Key Considerations. These longer-term calculations assume that the provisions are
enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate (SGR) mechanism governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments, and legislation to do so again is currently under consideration in the Congress.
The legislation would put into effect a number of procedures that might be difficult to
maintain over a long period of time. Although it would increase payment rates for
physicians’ services for 2010 relative to those in effect for 2009, those rates would be
reduced by about 23 percent for 2011 and then remain at current-law levels (that is, as
specified under the SGR) for subsequent years. At the same time, the legislation includes
a number of provisions that would constrain payment rates for other providers of
Medicare services. In particular, increases in payment rates for many providers would be
held below the rate of inflation (in expectation of ongoing productivity improvements in
the delivery of health care). The projected longer-term savings for the legislation also
assume that the Independent Medicare Advisory Board is fairly effective in reducing
costs—beyond the reductions that would be achieved by other aspects of the bill—to
meet the targets specified in the legislation.
Based on the extrapolation described above, CBO expects that Medicare spending under the bill would increase at an average annual rate of roughly 6 percent during the next two decades—well below the roughly 8 percent annual growth rate of the past two decades (excluding the effect of establishing the Medicare prescription drug benefit). Adjusting for inflation, Medicare spending per beneficiary under the bill would increase at an average annual rate of roughly 2 percent during the next two decades—much less than the roughly 4 percent annual growth rate of the past two decades. Whether such a
reduction in the growth rate could be achieved through greater efficiencies in the delivery of health care or would reduce access to care or diminish the quality of care is unclear.
The long-term budgetary impact could be quite different if key provisions of the bill were
ultimately changed or not fully implemented. If those changes arose from future
legislation, CBO would estimate their costs when that legislation was being considered
by the Congress.
