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Medicare Funds Stronger Than Previously Predicted – But Still in Trouble

Updated: Jan 17, 2023

By Andrew Donlan | June 3, 2022

Medicare funds – which are the largest payer of home health care services – are not running out quite as fast as previously predicted.

After a stronger economic recovery from the height of the COVID-19 pandemic than previously expected, the year in which Medicare will no longer have the funds to fully pay out what it needs to has been moved back by two years, according to a government report.

That’s the good news. The bad news is that it has only moved back two years: from 2026 – which is very soon – to 2028, which is only sort of soon.

After those funds hit that critical point, Medicare will only be able to pay 90% of the scheduled benefits. Policymakers are obviously trying to avoid getting to that point, and recently improved funds are a good first step.

“Today’s report from the Trustees of the Social Security and Medicare trust funds shows that the strong economic recovery driven by my economic and vaccination plans has strengthened programs that millions of Americans rely on and has put our nation in a better fiscal position,” President Joe Biden said in a statement Thursday.

The issue is obviously relevant to home-based care because Medicare is its payer. At the same time, it has also become relevant in conversations about the trend of bringing more care to the home, as that generally is a more cost-efficient setting.

“If we look at the problems that our health care delivery system has, the system that we have that is unsustainable for the country, the Medicare trustees say by 2026 we’re going to run out of money,” former U.S. Centers for Medicare & Medicare Services (CMS) Administrator Seema Verma said in February. “And in terms of options, we don’t want to ration benefits. … And so really, the path forward is value-based care.”

Value-based care is full-go in home health care, as the Home Health Value-Based Purchasing (HHVBP) Model will roll out nationwide on Jan. 1. It’s projected to save billions.

At the same time, providers are also engaging in value-based care models on their own. Some of those value-based models are with Medicare Advantage (MA) plans, which have also been a point of contention when it comes to funds running out.

Critics of directing contracting models – or the ACO Reach Model – believe that the government should not be engaging with private businesses while running out of money.

“It is completely baffling to me that the Biden administration wants to give the same bad actors in Medicare Advantage free rein in traditional Medicare,” Warren said during a Senate Finance Committee hearing earlier this year. “President Biden should not permit Medicare to be handed over to corporate profiteers. Doing so is going to increase costs and put more strain on the hospital insurance trust fund.”

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