workers’ compensation entity to determine whether Medicare is able to make payment for those claims. This not only means insurers and workers’ compensation entities that notify Medicare that they have ORM are strongly encouraged to report accurate ICD-9 or ICD-10 codes, since Medicare’s claims processing contractors will use this information to pay accordingly, but may also signal the start of an aggressive attempt by CMS to seek reimbursement of conditional payments directly from a liability insurer (including a self-insured entity), no-fault insurer or workers’ compensation (WC) entity as the identified debtor.

In addition, as has been previously mentioned at several NGHP Town Hall Teleconferences over the last three years, because the transition to CRC only includes those cases where CMS is pursuing recovery from the liability insurer, no-fault insurer or WC entity directly, meaning beneficiaries and their attorneys will continue to work with the BCRC where CMS is pursuing recovery from the beneficiary post settlement, this may also signal the beginning of CMS’ pre-settlement conditional payment recovery attempts from liability insurers, no-fault insurers, and WC entities directly. Considering the thousands of claims where no-fault insurers or workers’ compensation entities have reported to CMS that they have ORM for specific care, and the millions of dollars in conditional payments made by Medicare in such claims that have never been reimbursed, having a new contractor like the CRC to deal specifically with liability insurers, no-fault insurers, and WC entities directly may mean the beginning of such efforts.

Helios Settlement Solutions is prepared to assist clients dealing and communicating with the Commercial Recovery Center. As we have been doing for years, our Conditional Payments Resolution team is ready to continue to help clients with cases where CMS is pursuing recovery from the liability insurer, no-fault insurer or WC entity directly.  As always, we will continue to monitor these issues and be sure to report on any changes, including items discussed in the August 25, 2015 webinar.

Florida Federal Court Dismisses Another MAP PCA Due to Lack of Evidence Showing Responsibility

By , July 31, 2015 2:34 pm

On July 22, 2015, the United States District Court for the Southern District of Florida published its opinion on MSPA Claims, LLC, v. Liberty Mutual Insurance, concluding that a claim for double damages under the MSP private cause of action does not accrue until the primary payer’s responsibility to pay has been demonstrated. The court finds that even where an insurance contract exists between two parties, an insurer should still be able to contest contractual liability without being exposed to double damages. The Florida PIP statute, upon which Plaintiff relies to argue that Defendant is contractually and statutorily obligated to pay, recognizes that an insurer should be able to assert that the claim was unrelated, was not medically necessary, or was unreasonable. Therefore, the court holds that a contractual primary payer, such as a no-fault/PIP insurer, should have the ability to contest payment of claims without facing MSP private cause of action double damages.

 

Florida Healthcare Plus (FHCP) is a Medicare Advantage Organization (MAO). Defendant Liberty Mutual Insurance provides personal injury protection (PIP) insurance and was the primary insurance provider for Enrollee. On June 6, 2013, Enrollee sustained injuries in a car accident. FHCP conditionally paid for the cost of medical expenses associated with the accident. Notwithstanding that Defendant’s PIP policy is Enrollee’s primary plan, Defendant refused to provide reimbursement.

 

On March 5, 2015, MSPA Claims, LLC, who was assigned FHCP’s right to reimbursement, filed suit against Defendant in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida, to recover double damages under 42 U.S.C. §1395y(b)(3)(A), a private right of action created by the Medical Secondary Payer Act (MSP). Defendant removed the action to federal court on April 15, 2015, and then moved to dismiss. After Plaintiff filed a First Amended Complaint on May 8, 2015, the Court denied Defendant’s initial motion to dismiss.

 

Plaintiff’s Amended Complaint alleges: (I) declaratory judgment as to Defendant’s obligation to reimburse Medicare benefits; (II) private cause of action for double damages under 42 U.S.C. §1395y(b)(3)(A); (III) accounting; (IV) breach of contract pursuant to Fla. Stat. § 627.736; and (V) equitable subrogation. On May 28, 2015, Defendant filed a Motion seeking dismissal of Plaintiff’s First Amended Complaint.

