The 2010 Affordable Care Act (ACA) called for significant Medicare savings. All told, the Congressional Budget Office projected that the law would trim over $400 billion from Medicare spending during 2010-2019, reducing the program’s annual growth rate from 6.8 percent to 5.5 percent.
Those savings were enabled, at least in the case of hospitals, by the promise of expanding insurance coverage that would bring in more insured patients (and thus more revenues to help offset the Medicare cuts). Yet some observers in the health industry no doubt assumed that the ACA’s payment reductions could be reversed over time. After all, they had seen Congress repeatedly cancel scheduled payment cuts to Medicare physicians in the annual melodrama surrounding the Sustainable Growth Rate.
Why couldn’t the health care industry similarly expect to evade the ACA’s cost controls? In coming years, the industry could argue that any payment cuts would jeopardize patients’ access to care. And given that Medicare’s own actuary cast doubt on how realistic the projected savings were, the odds must have seemed good to hospitals and other providers that they could sooner or later count on SGR-like relief from Washington. Health reform offered an appealing political and business strategy: initially accept the projected cuts in the ACA, then gain more paying customers through the implementation of insurance expansion, and, finally, work to reverse the cuts and “unbend” the cost curve.
