No Savings Target Needed for Medicare for 2015 Implementation Year

Because Medicare spending growth moderated in 2013, it will not be cut automatically in 2015, based on a determination by the CMS Actuary in an April 30, 2013, letter. Under Soc. Sec. Act sec. 1899A(b)(6)(A), the CMS Actuary is charged with determining by April 30 of each year beginning in 2013, whether the projected five-year average Medicare per capita growth rate exceeds the projected Medicare per capita target growth rate for that year. If the Chief Actuary finds that the growth rate exceeds the target growth rate, a savings target is set.

The five-year period used for the current determination year (2013) is comprised of the two prior years, the current year, and the two subsequent years, or 2011 through 2015.

The growth rate is calculated from the projected five-year average of growth in Medicare spending per unduplicated enrollee, and came from the sum of the average per capita spending under each Part A, B, and D from the President’s fiscal year (FY) 2014 budget. The target growth rate is the average of the projected five-year average growth in the Consumer Price Index for All Urban Consumers and the medical care expenditure category of same. Should a savings target be needed, for 2015 it would be the sum of the total amount of projected Medicare spending for 2014 and the lesser of 0.5 percent (mandated by Soc. Sec. Act sec. 1899A(b)(7) or the difference between the growth rate and the target growth rate. The result of these figures found that the projected five-year average growth is 1.15 percent, and the growth target is 3.03 percent. Since the growth is less than the target, no savings target is needed.

What is the IPAB?

Soc. Sec. Act sec. 1899A(b)(6)(A) provides the statutory basis for the Independent Payment Advisory Board (IPAB) which was established by the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) to track the fiscal health of Medicare and to recommend methods to contain cost growth. Annually, the IPAB is charged with recommending how to improve quality of care for Medicare beneficiaries while reducing the growth rate in costs. Proposals made by the IPAB would be binding when cost projections exceed targets, unless Congress acts in another way to reign in the spending to the same degree as the IPAB recommendations. President Obama, however, has yet to submit to Congress any nominations for members of the IPAB, so it is not yet a functioning board.