White House: Overhaul Will Extend Savings, Solvency of Medicare

The federal health reform law will save Medicare $8 billion by the end of 2011 and $575 billion by the end of the decade, in addition to adding 12 years to the solvency of the Medicare trust fund, according to a White House report released on Monday, the AP/San Francisco Chronicle reports.

Details of Report

The report found that although Medicare spending will continue to increase after the passage of the overhaul, it will grow at a slower rate: 5.3% annually on average, compared with 6.8% without reform.

The largest portion of the savings will come from cuts in projected payment increases to hospitals and other health care providers across the next decade, the report found.

Savings also will come from efforts to improve care quality and combat Medicare fraud, as well as planned cuts to Medicare Advantage plans that currently provide coverage for one-quarter of beneficiaries. The MA cuts total $5.3 billion through 2011 and $7.8 billion over two years.

Medicare Solvency

Analysts previously estimated that Medicare's trust fund would become insolvent in 2017.

According to the administration's report, the overhaul will extend the fund's solvency until 2029.

However, critics contend that solvency will only improve "on paper" because the money instead will be spent on increasing insurance coverage for more than 30 million U.S. residents, according to the AP/Chronicle (Alonso-Zaldivar, AP/San Francisco Chronicle, 8/2).