 

Defendant moves to dismiss, arguing that: (1) Plaintiff sued the wrong entity; (2) Count I of the Amended Complaint is duplicative of Count II and should be dismissed; (3) Count II should be dismissed because: (a) Plaintiff failed to adequately allege Defendant’s responsibility to pay has been demonstrated; (b) a cause of action under §1395y(b)(3)(A) is not assignable; (c) § 1395y(b)(3)(A) does not create a private cause of action for an MAO; and (4) Counts III through V fail to state claims upon which relief may be granted. Defendant also moves to strike Plaintiff’s request for attorney’s fees and allegations of bad faith.

 

Regarding the improperly named entity argument, Plaintiff filed its lawsuit against Liberty Mutual Insurance Company, and served Liberty Mutual Insurance Company. However, in the documents referred to and attached to Plaintiff’s Amended Complaint, it is clear that Liberty Mutual Fire Insurance Company underwrote Enrollee’s PIP policy and that Plaintiff sought recovery from Liberty Mutual Fire Insurance Company. As Plaintiff has sued the wrong entity, dismissal of its Amended Complaint is appropriate for failing to state a claim against Liberty Mutual Insurance Company.

 

The Court however addresses Defendant’s remaining arguments to determine whether Plaintiff’s Amended Complaint would be subject to dismissal if it had named the correct entity, thus determining whether giving Plaintiff leave to amend its Complaint to name the correct party would be futile.

 

Regarding the duplicative claim for declaratory judgment argument, in Count I, Plaintiff seeks a declaratory judgment that Defendant is obligated to reimburse Plaintiff under the Medicare Secondary Payer Act (MSP) for Enrollee’s medical expenses as the provider of primary no fault coverage. In Count II, Plaintiff seeks money damages from Defendant under the MSP for double the amount of Enrollee’s medical expenses because, it alleges, Defendant did not make the appropriate reimbursement to Plaintiff as the primary payer. The Court finds Counts I and II in Plaintiff’s Amended Complaint are based on the same underlying allegations, and will both be determined based on the same legal standard – whether Defendant is liable under the MSP Act to reimburse Plaintiff for Enrollee’s medical expenses. Accordingly, the Court finds that even if the right entity had been named, Count I would have been dismissed for being duplicative of Count II.

 

Regarding Count II, Section 1395y(b)(3) of Chapter 42 of the U.S. Code establishes “private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).” Paragraph (2)(A) “prohibits Medicare from paying for items or services for which payment can reasonably be expected to be made under a primary plan, except as provided in subparagraph (B).” Subparagraph (B) authorizes Medicare to make conditional payments, but requires that “a primary plan, and any entity that receives payment from a primary plan, shall reimburse Medicare with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.” Glover v. Liggett Grp., Inc., 459 F.3rd 1304, 1308 (11th Cir. 2006) (quoting 42 U.S.C. § 1395y(b)(2)(B)(ii).

 

In Glover, the Eleventh Circuit held that a claim for double damages does not accrue until the primary payer’s responsibility to pay has been demonstrated, for example, by a judgment. Although this was decided in a case involving demonstrating a tortfeasor’s responsibility to pay for items or services, the Court here finds that the language used by the Eleventh Circuit, and the rationale underpinning its holding, “sweeps broadly.” As explained in Glover, “the demonstration of responsibility is a condition precedent to bringing a claim.” The reasons for reaching this result included the following: (1) without this condition precedent, a federal court’s jurisdiction would be drastically expanded; and (2) the alleged primary payer could not contest liability without risking the penalty of double damages.

 

Therefore the Court indicates that “even where an insurance contract exists between two parties, an insurer should still be able to contest contractual liability without being exposed to double damages.” The Court points out that the Florida PIP statute, upon which Plaintiff relies to argue that Defendant is contractually and statutorily obligated to pay, recognizes that an insurer should be able to “assert that the claim was unrelated, was not medically necessary, or was unreasonable.” Fla. Stat. § 627.736(4)(b). Thus, even as a no-fault/PIP insurer, “Defendant should have the ability to contest payment of claims without facing double damages.”

