Summary: Those who oppose health care reform continue to assert that the legislation is unaffordable. The only way to dispute this claim is first, to spell out the specific provisions in the Affordable Care Act (ACA) that trim spending and raise new revenues—without rationing care. These planks in the legislation provide substantial funding for the subsidies, employer tax credits, and Medicaid expansion needed to cover some 32 million Americans who are now uninsured—while simultaneously putting Medicare on the road to fiscal stability.
Here are the highlights. The Affordable Care Act finances reform by:
- collecting over $100 billion in new fees from the insurers, drug-makers and device-makers who will see their revenues grow as millions of new customers buy their products
- raising Medicare taxes for the 2% of the population at the very top of the income ladder
- cutting $132 billion in over-payments to Medicare Advantage insurers
- collecting penalties from individuals who choose not to purchase “essential minimal coverage” for themselves or their families
- collecting fees from employers with at least 50 full-time employees who do not offer insurance to their workers
- taxing “Cadillac” insurance plans (costing more than $10,200 for an individual, or $27,600 for a family)
- reducing government subsidies to hospitals that treat a large number of uninsured patients. (Because there will be fewer uninsured, hospitals will no longer need such large subsidies.)
And these are just the big-ticket items. For a longer list of the many concrete ways that the ACA provides funding for universal coverage, see the shaded table at the end of part 2 of this post providing detailed estimates from the Joint Committee on Taxation (JCT) and the Congressional Budget Office. The conservative-leaning Tax Foundation confirms that, together, these provisions will generate more than $900 billion.
That $900 billion includes savings Medicare will realize by trimming annual increases in Medicare payments to hospitals, skilled nursing facilities and home health agencies by 1%. Note: The ACA is not paring payments, it is trimming yearly increases in payments—and the legislation explicitly exempts doctors, calling for reductions “in payment updates for most Medicare goods and services other than physicians’ services . . .” (Fear-mongers who say that reform legislation will slash Medicare payments to doctors have been lying to you. In fact, the ACA raises Medicare and Medicaid fees for many physicians.)
In part 2 of this post, I will explain that the goal of this provision is to spur management to increase productivity, not by down-sizing, but by redesigning systems to provide better support for health care workers. As I explained in “Five Myths and Facts About Medicare” the Medicare Payment Advisory Commission (MedPAC) has discovered that when hospitals are under financial pressure they can and do become more efficient than hospitals that enjoy fatter profit margins. Don Berwick, co-founder of the Institute for Healthcare Improvement, has spent his career showing hospitals how to improve care, tighten operations, and reduce errors. As the new director of the Centers for Medicare and Medicaid Services (CMS) he is ideally positioned to guide this effort.
Medicare Trustees reckon that, thanks to this provision, Medicare’s Hospital Insurance (HI) Trust Fund will remain solvent until 2029, 12 years longer than was projected last year. “The 75-year HI financial shortfall has been reduced substantially, to 0.66 percent of taxable payroll, down from 3.88 percent in last year’s [Trustees’]report.”
This will give Medicare the breathing room it needs to achieve additional savings, using the new-found authority that the Affordable Care Act gives it to expand on successful pilot projects without needing approval from Congress. (In the past, lobbyists have blocked successful pilots.)
In the third and final section of this post, I will turn to the reforms that are not so easily “scored.” These are the savings that will flow from unprecedented changes in the structure of our health care system–reforms that have not been tried on a large scale. It is impossible to estimate just how much they will save but, as I explain in part 3 , over the long term, what cannot be counted is likely to count most. These are the crucial reforms that will turn a fragmented cottage industry into a system that can provide coordinated, high quality care at a lower price.
The Affordable Care Act proposes dozens of ways that we can transform how we pay for care, realigning financial incentives to reward value (in the form of better outcomes) rather than volume (more tests and more treatments). Some of these reforms already have succeeded in cities and medical centers across the nation.
This does not mean that change will be embraced everywhere. Much depends on the local medical culture, and how health care providers, insurers, patients and others respond to new incentives. Putting a number to total savings would require reading the minds of millions of Americans, and predicting how they will react over the next ten years.
But we do know that there is much waste in our fragmented health care system. Both research and on-the-ground experience demonstrates that by moving away from fee-for-service payment, rewarding hospitals and doctors for collaborating rather than competing, comparing the effectiveness of treatments, providing patients with the information they need to share in decision-making, and giving seriously ill patients an opportunity to choose palliative or hospice care, we can reduce the over-treatment that puts patients at risk—and offer them more affordable, safer, patient-centered care.
Many within the world of U.S. health care are more than ready for change. As Paul Levy, President and CEO of Boston’s Beth Israel Deaconess Medical Center, recently reported on The Health Care Blog, already, new incentives for physicians, combined with a growing awareness that we are “over-testing” many patients, “has led to a large reduction in the number” of imaging studies “done in hospitals” around the nation. “The result of these trends,” Levy adds, “will be to reduce the number of radiologists working in hospitals,” which “will also probably result in a reduction of salaries for this physician specialty.” This, he observes, represents “the first bend” in the health care inflation curve.
Reform has begun. Those who would repeal it may have to run to catch up.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Mainstream Media Rarely Tries to Explain the Congressional Budget Office’s nearly unbelievable claims that the Patient Protect and Affordable Care Act can:
1) Pay for itself
2) Provide coverage for 32 million uninsured Americans
3) Trim this nation’s deficit by some $143 billion over the next ten years
And, that’s not all. Medicare’s Trustees say that the reform legislation puts Medicare on the road to financial solvency–while limiting co-pays and beefing up benefits.
You might well ask: How can this be? How can we provide insurance for an additional 32 million people, improve Medicare, and simultaneously save money?
The media has not been a great help in answering these questions. This is, in large part, because the good news lies in the details—dozens and dozens of details. Fleshing out the myriad ways that the ACA generates new revenues while reining in health care spending would take up far too much time on a cable television show—and way too much space in most newspapers.
This is why the media so often settles for those one-liners that conservatives excel at: “CBO’s Score: Cloudy with a Chance of Bankruptcy,” declares one pundit. “The health-care bill does nothing to lower costs, and in fact, is going to raise costs dramatically,” says a Libertarian candidate running for the Senate from Indiana. This just isn’t true, but reform’s opponents get away with the sound-bites because reporters like pithy quotes—and an adequate rebuttal would require more than two or three sentences.
At this point, I am very tired of people who talk in bumper-stickers. Concise may be nice, but not when brevity serves only to package lies.
In this three-part post, my goal is to get my arms around all of the facts about new revenues and savings, and lay them down, in one place, so that readers can judge CBO’s claims.
Exactly where is the money coming from? Will you be paying? Who is contributing—and how much? Most importantly, are the contributions justified? Is it fair to ask high-income households to contribute so much? Just how high are the penalties for those who decide not to buy insurance? What do they get in return? Are seniors giving up benefits to fund care for younger Americans?
To find the answers to these questions, you have to delve into the details. But first, for the sake of total disclosure, a disclaimer.
Granted, These Are Projections: Savings Could be Less—or Greater
CBO Director Doug Elmensdorf acknowledges that the agency’s estimates of the cost of reform—as well as the savings and new money that the legislation will generate—are just that, estimates. As he told the World Health Organization in April:
“We have concerns in different directions: Subsidies will be more expensive than we project. Medicare reforms will save more money than we project. Our estimates reflect the middle of the distribution of possible outcomes, based on our professional judgment (including consultation with outside experts).”
