The senior-citizen population is one of the fastest growing demographic groups in theUnited States. Baby boomers will begin to retire in large numbers around 2010, and thedemand for health care services from this group will be of major concern to both thegovernment and health care systems.
However, the projection from Medicare trustees last month that the program that provideshealth insurance to U.S. seniors will be insolvent in 2026 instead of their previousdate of 2030 will not have a significant short-term credit implications for health care,according to comments from rating agencies and industry experts.
The date was pushed up because of lower tax receipts due in part to increasedjoblessness, the higher costs of inpatient hospital care, and the sharp growth inmedical costs overall.
Although its impact may be minimal so far, the recent revision of the insolvency date bythe Medicare trustees could increase budgetary pressures on Medicare spending for manyhospitals.
However, the real impact of Medicare insolvency is still of little concern for manyhospitals - for now.
Standard & Poor's credit analyst Michael Kaplan says the agency expects it to have noimpact on short-term health care credits, although it could play into the anxieties manyhealth care systems are already feeling due to increased federal budget cuts.
Kaplan said that health care systems already feeling that pinch might see the insolvencydate as another potential warning sign.
"I believe health care systems are already sensitive to their vulnerability in terms ofgovernment reimbursement to the extent that reimbursement pressures will increase,"Kaplan said "These [pressures] may be exacerbated by legislative concerns regarding theMedicare insolvency date."
He added, however, that insolvency dates have fluctuated over time and will continue todo so. A few years ago, he said, the insolvency date was extended when the economy wasbooming.
Standard & Poor's director and insurance analyst Jack Reichman said the revision willalso create incentives for lower reimbursement from Medicare to health care providersand institutions in the near term, which will hurt all health care providers.
However, some experts still roll their eyes at the notion of Medicare insolvency, sayingthat with the unpredictability of health care, long-term projections are too tough toprepare for.
Pamela Federbusch, a senior vice president and health care analyst at Moody's InvestorsService, said that the rating agency won't even speculate about the impact.
"A lot can happen in 20 years," she said. "They move these dates all the time."
On the provider side, the status of Medicare 20 years from now is also of littleconcern.
Michael Dowling, chief executive officer of North Shore-Long Island Jewish Health Systemin Manhasset, N.Y, said his system has too many other things on its plate right now tobe concerned about Medicare payments 20 years from now.
"If it runs out, you try to find a new revenue source or you try to find something onthe expenditures. That's all you can do," Dowling said. "Health care costs are going tocontinue to escalate; the demographics and advancement in technology are constantlychanging. By the time Medicare insolvency finally comes, it's probably going to be verydifferent than what's suggested currently. We tend to incorporate any plans once it'sall known."