 

The court explains that this holding does not contravene 42 C.F.R. § 411.22(b)(3), which provides that a primary payer’s responsibility for payment may be demonstrated by other means, including a contractual obligation. The Court rules that the regulation still requires that the responsibility for a payment be demonstrated, and simply alleging the existence of a contractual or statutory obligation does not mean that a responsibility to pay has been demonstrated. Thus, Plaintiff’s Amended Complaint is dismissed without prejudice with leave to re-file once Plaintiff can establish the necessary prerequisite by pursuing a subrogation or breach of contract claim in state court.

 

Having found that Count II fails to state a claim, the Court does not address Defendant’s arguments that a claim under § 1395y(b)(3)(A) is not assignable and that the statute does not create a private cause of action for an MAO. Count II gave this Court federal question subject matter jurisdiction over this action. Since this claim is now being dismissed, the remainder of Plaintiff’s Amended Complaint is also dismissed for lack of subject matter jurisdiction over Plaintiff’s state law claims.

 

This decision follows the April 2, 2015, United States District Court for the Southern District of Florida opinion on MSP Recovery, LLC v. Progressive Select Insurance Company, in which the court found that since Plaintiff did not allege that Defendant’s responsibility to pay had been demonstrated by settlement, judgment, award, or any other means, the court granted Defendant’s motion to dismiss. As the court does here, these cases follow the findings of the 11th Circuit in Glover v. Liggett Group and Phillip Morris, USA, in which that court concluded that a primary plan has a duty to reimburse a secondary payer MAO for conditional payments only “if it is demonstrated that such primary plan has or had a responsibility to make payment.”

 

As in Glover and MSP Recovery, the court here further expands on the notion that demonstrating responsibility for such payments is not just proving the existence of an insurance contract between the parties. The court makes it clear that, even in no-fault situations, there must be evidence of responsibility for payment of such expenses for MSP private cause of action to apply. Such evidence may include a settlement, judgment, or award, or may also include proof that the insurer has accepted responsibility of the claim, made voluntary payments on the claim, or has been found responsible for such expenses by the appropriate court or administrative body. Short of these, at least in Florida’s southern district, a primary payer’s obligation to reimburse Medicare does not exist under the MSP private cause of action provisions. It will be interesting to see whether these decisions will renew any attempts by corporate defendants and insurers to test such findings in jurisdictions which have held no such proof of responsibility is necessary in MSP private causes of action such as the 3rd (Delaware, New Jersey, Pennsylvania, Virgin Islands) and 6th (Kentucky, Michigan, Ohio, Tennessee) Circuit Court of Appeals. As always, Helios Settlement Solutions will continue to report on any new cases or matters regarding same.

Medicare Loses Another $15 Billion in 2014; Trustees Again Predict Hospital Insurance Trust Depletion by 2030

By , July 30, 2015 9:31 am

chart1Introduction

The Social Security Act established the Medicare Board of Trustees to oversee the financial operations of the Hospital Insurance (Part A) and Supplementary Medical Insurance (Part B and D) trust funds. The Social Security Act requires that the Board, “among other duties, report annually to the Congress on the financial and actuarial status of the trust funds.” On July 22, 2015, the Boards of Trustees of the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund, delivered its annual report to Speaker of the House of Representatives John A. Boehner and President of the Senate Joseph R. Biden, Jr. The 2015 report is the 50th that the Board has published. What follows is a verbatim rendition of information, statistics, analysis, and predictions as published in the 2015 Medicare Trustees Report, which can be found here (PDF file).