The CBO estimate is, in fact, “middle of the road.” At one end of the spectrum, a Commonwealth Fund report authored by health care economist David Cutler and Commonwealth President Karen Davis is significantly more optimistic than the CBO, forecasting that reform would lead to federal savings of $400 billion over 10 years. “Cutler et. al. believe that the use of Exchanges will reduce average insurer administrative costs by three percent, compared with the CBO’s estimate of just 0.4 percent,” Roger Collier, editor of the Health Reform Update, recently explained. They also are convinced that “system modernization” (i.e., structural reforms that will make care more efficient) “will trim medical costs by one percent a year.” The CBO does not attempt to include these savings in its estimates.
At the other end of the spectrum, Medicare’s Office of the Actuary (OA) predicts that savings and new revenues will fail to cover the full cost of reform, estimating that over the course of a decade, the ACA will cost the federal government $289 billion. This is in part because the OA scores how many Americans will be signed up for insurance by counting people who are eligible for both Medicare and Medicaid– as if they will be covered by both programs–“leading to total insured enrollment appearing to exceed the entire US population,” Collier notes on The Health Care Blog.
Moreover, “OA diverges most from the CBO numbers—by some $330 billion—in projected revenue from drug manufacturer fees, hospital insurance taxes, and other provisions, which might be more within CBO’s budgetary forecasting capabilities,” Collier writes. “Inserting the CBO estimates into the OA forecast would give a net reduction of federal spending of $40 billion—reasonably close to the CBO savings of $89 billion.”
Collier suggests that the Commonwealth Fund may be overly optimistic. But CBO and the Office of the Actuary are not so far apart. In the end, Chief Actuary Richard S. Foster, like CBO’s Elmensdorf, stresses the uncertainty of any estimate that tries to assess total savings: “Many of the provisions, particularly the coverage expansions, are unprecedented . . . Consequently little historical experience is available with which to estimate the potential impacts.” Moreover, “The behavioral responses to changes introduced by national health reform legislation are impossible to predict with certainty. In particular, the responses of individuals, employers, insurance companies, and Exchange administrators to the new coverage mandates . . .”
Laying out the Numbers: Cutting Costs and Raising New Revenues
That said, CBO can project revenues and savings from fees and taxes with a fair amount of certainty. These are not just “hoped-for” savings. Under the Affordable Care Act:
- Medicare will be cutting overpayment to Medicare Advantage insurers by some $132 billion over the next four years. In Congress, both conservatives and progressives agree that these “windfall” payments to insurers are unwarranted. (See discussion of Advantage below.)
- Drug-makers, device-makers, and insurers already have agreed to kick in $107 billion in new fees. Drug companies begin making their contribution next year.
- Because more than 30 million formerly uninsured Americans will have coverage, Medicare will be able to trim subsidies to hospitals that care for the uninsured by $36 billion, or 75%. (The subsidies cannot be totally eliminated because some patients will remain uninsured.)
- Beginning in 2014, individuals who choose not to purchase “minimal essential insurance” will pay penalties that CBO projects will total $17 billion. (Libertarians and others who object to both the individual mandate and the fines should note that households that ignore the mandate are expected to contribute less than one-third of the $60 billion that the insurance industry will be kicking in. In return, those individuals will enjoy the security of knowing that, if, at some point in the future, they or their families become sick and decide to purchase coverage, insurers cannot turn them away, or gouge them by charging them more than healthier customers. This is why those who reject the mandate are asked to help fund reform. They, too, will benefit.)
- Employers with at least 50 full-time employees who do not offer coverage to their workers will pay roughly $52 billion in fees, beginning in 2014.
- The government will take in as much as $32 billion in taxes on pricey health plans that fetch $27,600 to cover a family, or $10,200 for an individual, beginning in 2018. Admittedly, this is a soft number—no one knows how many plans will cost that much in 2018. In fact, reformers hope that insurers will do their best to make sure that premiums come in under that line. This, in turn, would reduce national expenditures on health care. In its own way, the “Cadillac tax” creates a global budget for health care spending—without cutting benefits or shifting costs to patients. (Under the legislation, all plans must offer comprehensive benefits and there is a cap on how much families can be asked to pay out-of-pocket.)
- Beginning in 2013, reform will raise another $210.2 billion in new Medicare taxes on wages and self-employment income (0.9 percent) and on investment income (3.8 percent) from taxpayers with an adjusted gross income over $200,000 ($250,000 for couples).
(Source: Deliotte., “Prescription for Change Filled,” March 30, 2010. The report relies on estimates from the Joint Committee on Taxation (JCT) and the Congressional Budget Office (CBO)]
And this is a just a short list. For a complete inventory of the ways the legislation generates savings and new money, see the shaded box at end of part 2 of this post. It includes more esoteric sources of funding including $23 billion that results from cancelling an energy tax credit for “black liquor” (a by-product of paper production), as well as smaller amounts that will flow from dozens of places ($3 billion here, $500 million there.)
These are revenues that reformers can count on, flowing from specific taxes and fees that are now part the law of the land. Could some of these be repealed? Perhaps, but as Collier notes, this “seems close to absurd, given both political parties’ promises to cut the deficit. Almost certainly, there will be some yielding to lobbyists, but a more likely effect will be modest shortfalls in savings . . .”
Should We Expect High-Income Tax-Payers to Contribute So Much?
The biggest item on the list above is the $210 billion that wealthy taxpayers will be contributing. To some, it may seem terribly unfair to force those in the top two percent to take on such a large share of the cost of reform.
But consider this: in recent decades, the wealthiest 10 percent of households saw their share of the nation’s total income climb from 34.6 percent in 1980 to 48.2 percent in 2008. More importantly, the richest one percent (earning over $368,000 in 2008), watched their slice of the income pie more than double, rising from 10 percent 1980 to 21 percent in ’08.
Meanwhile, as the middle line in the chart below illustrates, middle-class incomes remained relatively flat.
One might argue that the rich became richer because they were working hard to innovate, creating businesses that benefit all of us. In many cases this is true. But these households weren’t just earning more; they were paying out a smaller share of their income in the form of taxes. Over the past 30 years, the average marginal income tax rates for those perched on the highest step of the income ladder plunged—from an average of 48.2% during the eight years of the Reagan administration in the early 1980s, to 39% during President Bush Sr.'s administration in the early 1990s.
Today, the top marginal rate stands at 35%–the lowest in 80 years. Even if the Bush tax cuts for wealthier Americans were eliminated, the top marginal rate would revert to just 39.5%. High income households would be laying out roughly what they did in the early 1990s when Bush Sr. was president–and nearly 9% less than they shelled out during the Reagan years.
Granted, if progressives win the current tax debate, the taxes that high-income households pay on long-term capital gains could climb to 20% , up from 15% today—but still well below 28%, the rate they paid on those gains in the late 1980s and early 1990s when income at the top was significantly lower.
To put tax rates for high-income households in a larger historical context, keep in mind that during the Eisenhower and Kennedy administrations of the 1950s and early 1960s, the top marginal rate was 91%. This is one reason why the gaps between the rich and the middle class were so much lower in those decades.
