The annual report of the Medicare Board of Trustees, released August 5, 2010, concludes that the financial outlook for the Medicare Hospital Insurance (HI) and Supplemental Medical Insurance (SMI) Trust Funds has improved as a result of the ACA. According to the report, the HI Trust Fund is now projected to remain solvent until 2029, 12 years longer than projected last year, with a lower long-range actuarial deficit. Likewise, projected Medicare Part B costs under the SMI Trust Fund are expected to reach 2.5% of GDP in 75 years, compared to the 4.5% projection last year. Trustees acknowledge, however, that actual Part B costs are likely to exceed current law projections because Congress is likely to continue to override the sustainable growth rate (SGR) formula to avert steep cuts in physician reimbursement. The Trustees attribute the largest amount of projected ACA savings to reduced Medicare rate updates under the “multifactor productivity adjustment” provision, which cuts inflation updates for most types of providers based on productivity gains in the overall economy. In an appendix to the Trustees report, the CMS Chief Actuary Richard Foster again warns that “most health care providers cannot improve their productivity to this degree—or even approach such a level—as a result of the labor-intensive nature of these services.” Mr. Foster observes that by the end of the long-range projection period covered in the Trustee’s report, “Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services would be less than half of their level under the prior law.” He predicts that Congress would need to override the productivity adjustments, as it has with the SGR formula, to prevent providers from withdrawing from Medicare. Thus, Mr. Foster concludes that the report’s financial projections for the Medicare program “do not represent a reasonable expectation for actual program operations in either the short range (as a result of the unsustainable reductions in physician payment rates) or the long range (because of the strong likelihood that the statutory reductions in price updates for most categories of Medicare provider services will not be viable).”