The Medicare Trust Funds

The Medicare program has two parts. “Hospital Insurance (HI), otherwise known as Medicare Part A, helps pay for hospital, home health following hospital stays, skilled nursing facility, and hospice care for the aged and disabled. Supplementary Medical Insurance (SMI), consists of Medicare Part B and Part D. Part B helps pay for physician, outpatient hospital, home health, and other services for the aged and disabled who have voluntarily enrolled. Part D provides subsidized access to drug insurance coverage on a voluntary basis for all beneficiaries and premium and cost-sharing subsidies for low-income enrollees.”

Medicare also has a Part C, which serves as an alternative to traditional Part A and Part B coverage. “Under this option, beneficiaries can choose to enroll in and receive care from private Medicare Advantage and certain other health insurance plans. Medicare Advantage Organization (MAO) and Program of All-Inclusive Care for the Elderly (PACE) plans receive prospective, capitated payments for such beneficiaries from the HI and SMI Part B trust fund accounts; the other plans are paid from the accounts on the basis of their costs.”

2014 Overview

The report indicates that “in 2014, Medicare covered 53.8 million people: 44.9 million aged 65 and older, and 8.9 million disabled. About 30 percent of these beneficiaries have chosen to enroll in Part C private health plans that contract with Medicare to provide Part A and Part B health services. Total expenditures in 2014 were $613.3 billion, and total income was $599.3 billion, which consisted of $588.1 billion in non-interest income and $11.2 billion in interest earnings. Therefore, assets held in special issue U.S. Treasury securities decreased by $14.1 billion to $266.4 billion from 2013 to 2014.”

Trustees Short Term Predictions

The report estimates “the depletion date for the HI trust fund to be 2030, the same as in last year’s report. As in past years, the Trustees have determined that the fund is not adequately financed over the next 10 years. HI tax income in 2014 was somewhat higher than last year’s estimate, mostly due to adjustments for prior years, but is projected to be slightly lower through 2019; after 2019, however, projections of earnings throughout the period are higher mostly due to assumptions of slower projected growth in employer-sponsored health insurance—a factor that increases wages. Although HI expenditures in 2014 were nearly equal to the previous estimate, projected expenditures are higher at the end of the 10-year period than shown in last year’s report, largely due to increases in provider payment update assumptions that reflect recent trends.”

Hospital Insurance (Part A) Predictions

The report shows that “HI expenditures have exceeded income annually since 2008. However, the Trustees project slight surpluses in 2015 through 2023, with a return to deficits thereafter until the trust fund becomes depleted in 2030. In 2014, $8.1 billion in trust fund assets were redeemed to cover the shortfall of income relative to expenditures. The Treasury also paid from the general fund $8.8 billion in interest to the HI trust fund in 2014. The assets were $205.4 billion at the beginning of 2014, representing about 76 percent of expenditures during the year, which is below the Trustees’ minimum recommended level of 100 percent. The HI trust fund has not met the Trustees’ formal test of short-range financial adequacy since 2003. Growth in HI expenditures has averaged 2.1 percent annually over the last 5 years and is projected to average 4.8 percent over the next 5 years.”

Supplemental Medical Insurance (Part B) Predictions

The report concludes that the “SMI trust fund is adequately financed over the next 10 years and beyond because premium and general revenue income for Parts B and D are reset each year to cover expected costs and ensure a reserve for Part B contingencies. In 2016, however, a hold-harmless provision that restricts Part B premium increases for most beneficiaries is expected to cause a substantial increase in the Part B premium rate for other beneficiaries.”

Trustees Long Range Predictions

For the 75-year projection period, the report details that “HI actuarial deficit has decreased from 0.87 percent of taxable payroll, as shown in last year’s report, to 0.68 percent of taxable payroll. The 0.19 percent of payroll reduction in the actuarial deficit was primarily due to (i) lower long-range Medicare cost growth resulting from changed assumptions about the effect of increases in income, technology, and health care prices on health care costs (about 0.23 percent of payroll) and (ii) provider payment reductions due to legislation (about 0.03 percent of payroll). Partially offsetting these favorable changes is the assumption that a higher proportion of Medicare beneficiaries will enroll in MA plans (about 0.07 percent of payroll).”