Today, taxes on dividends and capital gains also stand at historic low, and this represents another break for wealthy famlies because their investment income often exceeds their earned income. As a result, as the Tax Foundation table below reveals, when you combine earned income and investment income, the effective federal tax rate for this group (the percent of total adjusted gross income that the top 1% actually paid) fell from nearly 35% in 1980 to 23% in 1998. (See the fourth column in the table, headlined "Top 1%")
(Click Table to enlarge)
**** Notes from the Tax Foundation:
(1) All tax returns that have a positive AGI are included, even those that do not have a positive income tax liability.
(2) The only tax analyzed here is the federal individual income tax, which is responsible for about 25 percent of the nation's taxes paid (at all levels of government). Federal income taxes are much more progressive than payroll taxes, which are responsible for about 20 percent of all taxes paid (at all levels of government), and are more progressive than most state and local taxes (depending upon the economic assumption made about property taxes and corporate income taxes). Thus, if one looked at all taxes, one would find greater inequality
The bottom line: Over the past 30 years, the top 2% have been taking in a far larger share of the nation’s income while paying out a much smaller percentage of their income in taxes. The chart and table above make a compelling argument that high-income Americans are in a position to extend a hand to those who cannot afford health care insurance.
Those earning six figures can do this without changing their lifestyles: According to Deloitte, a single person earning $250,000 annually would owe an extra $450 in taxes, while an individual reporting $500,000 would pepy extra taxes of just $2,700. A couple with $250,000 in joint income would pay no additional tax.
Trimming Over-Payments to Medicare Advantage Insurers
Cuts in what many call unwarranted subsidies for private sector Medicare Advantage insurers represent the second-largest source of funding in the Affordable Care Act. Those critics who like to sum up reform in a sentence or two describe the change in headlines like these: “The Healthcare Hatchet is Coming to Medicare Advantage” (Washington Examiner) or “Millions to Lose Advantage Coverage; Benefits Cut in Half" (AHIP press release).
No surprise, the story is far more complicated than that.
As I have explained in the past, when Congress passed the Medicare Modernization Act in 2003, it agreed to pay private sector Medicare Advantage insurers an average of 13% more than it would cost Medicare to cover the same patients.
In a recent phone interview the Urban Institute’s Robert Berenson (a former Medicare official and astute, long-time observer of Washington politics) explained such Congressional largesse: “Newt Gingrich wanted to privatize Medicare, by turning it over to the insurers.” If legislators could make the program sufficiently lucrative, insurers would advertise broadly, promising seniors “extras” such as free eye-glass frames, lower co-pays, or gym memberships.
And that is just what insurers did. Today, roughly one quarter of Medicare beneficiaries are enrolled in Advantage plans. But more than 75 percent of seniors have stuck with the original Medicare program, and they, along with tax-payers, are footing the bill for the overpayments to insurers. This hardly seems fair.
Moreover, as Martha Gold, a Senior Fellow at Mathematic Policy Research, noted in Health Affairs, while "individual enrollees may gain” [from Medicare Advantage], beneficiaries as a whole may be harmed if higher payments add to the fiscal stress on Medicare making the program less viable in the long run."
If Medicare continues to spend at the current rate, in seven years its hospital fund will begin to run out of money. At that point, it would have to make deeper cuts in the payments to Advantage insurers. In response, probably most insurers would flee the business just as they did in the late 1990s when insurrers decided that an earlier attempt to outsource Medicare to the private sector just wasn’t adding enough to their bottom lines. Seniors bumped from Advantage plans could return to traditional Medicare, but they would find that they, along with all other Medicare beneficiaries, would have to pay substantially higher co-pays and deductibles as Medicare struggled to stay afloat.
Medicare Advantage seniors need to understand that they are still part of Medicare. Their fate depends on Medicare’s solvency. It’s not worth risking that safety net for a “Silver Sneakers” gym membership that, in fact, many seniors rarely use. Even lower co-pays and annual eye exams do not justify the 13% premium that Medicare is doling out to insurers.
Indeed, even Advantage customers acknowledge that the “extras” that Advantage plans offer just aren’t worth that much to them. A 2009 study published in the International Journal of Health Care Finance and Economics reveals that when Advantage beneficiaries were asked how much they would pay, out of their own pocket, for the benefits provided by their insurer, they estimated the value of those benefits at 14 cents for every extra dollar that Medicare was ponying up. As economist Austin Frakt, a co-author of the report, explains: This relatively poor return of value on taxpayer dollars is why I support reductions in Advantage payments. The administration and congressional Democrats have chosen the right path for Advantage payment policy.”
In part 2 of this post, I will talk about the ultimate effect of Advantage cuts on seniors. Despite shrill predictions (more sound-bites) 99% of those on Advantage will still have access to an Advantage Plan. And thanks to the new authority that the Affordable Care Act grants to the Secretary of the Department of Health and Human Services (HHS), HHS Secretary Kathleen Sebellius has succeeded in protecting Medicare beneficiaries from excessive increases in cost-sharing and premiums in 2011. Next year, the premium on the average Advantage plan will fall by 1 percent. Under the ACA, seniors on traditional Medicare also will enjoy lower co-pays and better benefits.
Part 2 will conclude by explaining how Medicare aims to improve productivity and reduce waste, by trimming annual increases in payments to hospitals, nursing homes and home health agencies while improving care for patients. Ask hospital CEOs, and some will tell you that productivity cannot be improved—hospital systems are as good as they possibly could be. Then ask a hospital nurse about waste, errors, and whether better system support would give her more time with patients. Or talk to a hospital executive like Paul Levy.
In Part 3, I’ll discuss the savings that can flow from deep structural changes in how we pay for care, and how it is delivered. These are the savings that cannot easily be counted, but, in the long run, may well count most.
Hey,
My name is Jodi P. Smith. I help run and maintain a web site called http://www.healthinsurancequotes.org/. I have been working very diligently to gain more exposure for it, and with a little bit of your help I think that I could accomplish that. I was hoping that maybe we could help each other out.
I would love the opportunity to write a guest post for your web site healthbeatblog.com. I am open to any specific requests that you may have or any topics that you would like me to cover, and if you would like to provide me a title then I could have it written up for you in no time. Otherwise I could write a guest post entitled “Improving Your Health.”
The guest post will be 100% unique and of a high standard. Of course it will never be sold or used anywhere else. All I ask is that you provide me with a link or 2 back to my site. I look forward to working with you and hope to hear from you soon.
Thank you so much for your time.
Somehow this logic baffled me until I understood. The writer seems to not understand that whether you take it from the citizens as tax or fees or increased cost of insurance, it all comes from the same citizens.
We see it from our point of view as a total cost calculation. So these additional things can never “pay for themselves” — we pay for them.
•collecting over $100 billion in new fees from the insurers, drug-makers and device-makers who will see their revenues grow as millions of new customers buy their products
–> Except these companies see the need for profit as a percentage of revenue, so they will still charge us higher prices because of higher taxes/fees.
• raising Medicare taxes for the 2% of the population at the very top of the income ladder
–> Do we actually not think the rich will demand that their corporations pay this amount in an increased wage which will be passed on to all of us as a higher price?
• cutting $132 billion in over-payments to Medicare Advantage insurers
–> Will the insurers not pass this back to us as higher insurance costs?
