How to Rein in Medicare Spending Without Hurting Seniors

In his Inaugural speech, President Obama renewed his commitment to safety nets:  “Medicare and Medicaid and Social Security–these things do not sap our initiative, they strengthen us.

Yet last week, he signaled that he is “open to making modest adjustments to programs like Medicare.” Should seniors brace for bad news?

No. There are many ways to cut Medicare spending without drawing blood. It’s a matter of using a scalpel, not an axe, to trim the fat.

Not long ago, the Center for American Progress (CAP) unveiled a Senior Protection Plan that would do just that, revealing how we could reduce Medicare spending by $385 billion without harming beneficiaries.”

The administration pays attention to CAP. Recently Bloomberg News described CAP as “the intellectual wellspring for Democratic policy proposals, including many that are shaping the agenda of the Obama administration.” This suggests that the report’s proposals may offer a preview of “adjustments to Medicare spending” that the president would consider.

How would CAP save $358 billion without rationing benefits or shifting costs to middle-class seniors? The report focuses on squeezing waste out of the system. Waste doesn’t help beneficiaries.

During recent fiscal cliff negotiations, Democrats and Republicans agreed to adopt four of CAP’s proposals, and I suspect that, over time, we will see more of its recommendations become part of the reality of health care reform.

Recently, I interviewed CAP president NeeraTanden and Topher Spiro, CAP’s managing director for health policy. I was impressed by how their practical approach differs from conservative strategies for slicing “entitlements.”

 “Painful” Doesn’t Mean Better

When Republicans discuss safety nets such as Medicare they tend to talk proudly about the “very painful cuts” that will be needed. (Given their righteous tone, one would think that they were the ones who were going to suffer.)

Tanden explains that CAP’s goal is to offer ideas that would reduce waste and make Medicare more efficient “without punishing seniors.”

Complicated Problems and Simple Solutions

Typically, conservatives favor blunt solutions that can be summed up in a sound bite: “Raise the eligibility age for Medicare to 67.” (Here, I’m reminded of H.L. Mencken’s observation: “For every complicated problem, there is a solution that is short, simple, and wrong.”)

In truth, forcing seniors to wait until they are 67 would save nothing. The change would merely shifts costs to older seniors, younger Americans who have private insurance, employers, and the states. CAP points out: that “the cost increases would be twice as large as the federal savings.”

Nevertheless, in 2011, President Obama seemed open to this idea. Could this be one of the “adjustments” that he has in mind?

Spiro doesn’t think so. “That was in a different context. Since 2011, the Supreme Court has ruled that the states do not have to expand Medicaid.” As a result, more than 270,000 65-and 66-year-olds could be left uninsured. “The administration will take this under consideration.”

The other change, of course, is that “the president has more leverage,” Spiro notes. “He won the election.”

Dozens of Reforms Are Needed  

While Republicans prefer sweeping across-the board solutions, thoughtful reform is more complicated.

CAP calls for dozens of discrete changes, including:

  • prohibiting “pay for delay” agreements that let “brand-name drug manufacturers pay generic drug manufacturers to keep generics off the market” (saving $5 billion);
  • increasing premiums for the wealthiest 10% of Medicare beneficiaries (raising $25 billion);
  • insisting that drug-makers extend Medicaid rebates to low-income Medicare beneficiaries (saving $137.4 billion).

To fully understand CAP’s approach, consider the four ideas that were accepted during Fiscal Cliff negotiations. . .

This post originally appeared yesterday on To read the rest of the please click here. You can comment there, or return to HealthBeat to comment.


110 thoughts on “How to Rein in Medicare Spending Without Hurting Seniors

  1. CAP has some good ideas, and thanks for the link, but I am back to my old complaint about budget dust.

    In 2011, Medicare spent $550 billion. Based on pure demographics and assuming decent control on the amount-per-beneficiary (i.e. a 3% growth rate), Medicare will spend about $8 trillion over the next 10 years.

    I did this on a sheet of notebook paper. Just put in $550 billion and add $50 billion a year.

    But my crude numbers are not far off at all from projections in the Statistical Abstract and elsewhere by experts.

    OK, now in the face of $8 trillion, a savings of $385 billion over 10 years is not much.

    I am skeptical that federal revenues will grow faster than Medicare spending, as they did when the baby boom was in its forties. I think that federal revenues will continue to be flat.

    To me this means that we might have to cut Medicare more radically, in order to keep it and Medicaid from taking over the federal budget like Pac-Man.

    I am working on an article with my own proposals, and will share it with you of course.