The report also suggests “Part B outlays were 1.5 percent of GDP in 2014, and the Board projects that they will grow to just over 2.4 percent by 2089 under current law. These long-range projections are lower than those in last year’s report under current law and much lower than under last year’s projected baseline mostly due to (i) recent legislation that changed physician payments and (ii) lower assumptions for long-range health care cost growth for other Part B services. The Board estimates that Part D outlays will increase from 0.5 percent of GDP in 2014 to about 1.4 percent by 2089. These long-range outlay projections are slightly lower than those shown in last year’s report primarily due to the assumptions about long-range health care cost growth as mentioned above.”

Conclusion

The report concludes that “total Medicare expenditures were $613 billion in 2014. The Board projects that expenditures will increase in future years at a somewhat faster pace than either aggregate workers’ earnings or the economy overall and that, as a percentage of GDP, they will increase from 3.5 percent in 2014 to 6.0 percent by 2089 (based on the Trustees’ intermediate set of assumptions). If the reduced price increases for physicians and other health services under Medicare are not sustained and do not take full effect in the long range as in the illustrative alternative projection, then Medicare spending would instead represent roughly 9.1 percent of GDP in 2089. Growth under any of these scenarios, if realized, would substantially increase the strain on the nation’s workers, the economy, Medicare beneficiaries, and the Federal budget.”

The Trustees project that “HI tax income and other dedicated revenues will fall short of HI expenditures in most future years. The HI trust fund does not meet either the Trustees’ test of short-range financial adequacy or their test of long-range close actuarial balance. The Part B and Part D accounts in the SMI trust fund are adequately financed because premium and general revenue income are reset each year to cover expected costs. Such financing, however, would have to increase faster than the economy to cover expected expenditure growth.”

As the Trustees have indicated annually for several years now, “the financial projections in this report indicate a need for additional steps to address Medicare’s remaining financial challenges. Consideration of further reforms should occur in the near future. The sooner solutions are enacted, the more flexible and gradual they can be. Moreover, the early introduction of reforms increases the time available for affected individuals and organizations—including health care providers, beneficiaries, and taxpayers—to adjust their expectations and behavior. The Trustees recommend that Congress and the executive branch work closely together with a sense of urgency to address the depletion of the HI trust fund and the projected growth in HI (Part A) and SMI (Parts B and D) expenditures.”

2015 Medicare Trustees Report Data for Calendar Year 2014

Part A

Part B

Part D

Total

Assets at end of 2013 (billions)

$205.4

$74.1

$1.0

$280.5

Total income

$261.2

$259.8

$78.2

$599.3

Payroll taxes

227.4

227.4

Interest

8.8

2.4

0.0

11.2

Taxation of benefits

18.1

18.1

Premiums

3.3

65.6

11.4

80.3

General revenue

2.0

188.5

58.1

248.6

Transfers from States

8.7

8.7

Other

1.6

3.3

5.0

Total expenditures

$269.3

$265.9

$78.1

$613.3

Benefits

264.9

261.9

77.7

604.5

Hospital

139.2

44.1

183.3

Skilled nursing facility

28.8

28.8

Home health care

6.6

11.2

17.8

Physician fee schedule services

69.2

69.2

Private health plans (Part C)

74.0

85.7

159.7

Prescription drugs

77.7

77.7

Other

16.3

51.7

68.0

Administrative expenses

$4.5

$4.0

$0.4

$8.8

Net change in assets

−$8.1

−$6.1

$0.1

−$14.1

Assets at end of 2014

$197.3

$68.1

$1.1

$266.4

Enrollment (millions)
Aged

44.6

41.3

n/a

44.9

Disabled

8.9

8.1

n/a

8.9

Total

53.5

49.3

40.5

53.8

Average benefit per enrollee

$4,951

$5,308

$1,920

$12,179

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