• collecting penalties from individuals who choose not to purchase “essential minimal coverage” for themselves or their families
–> Can we not see that it doesn’t matter whether you call it a tax or a charge for the uninsured that it is still money coming out of the public’s pocket?.
• collecting fees from employers with at least 50 full-time employees who do not offer insurance to their workers
–> Do we think the employers will raise their prices accoringly for the increased costs?
• taxing “Cadillac” insurance plans (costing more than $10,200 for an individual, or $27,600 for a family)
–> Again, it doesn’t matter if it is a tax or a cost of doing business, it will be passed on to the citizens.
• reducing government subsidies to hospitals that treat a large number of uninsured patients. (Because there will be fewer uninsured, hospitals will no longer need such large subsidies.)
–> It doesn’t matter what pocket it comes from, it still comes from the citizen’s pocket.
Joe Says–
First, it matters very much which citizens’ pockets the money comes from.
In 2010 there is no homogeneous group of people in the U.S. that we can refer to as “the public” or “citizens.”
In the 1950s, there was a fairly homogeneous group of white people who made up the majority and fit that definition– but certainly not today.
Our society is sharply divided between the wealthy, the upper-middle-class, the middle-class, the lower-middle-class, the nearly invisible working poor, and the homeless.
These people live in different neighborhoods (assuming that they have housing); their children go to very different schools; they see very different doctors (if they have access to doctors); they shop in different places; attend different churches (if they are religious)etc. etc. etc.
When it comes to healthcare reform, here is the difference between the different groups:
The very wealthy are in a position to make a significant contribution to universal coverage –as are corporations in the health care industry that have been over-charging for years.
And enlightened members of that group–people like Bill Gates and Warren Buffet– understand that all of us will be better off if we live in a society where everyone has access to comprehensive coverage.
As for insurers charging custmoers for the new fees they will be paying:
insurers will not be able to do this.
State regulators (and the Secretary of HHHs) have begun to get really tough.–using the new authority that the legislation gives to the Secretary.
After Secretary Kathleen Sebelius got tough with Medicare Advantage insurers, they agreed to lower the average premium by 1% next year–even though Medicare has frozen the reimubursements that it is paying them, and will be slashing those reimbursements over the next 4 years.
Drug-makers and device-makers will also find themselves under pressure.
See the newest issue of Health Affairs–it’s likely that Medicare will begin to use comparative effectiveness info to decide how much to pay for drugs and devices.
Finally, many of the taxpayers in that top 2% are retired. They have no effect on how much others earn. (These days, individual shareholders have virtually no power with corporations–unless they are Warren Buffet, or another billionaire who is in a position to try to acquire the company in an hostile takeover.
Institutional shareholders (money-manager who own tons of shares) have more power, but not enough to determine wages. In any case, that is not their agenda.
Joe, this country is changing– the demographics are changing.
Also, Congess is losing power –and has been, at least since the Bush admninistration.
The Obama adminiistration went around Congress to put people like Elizabeth Warren, Don Berwick etc. in positions of great power.
Gratned, conservatives will win many seats in Congress this year (this almost always happens two years into the first term of a new presidency), but unless those legilsators know how to solve our economic problems and create jobs, you will see a turn-around in 2012.
Medium-term (over the next 4-7 yeaars) my guess is tha tthe country will be heading in a direction that reverses the trends of the past 30 years.
Longer-term (10-12 years) this is likely to be the most racial change that we have seen since the 1980s.
Hold onto your hat! (And don’t worry, this could alll be very good for everyone.)
“Paying for itself” should mean cuts or efficiencies cover ALL new costs.
Your way, I could “pay for myself” to go to college if I could assess a fee on someone else. A brain pool tax on employers, perhaps? Ridiculous!
Comments, per your highlights….
Here are the highlights. The Affordable Care Act finances reform by:
* collecting over $100 billion in new fees from the insurers, drug-makers and device-makers who will see their revenues grow as millions of new customers buy their products
******[A NEW TAX! It’s a free market system and the increases will trickle down to the consumer!!]
* raising Medicare taxes for the 2% of the population at the very top of the income ladder
******[A NEW TAX!]
* cutting $132 billion in over-payments to Medicare Advantage insurers
******[I would imagine that this would impact profits. Businesses are in the business of maintaining and improving profits. Let me guess that this will be a NEW TAX, since Med Adv premiums will go up or coverage down!]
* collecting penalties from individuals who choose not to purchase “essential minimal coverage” for themselves or their families
******[In the end, IT’S A TAX. In the beginning, it will be found unconstitutional!]
* collecting fees from employers with at least 50 full-time employees who do not offer insurance to their workers
******[FEES? IT’S A TAX.. and that will hurt employees and customers one way or another!]
* taxing “Cadillac” insurance plans (costing more than $10,200 for an individual, or $27,600 for a family)
******[A TAX is A TAX! A PRIME EXAMPLE of Taking from the Maker and giving to the Taker…until the Makers have had enough! Do we want to be GREECE, do we want to be FRANCE?]
* reducing government subsidies to hospitals that treat a large number of uninsured patients. (Because there will be fewer uninsured, hospitals will no longer need such large subsidies.)
*****[DREAM ON. Obamacare will never produce fewer uninsured s because we will go bankrupt before that could ever happen!]
Hey Joe at 3:45 PM. I missed your comments before I posted mine. I read the original posting by Maggie and speed jumped to the comment line. Seems we agree (in content and, eerily, in form too).
Hold on to your pocketbook!
-John
John–
I don’t know what to say.
It’s clear that you are not terribly interewted in
universal coverage, and don’t see compehrensive health care as a necessity that any civilized society wants to provide to all of its citizens. You also don’t seem to udnerstand that, in order to make that happen,we have to share in the cost.
The idea of “sharing” or “collective thinking” doesn’t seem to be part of your vocabulary.
But this is why all other developed countries offer universal coverage. And the citizens, employers and businesses of those countries pay for these programs.
The good news is that, within this country, the majority of citizens agree that this is what we should do.
They disagree on some of the specifics, but Congress was able to pass the ACA because most of us agree on the goal.
Dear Maggie, Then present the truth as it is! Your post talks about how money will be saved, yet your answer says that money will simply be reallocated. The citizens are not dumb, they read the blather about savings and know that its simply reallocation of rising costs. It is that sort of “spin” that makes us even more furious about being treated as dumb.
Tell it like it is and let the chips fall as they may, but don’t try to fool us. I see that as part of the bigger problem with DC and all of this politics thing.
I liked your book, that is why I read your blog in the first place. The book was straightforward without the spin I see here. The book informed even the least knowledgeable, there was its value.
All this spin IS part of the problem, not part of the solution.
As you wrote in the book, the problem is money driven medicine. The focus has been lost and the problem will get worse.
Why don’t you give your salary to a needy family and leave the rest of us alone?
Frank and Joe Says,
Frank:
I’m not doing anything to you.
Congress passed legislation that raises taxes for those in the top bracket.
I’m simply laying out the numbers to explain how and why this is affordable for those in the top 2% (because their incomes has been growing and tax rate falling) over the past 30 years. By contrast, if you look at middle class income, it’s clear that the middle class hasn’t even been keeping up with inflation. They’re not in a position to increase their contribution to Medicare.
