CMS Chief Actuary Continues to Raise Concerns Regarding Medicare Payment Reform - January 20, 2010

Richard Foster, the chief actuary of CMS, released a memorandum on January 8 reiterating earlier concerns about health care reform provisions that adjust future market basket payment updates for productivity improvements. In the latest memorandum, Foster stated that the Senate reform bill's provisions would cause approximately 20% of Medicare Part A providers to become unprofitable over the 10-year projection period used to calculate productivity adjustments. According to Foster's analysis, because the provider productivity adjustments are based on economy-wide productivity gains, they do not accurately reflect the labor-intensive nature of health care, so payment rates will grow more slowly than providers' costs. Foster suggested that policies on productivity adjustments could be changed over time, preventing the projected losses to providers. Doing so, however, would reduce the $226 billion in savings that the CBO estimates would result from the current legislation.