Joe Says–
Redistributing $ and saving money by reducing waste are two overlapping parts of the solution. In the book, I make it clear that the health care dolalrs that we save by reducing waste will make universal coverage possible—those dollars can be used to provide good care for all Americans.
In the book, I talk about reducing overtreatment–by cutting back on unnecessary tests and treatments.
At the same time when we do that,someone’s income is reduced. As Paul Levy, head of Deaconess hospital, points out in a post that I quote in the summary, hospitals already are beginning to do fewer tests. Levy goes on to say that, as a result, hospitals need fewer radiologists, and radiologists incomes will go down.
At the same time Medicare will save money because it will be paying for fewer tests, and ultimatley,Levy suggests the payment per test may be lower.
So income is redistributed from radiologists to Medicare. As a result, Medicare won’t have to raise premiums and co-pays –and so, in the end, seniors save money. The $$ that radiologists lose is redistributed to seniors.
In addition, as we reduce waste and slow Medicare inflation, the government will have money for things other than health care– education, help for the poor, etc.
In the New York Times, David Leonhardt has written some very intelligent pieces about how cutting waste out of the health care system is all about redistributing $$$.
IN general, wealtheir people (who have good insurance) tend to be over-treated while poorer people (who don’t have good insurance) are undertreated.
Uner the reform legislation, we cut back ont he over-treatment of the wealthy and use some of that money to provide subsidies for poorer people so that they can afford insurance.
Ultimately, the goal is to try to cap the total amount that we spend on health care in this country as a % of GDP–and keep it about where it is–at 17%. That is plenty of money to provide good care for everyone–as long as we don’t squander health care dollars on overtreatment, or overpaying for drugs, devices and procedures that are no better than the older, less expensive
products and services that they are trying to replace.
Finally, we need money to seed reform: pilot projects cost money, comparative efffectiveness reserach costs money, doubling the capaciy of communitiy clinics costs money, bonuses for primary care costs money.
Some of that can be funded with the money we are saving by cutting back on over-payments to Medicare Advantage, by cutting back on the number of back surgeries and angioplasties and tests that we do, by trimming increases in Medicare payments to hospitals by 1%a year; by refusing to pay for preventable hospital errors and preventable readmissions, by trimming Medicare payments for certain services that just aren’t that effective and are ovevalued.
But at this point Medicare is running out of money, so we also need to raise new revenues to put it on solid financial footing.
Here Congress had several choices: It could raise the co-pays and premiums that all seniors pay; it could raise Medicare payroll taxes for all Americans, or it could raise Medicare payroll taxes only for the wealthiest Americans.
They chose the third alternative. In this post, I explain why: becuase th top 2% has actually seen its income climb sharply in the past 30 years, while also paying a smaller share of that income in taxes, it is in a position to help put Medicare on the road to financial health.
That Medicare tax increase that will be paid by the top 2%, combined with the savings that come from cutting over-payments to Advantage insurers and trimming increases in Medicare payments to hospitals, nursing homes etc. (spurring them to become more productive) buys Medicare another 12 years.
During those 12 years, Medicare can find more ways to save from within.
Bottom line: saving money and redistributing money are tied together: the money saved will be used to help those at the lower end of the income scale.
Finally, for the past 30 years we have been redistiibuting wealth upward–as incomes grow at the top and taxes fall. This has created bubbles at the top where too much money has been chasing too few goods (stocks, real estate, high-tech healthcare which has become outrageously expensive. We have reached a point where those bubbles have undermined the economy– now we need to move in the opposite direction, redistributing wealth downward as we
repair infrastructure, improve public education,improve public health, build community clinics etc.
Taxes at the top will go up. Many people realize that–this is why so many in Washington are beginning to talk about a VAT–and how to make it a progressive tax (so that the middle class pays significantly less than the wealthy.)
This is why many want to eliminate Bush’s tax cuts for the rich–which helped create the deficit.
I realize that many people don’t like the ideaa of redistributing wealth downward–but it is necessary for the health of the economy and the society. And, unless you are super-rich, you are much more likely to benefit than to be hurt.
Just adding some fuel here! Rec’d information on the AETNA MA plan for Medicaid patients and premiums remained the same, however, costs for various services to be paid by the patient have been increased from between 25% for an office visit and 110% for a hospital stay.
Henry–
I know that Mass Medicaid is in financial trouble.
It will be interesting to see what state regulators have to say about this —
Also, raising co-pays for Medicaid patients doesn’t make much sense since they don’t have the money. Particularly in the case of hospital stays, it simply means more unpaid hospital bills . . .
I just took a pay cut from 600,000 to 550,000 as a result of fewer tests. I can live with that.
Tony–
Wow–thank you.
It helps enormoously when specialists and other very well-paid members of the health care industry make it clear that they, too, understand that we need to reduce overtreatment –which means that someone’s income stream will be cut.
This doesn’t mean Draconian 20% cuts–and that’s not what Levy is talking about. He, too, is talking about cuts that people “can live with”.
Ideally, some physicians may make less but also won’t work such long hours. (U.S. doctors are better paid than doctors in Europe but also work much harder. There are tradeoffs. )
My comment only was to reinforce Joe’s comments relative to cost-shifting. And, it’s going to be a major reason for any savings to the system. Consumers are always the fall-back mechanism.
Interesting video on what healthcare execs think of reform bill
http://www.youtube.com/watch?v=XQ9FUyoELYo
Henry–
It’s always disappointing when people don’t actually read the post.
If you read the post, you’ll find that virtually none of the more than $900 billion generated by the bill represents “cost-shifting” to consumers
In fact, deductibles and co-pays will no longer apply to preventive care on insurance policies.
Medicare Advantage plans are reducing premiums by an average of 1% next year.
Finally, under the legislation there is a cap on how much any family can be asked to pay out of pocket in total co-pays and deductibles–much less than what many pay today.
Please provide examples of cost-shifting (with links to support your claims)–and evidence backing up your claim about Mass Medicaid. (I spent about 20 minutes Goggling that, and couldn’t find any mention of what you said in the news or on blogs. One would think that such a large change would have made the papers . . . )
I would be
Guy Kite–
Thanks for sending the link.
I tried to listen to it, but for some reason most of it didn’t come through.
From what I could tell, most of these exectuives were talking about how the reform legislation would affect their business rather than how it would or wouldn’t raise the quality of care and make it more effective for patients . . . They kept saying things like “the biggest issue, For Us . . ”
Also, there is a terrible lack of awareness regarding the current situation. One executive says that today, “anyone who wants healthcare gets care–they just go to an ER.”
This is not true. Under the law an ER does not have to treat you if you are able to walk (into the ER, and out of the door.)
If you’re not able to walk,, they do have to patchyou you, but they don’t have to give you the treatment that the ER doctor recommends in the hospital’s outpatient clinic–unless you can pay for it upfront.
Another executive simply repeats the misinformation about care in Europe. .
That lack of awareness on the part of a “healthhcare
executive” says it all.
Tony – I think it would be interesting and enlightening if you could provide some color around the reasons for the reduction in testing in your practice which resulted in lower income for you. Are patients coming in less often because they face higher deductibles or they have decided to defer care like elective surgeries? Or, has there been a shift to more conservative practice patterns by you and your colleagues? Has the perceived risk of litigation declined in your area resulting in less defensive medicine? In short, is this a phenomenon that has more to do with today’s difficult economic times or is the reduced utilization of services more secular in nature? If it’s the latter, how widespread do you think it is geographically?
Maggie, I have no problem with some reallocation of wealth from the rich to the poor. I’m just saying that the political spin to make it sound like we are somehow saving money is what makes people distrust the whole thing. My point is being straight with folks, treating them like adults rather than trying to hoodwink them, I think, will work better.
Nice Blog!!!
Thanks For Great Information .
Barry,
I believe it is mostly due to the economic times and nothing to do with practice patterns. Patients are delaying treatment. Defensive medicine I believe will be practiced until medmal laws change.
Joe Says–
I’m not trying to hoodwink anyone.
As I said at the very top of this post, reform both saves money (from within the system) AND raises new revenues through taxes and fees.
See the pie chart at the beginning of part 2 of this post and you’ll see that savings are greater than new revenues.
suvarna, Barry & Tony–
Suvarna– thanks
Barry & Tony-
Yes, the recesssion also helps explain less imaging. But Paul Levy also is right that doctors are becomign more aware that we’re over-testing, paients are becoming more concerned about excess radiation, and insurers are changing financial incentives to discourage over-testing.
It would be impossible to separate these factors, but combined, the effect is, as Levy suggests, is to change the medical culture.
Joe Says-
I’m not trying to hoodwink anyone.
As I said at the top of this post, the funding comes from a combination of raising new revenues, mainly through taxes and fees, AND savings from within the system.
Insofar as taxes are progressive, they redistribute money from the wealthy to the less wealthy.
If you look at the pie chart at the beginning of part 2 of this post, you will see that savings play a greater role than new revenues . . .
Maggie –
I’m one of the folk who believe that PPACA reform didn’t go far enough. I’m delighted that the new law goes a long way to making sure that every American has health care coverage (unless the individual mandate is found by the Supreme Court to be unconstitutional), but it does far too little to slow the rising cost of health care. Anyone who remembers water beds will also remember how pressing down in one place caused a rise elsewhere—and that’s exactly what’s likely to happen with post-reform health care costs: a redistribution of a rising expenditure tide (to pick another watery metaphor).
Joe is correct in his analysis: imposing new taxes and fees doesn’t usually result in improved corporate or individual behavior; it just moves the cost onto another party. This doesn’t disturb me as much as I suspect it does Joe, since I assume it was necessary to get reform passed. On the other hand, it’s foolish to pretend that the new taxes and fees and penalties and reduced subsidies are savings. Kidding ourselves isn’t going to solve (or even ameliorate) the problem of astronomic health care costs.
Hi Maggie:
Amazing people still see doing nothing has some relevance in todays environment and politics. Amazing stupidty. If we had passed Clintons bill the cost of doing so would have been far less.
The cost of doing nothing supercedes the cost of passing healthcare reform. Urban Policy Institute does a nice article on the issue of doing nothing: http://www.urban.org/UploadedPDF/411887_cost_of_failure.pdf
Thank you for the support Roger. Actually I have no problem with some redistribution, but it has to have results, not just talk. Far too many feed at the trough of healthcare spending, some overeat dramatically.
I really support taking hospitals and their service departments (rad, path etc etc) into public ownership. Its the only way to change the system.
I want hospitals nationalized.
Roger–
Good to hear from you.
I am aware of your stance on health care reform, but I am surprised that you ignore the many provisions in the bill that capture savings from within the health care system.
The fact is that more than half of the $968 billion that will fund reform comes, not from new taxes and fees, but from
cuts in health care spending.
Here I’m thinking of the $133 billion cuts in overpayments to Medicare ADvantage insurers (those excess payments were wroth about 11 cents on the dollar according to Advantage customers); the $22 billion cut from subsidies to hospitals that take care of a disproporitoinate share of the uninsured (no longer needed because there will be many fewer uninsured); $39.7 billion in adjustements to Home Health Care (much fraud there) and $196 billion generated by shaving annually increases in payments to hospitals, nursing homes and home health agencies by 1% annually.
These savings won’t suddenly “pop up” in the form of spending some place else in the system.
The water bed analogy is colorful, but it’s just that–an anaology, a metaphor.
The fact that water beds react in a certain way does not mean that markets react that way.
The analogy might apply to an unregulated market, but not to a regulated market. And the ACA gives HHS SEcretary Sebelilus extraordinary latitude to regulate the market.
For instance, she can
cut Medicare payments for overvalued services. Medicare is already slashing payments for diagnostic imaging done by docs who buy or lease the equipment. (MedPac research shows they order twice as many tests.)
Meanwhile, private insurers have said that they will follow Medicare cuts, and when it comes to diagnostic imaging, they have begun to do just that.
As for savings “popping up elsewhere” under reform, hospitals experiencing a 1% cut in annual increases from Medicare will not be able to shift that loss and charge private insurers more.
For one, under reform everyone expects a shake-out adn conoslidation in the insurance industry. Hospitals will be negotiating with much larger insurers that have far more market clout.
Secondly, if hospitals try to charge insurers more, insurers will no longer be able to pass the cost along in the form of higher premiums. (This means that insurers will push back.)
Under reform, insurers have to justify any increases to state regulators. State regulators are beginning to get tough–as is Sebelius (HHS) who recently negotiated Medicare advantage premiums and brought them down by 1%. She also eliminated exorbitant co-pays that some Advantage insurers had been charging for extremely expensive drugs.
(Durg makers are also going to find private insuers less willing to pay sky-high prices for drugs.)
Finally, in terms of savings coming from within the health care system, I haven’t even begun to talk about the effects of “Medicare modernization” as Medicare moves away from fee-for-service, changes how it papys–and how health care is delivered.
The legilsation calls for many pilots that aim to save money while lifting quality–some will succeed.
When they succeed, Sebelius now has the power to roll them out nationwide, without needing permission from Congress. (In the past, lobbyists blocked money-saving pilots that cut into someone’s revenue stream.) This is a radical change.
Under reform, IPAB also is required to come up with ways to cut Medicare spending (withint reducing benefits or increasing co-pays) in any year that Medicare spending grows by more than roughly CPI plus 1 percent. Congress cannot block these cuts in spending. They automatically go into effect, unless Congress comes up with equal saavings from within Medicare (that doesn’t cut benefits or raise cost-sharing.)
I’m not sure if you agree with what Dartmouth researchers and many others say about the enormous waste within the system in the form of unnecessary tests and treatments as well as unco-ordinated care.
As we squeeze that waste out, it is not going to pop up in some other place. This is unncessary spending.
As KIbbe and Klepper wrote recently, highly paid doctors will watch their incomes fall to some degree. A radiologist on this thread noted that his income has already fallen by $50,000 and he can live with that.
Insofar as many Americans are over-treated, doctors will be doing less. Insofar as we shift our focus to preventive care and chronic diseases management (rather than waiting until patients need acute care) surgeons and others will be doing less. Insofar as we emphasize palliative and hospice care rather than
putting the patient through yet another futile round of chemo, oncologists will be doing less.
This may well mean that they will not be working such long hours. (U.S. docs work much longer hours than doctors in Europe where care is less aggressive, less intensive, and less expensive–and outcomes generally as good.)
This could be a trade-off for earning somewhat less. (Younger docs, in particular, who value time with family and friends are likely to value this trade-off.)
Meanwhile, docs at the bottom of the income ladder who do the preventive care, palliative care, etc. will be earning somewhat more.
(And under the legislation more med students and nurses will be receiving full scholarships and loan foregiveness so that they dont’ come out of school burdened with huge loans.)
There are a great many ways that the legislation trims waste and excess from within the system.
i’m be explaining those savings in detail in parts 2 and 3 of this post.
Joe SAys–
I’m not quite sure why you continue to ignore the many provisions in the bill that will cut “overeating” at the trough.
Cuts in overpayments to Medicare ADvantage insurers.
Cuts totally nearly $200 billion in annual increases to hospitals, nursing homes and home health agencies (all very wasteful.)
The fact that HHS Secretary has the power to cut payments for any service that HHS deems “overvalued.”
The pressure on insurers to push back on hospitals that overcharge.
The new limits on how much insurers can spend on “administratoin” (profits, salaries, lobbying, etc.)
I could go on.
Joe –you seem to have a sound-bite fixed in your head; there are no real savings in this bill. It doesn’t nothing to cut the overpayment and excess.
This, a guess, is proof that if you tell a Big Lie often enough, some people will believe it.
Nationalizing hospitals is an intereseting idea –but where would you get the money needed to compensate the bondholders who have lent hundreds of billions to those hospitals? You can’t simply take over the property without buying them out. The same applies to shareholderes who own for-profit hospitals.
In other words, from a pratical point of view, that ship has sailed.
“You can’t take over property without buying them out”
GM and Chrysler bondholders would disagree with that statement.
jenga–
These auto companies wereshaky. Bondholders were taking a conscious risk (or should have realized that they were taking a risk)when they invested.
By contrast, when non-profit hospitals float bonds they are usually perceived as a pretty safe investment (barring unusual situations). Thus it would be an enormous shock to the system if investors suddenly lost a large portion of their investment.
1) Re nationalization of hospitals – of course the debt would accompany the owner. The debt gets paid by the citizens no matter how you cut it.
2) “These savings won’t suddenly “pop up” in the form of spending some place else in the system.” — Of course they will. Healthcare provider and payor accounting isn’t about matching cost to revenue in a detailed service by service or line by line way, it is done at the macro level to allow cost shifting. And even if they don’t directly absorb the “savings” then these same “savings” are a net push if you consider the full impact of consumer spending, employer costs/pricing, and taxes.
The water bed analogy was perfect.
And no, I have no time at all to listen to Limbauch or any of the other drivel. I work in healthcare, so I know the system, I don’t need anyone telling me how it works, I see how it works daily. I may even know better than you! What I have seen would curl your hair!
Have you never heard “As General Motors goes, so goes the nation”? Alot of the bondholders could have felt it was the safest thing out there. It was GM. It was the USA and it’s folding would be a pretty damn big shock to the system. There is no risk free financial investment, I thought you knew that. If US bonds could be worthless, so could a nonprofit hospital bond. Even gold is not risk free, you can’t eat gold.
Related to this discussion of whether how ACOs and Medicare pilot projects can or cannot be implemented, there was a good discussion panel on this last Friday. Below is the link to the video and audio of this discussion. The audio link works, but the video does not seem to work yet.
http://www.aei.org/event/100312#spe/
NG, Jenga, Joe SAys
NG–Thanks for the link
Berenson’s presentation is particularly useful. He knows the subject very well.
Jenga–
As I’ve mentioned, I wrote for Barron’s for years.
Based on what I know about
U.S. auto companies (going all the way back to Chrysler) I would never buy their stock.
I know too much about the safety records and repair records of most U.S. cars. (I grew up in a generation where people who were educated (“or just plain smart”) as the ads put it, bought foreign cars.
I am very sorry for all of the auto workers who have lost their jobs over the years, and I blame management. In recent years, the design of most U.S. autos has been poor, and the industry has continued to revert to building huge, gas-guzzling cars that add to our energy problems, are bad for the environment, and in the case of many SUVS are unsafe.
The line about GM dates back to the early 1950s (before foreign automakers began to take a large share of teh U.S. market) refers to the economy and jobs.. When Americans have jobs, they buy new cars–so new car sales are an economic indicator. But that doesn’t mean that the company is a good investment.
Joe Says-
Let me suggestt that you read the Medicare Payment ADvisroy Comission reports about the myths regarding “cost-shifting.”
MedPAc knows far more than either your or I. One person’s experience creates anecdotes–but for facts that encompass an industry, you need research.
Finally,I can’t help but note that you continue to ignore all of the provisions in the bill that cut waste, fraud and feeding at the trough.
“I can’t help but note that you continue to ignore all of the provisions in the bill that cut waste, fraud and feeding at the trough.”
1) I did not ignore them, I simply say that most of these items will pop up elsewhere, in heathcare costs or passed through to consumers as higher prices or taxes. You apparently don’t believe that, so we simply disagree.
2) Regulators will go along with those they regulate. Look at the banks, the MMS, etc etc! It is a natural thing and is the primary reason why I do not think HHS or State regulators will be able to keep the lid on cost increases. They certainly have not been able to already and (at least at the state level) they already had the power to do so. Regulators fall prey to the stockholm syndrome, or worse they are ethically challenged because they are setting themselves up for jobs in oranizations they regulate. So if you think that I’m going to believe that something will occur that never has before, well I’m not that hopeful.
3) Fraud – This is an area where I dearly hope things will change. However I forsee no changes unless the Feds are willing to a) put a company under with a fine big enough to be meaningful or b) put bad actors in jail for some real hard time.
This I hope is where Obama directs the second half of his first term, going after fraud, abuse, monopolist practices, graft, corrution, etc etc. I wish he would go after this in a big Big BIG way with real teeth, not through congressional advertisement/hearings but with the FBI/CIA/Justice Department.
That is where my hope for change rests now.
Joe Says–
You need to explain where the cuts in payments in Medicare Advantage insurers will “pop up”–and how. (Same with other large cuts.
Just saying that markets are like waterbeds isn’t really persuasive.
On whether insurers will comply with regulators.
We have a law that gives the Scretary of HHS unprecdented power to enforce regulation (without going through Congress). This is radical.
Secondly, and more importantly, under reform,
many insurers won’t survive. (Insurers themselves recognize this. Also, see Joe Paduda’s recent excellent post on Managed Care Matters that I summarize in my post on Health Wonk Review that should appear here on HealthBeat this afternoon.
Therefore, insurers cannot afford to be the ones who find themselves in lawsuits, or paying heavy fines.
I interviewed insurance industry whistle-blower Wendell Potter a couple of weeks ago who confirmed that insurers are “running scared.”
Finally, see the video of the conference where I appeared on a panel with Cigna’s Hoagland –he is very clear that the insurance industry inderstands how much power Sebelius (Sec of HHS)has, and that Cigna and other insurers are going to do their best to implement the law. . . . (I plan to post link to video today or tomorrow)
Finally, Joe Says, I can understand your cycnicism based on past experience.
But this law–and the power it gives HHS and the amdinistration to go around the lobbyists–is quite different from anything we have seen before. Probably the most radical legislation since some of FDR’s legislation.
That transfer of power is all in the details, the 1000 plus places that say “The Secretary of HHS may . . ” Understandably, Congress did not underline how much power it was handing over–or highlight it in yellow. But it’s there, and it’s the law.
Joe Says–
Let me add that while I think fraud is very important, most of the waste in our healthcare system is not caused by conscious fraud.
It is the result of people doing what they think they should be doing– prescring what they assume is the best treatment (usually the newest, and inevitably the most expensive) and drugs (again newest and most expensive) and sparing no expense (whether in ordering tests or in hospitalizing patients ) becuase for decades, medical schools have taught doctors that the best doctors are “thorough” and aggressive in fighting disease.
There is much to be said for that attitude, but it needs to be tempered with an awareness that a)newest is not always best b) the
aggreessive treatment that is best for one patient is not best for all patients and c)doctors need better access to comparative effectivenses reserach so that they can choose the right treatment for the right patient at the right time.
Finally, as the Rick Scott Columbia/HCA case shows it is very very difficult to fight fraud. Doing so would mean putting many white collar criminals–hospital CEOs, physicians who took kickbacks, drug-makers and device-makers who paid kick-backs–in jail.
These are people who can afford expensive lawyers, and under our system those expensive lawyers often win–whatever the merits of the case.
Juries also are somewhat hesitant to put well-spoken, well-dressed, seemingly sympathetic white collar criminals in prisons.
Until they do, stiff fines
won’t have much impact.
Just to add a dose of reality to all the theoretical statements being thrown around in criticism of Maggie’s article:
In the mid-90’s, private insurance companies embarked on an attempt to control costs by decreasing or eliminating payment for services that had poor scientific support for their utility, by freezing and/or decreasing payments to doctors and other providers for many services, and by changing payment systems for hospitals. The result was a very sharp decline in the rate of spending growth in health care, to the point where many health care economists were celebrating an end to the runaway cost increases that had been typical in health care up to that time, and even predicting that there might be actual decreases in health care costs in the US.
Needless to say, that ended, mostly due to aggressive pushback by doctors, hospitals, suppliers, and other providers and their PR and lobbyist flacks, complaints by patients largely related to information they got from doctors, vendors, and other providers, embrace of those complaints and pushback by the media and later by politicians, and — unfortunately — some significant mistakes by insurance companies that sometimes mistook an enthusiasm for lower costs for the existence of good scientific evidence.
What did not happen, however, were any “hydrolic” shifts of spending so that the significant savings being realized could by shifted to and spent in other areas of health care.
There is simply no empirical evidence for that talking point. It is just talk radio noise.
It is possible to control costs in health care by making careful cuts based on science. You just have to be ready for certain politicians, their lobbyist supporters, and their media allies who are all more concerned about political partisanship and profits than actually doing anything to accuse you of throwing granny from the train, and be ready to push back.
Maggie, I have been in the room when hospital executives figure out how to beat the system. I have watched successful pricing programs work to increase payments based on conditions that are temporary yet these same increases never go away. I have watched how debt is turned into cost increases, again that never go away. Through these and a lot of other very creative ways, the cost will pop up somewhere, it has to happen, the hospitals and insurance companies have revenue targets to make.
I have seen the marketing practices planned and executed to encourage overtreatment in high income areas and have analyzed the outcomes enough to know patients were hurt.
You are on the outside. Wendell Potter is now on the outside. Reality is not revealed to outsiders. Of course they are going to tell you things that reduce their liability/culpability or send you off on some other tangent.
If you think that healthcare executives are any less ethically compromised than banks or crooks, then you are mistaken. You must realize by now that those willing to eshew ethics for money vault to the top in today’s healthcare business environment.
If you don’t want to call it fraud, fine, call it whatever you want, but it is still wrong and needs to be stopped. If you are telling me that the resources of the federal government can be effectively countered by a few high priced lawyers, then I think we have identified the problem that I wish President Obama would address.
Maggie and Pat S:
Don’t take my waterbed metaphor too literally. Providers aren’t going to react as rapidly as waterbeds do when their occupants lurch from one side to the other. But, trust me, they will react, maybe taking a year or so to do so as Pat S describes in the 1990s, maybe faster.
Already, hospitals and physicians are building “fortresses” against threats to their income, by consolidating to become dominant in their markets. I know that insurers are expected to do the same (although it’s not happening yet, as I’ve explained in a recent Health Care REFORM UPDATE piece), but that doesn’t necessarily even things up. Take a look at Massachusetts, where there is a dominant insurer (the Blue Plan), but the highest health care costs in the nation, and still rising fast.
Bottom line is that providers have income expectations and will take steps to achieve them. The one cause for a small amount of optimism is that reform will generate more business for providers, so maybe they will be able to slow down their price increases. (Or, alternatively, increased demand without increased supply will result in INCREASED prices.)
It is very easy to conclude that because something appears internally logical, or because something fits with our own anecdotal experience, or because we wish it were true that it must be true. Erroneous theories of the shape of the universe and of how economics works have been constructed that way.
Consequently we have to be disciplined in our insistence that we measure our ideas not just against the ideas themselves or against our personal experience, but against objective sets of data describing what has and does happen in the real world.
There are many other countries that have been able to control health care spending much better than we have. There was a time in the 90’s — not a year or two but most of the decade — when the US was able to control health care spending better than we have before or since. Certainly providers and vendors sat around tables and tried to conspire to defeat attempts to control costs that might result in loss of income for the interested parties.
But those efforts did not work. Costs were brought under control.
That is an objective fact. And since it has happened before, both here and elsewhere, it can certainly happen again. Not easily. Not without great amounts of weeping, wailing, and gnashing of teeth by providers and vendors, attempts to confuse the public, embrace of those attempts at confusion by some parts of the media, and concerted efforts by the K street hired guns to block the efforts; but nonetheless it can be done.
Not only can it be done, but it must be done. We have to control health care costs because they are unsustainable, and the only other alternative is to engage in real rationing of health care by cost in a way that will exclude the bottom 80% of people in the US economic spectrum and make good health care available only to the most wealthy.
Pat S.–
Yes, we are on the threshhold of some major changes– because we have no choice.
Either we join the rest of the developed world, by choosing more affordable care for all,, or we join the developing world (what used to be called the Third World) where only an elite receives decent care.
And change means that some of our old assumptions about “how the world works” will no longer apply.
The Civil Rights Act changed how the world works for many Americans–and it took them 10-15 years to accept this. (In some ways, some people still haven’t accepted the change.)
The Patient Protect and Affordable Care Act is, in some ways, comparable to the Civil Rights Act. It marked the beginning of major changes. In retrospect, we will see this.
Finally, yes, the fact that insurers were able to bring down costs in the 1990s shows that it can be done. And back then, insurers had only their own market power to back them up. Today, the law of the land says that waste must be eliminated, that we will no longer pay for preventable errors, and that providers will no longer be rewarded for volume. Those who want to receive bonsues will have to become accountable, taking responsibilty for better outcomes.
“Either we join the rest of the developed world, by choosing more affordable care for all, or we join the developing world (what used to be called the Third World) where only an elite receives decent care.”
Maggie, you seem to have a sound-bite fixed in your head; a long history of US society providing care will abruptly end without Obamacare.
This, a guess, is proof that if you tell a Big Lie often enough, some people will believe it.
It’s not a question of care, its a question of cost for that care. I agree that Obama care did not go far enough to get the money out of money driven medicine.