  2. I agree with Bob Hertz. When it comes to saving money on Medicare, all Democrats seem to know how to do is squeeze and tinker with provider payments. CAP’s proposals, like Bob says, are a drop in the bucket in the scheme of things.

    Why doesn’t CAP propose that Congress specifically allow CMS to take costs into account in determining what to pay for and not pay for? This could be especially useful it the case of ultra expensive specialty drugs to treat cancer and MS. Does the VA pay for these, and, if so how much vs. private insurers and payers in other developed countries? Negotiating leverage comes with a threat to keep drugs off a formulary or relegate them to a low tier that requires a high beneficiary co-pay. The VA’s formulary is highly restrictive. CMS will pay for anything that wins FDA approval by showing that it’s better than nothing even when it’s no better than existing therapies that cost half as much or less.

    Maybe CAP should advocate sensible tort reform or require beneficiaries to pay an extra $10 per month in Part B premiums if they haven’t executed a living will or advance directive or POLST.

    Even though my wife and I are on Medicare ourselves, I’m tired of this attitude among too many of my fellow citizens which, when it comes to healthcare, is: I want what I want when I want it and I expect someone else to pay for it. People in other countries don’t impose unreasonable expectations and their associated costs on their fellow citizens. We shouldn’t either.

  3. I tend to agree that the CAP proposals create relatively small savings, much less than we need to save Medicare, the federal budget, and the economy as a whole. They are, of course, better than nothing and much better than proposals for either outright rationing of care by cost or transfer of large amounts of cost to the patient — those really amount to the same thing — that characterize many conservative proposals, especially those of Paul Ryan.

    Barry does touch on some things that would be more useful — reform of drug procurement process could save more money by itself than all of the CAP plans put together and would have nothing but positive effect on health.

    However what we really must do is implement reforms to address the waste in health care identified by such diverse researchers as the Institute of Medicine and former Bush treasury secretary Paul O’Neill. The savings available here for Medicare are in the range PER YEAR that CAP envisions for ten years.

    What this requires is that we get serious about the idea that medicine in based on science, not marketing skill, and make Medicare and Medicaid payments dependent on good science, eliminating ineffective and harmful care by refusing to pay for it, eliminating expensive innovations that do not offer improved results, and encouraging elimination of health care induced injuries by making payment contingent on implementing programs to prevent them.

    The ACA and the IPAB begin putting our toe in the water on this, but we really do not have the time to waste as both public and private health insurance programs become cripplingly expensive and as the economy buckles under the weight. It will not be easy, since this waste is built in to provider and hospital care in this country and since one person’s waste is another’s new Mercedes.

    We will arrive at that point eventually, since we must end there or be ruined. The only question is how many trillions of dollars will be added to the public debt, how high the burden to employers will be, and how many people will be excluded from care before we get there. Obviously, starting now is much better than later, and politicians must find the courage to start this now, regardless of the opposition of powerful interest and political donor groups.

  4. Pat S. & Barry

    . CAP’s $34 billion is in addition to roughly $900 billion that the ACA will be saving over 10 years.

    Please see my reply to Bob Hertz on the post below titled “Under the ACA will YOUR insurance premiums rise or fall?” My response to Bob is now at the end of the thread, and is dated January 29, 2013 at 5:57 pm s

    This $900 billion does not include the billions that can be saved, as you say, by practicing evidence based medicine and moving away form fee-for-service payments.

    I explain all of these numbers, in detail, in a white paper I wrote late in 2011. You’ll find it here.

    PAT S. & BARRY & Bob– Please read pages 3-7– Introduction and Overview of the Numbers. I can’t tell you how frustrating it is that so few people are aware of the ways that the ACA totally pays for itself, REDUCES the DEFICIT, and paves the way for breaking the back of health care inflation.

    I think you’ll be surprised to see that the $750 billion of the $950 billion in savings and new revenues are numbers that we can count on (and that CBO has scored). This are not “Hoped-for-savings” that depend on people doing the right thing or responding in a certain way to financial carrots and sticks.

    Another $200 billion are very likely savings that will be produced by simply trimming the inflation increases that Meidcare gives to hospitals, nursing homes and ambulatory surgical centers by 1% a year each year, for 10 years.(This is now the law. Hospitals know this, which is why many have been trying to reduce their costs)

    In addition to that $950 billion, ($750 plus $200 billion) are the billions that can be saved as we move away from fee-for-service payments, and begin paying for value not volume. In order to produce value (better care for less), providers are going to have to turn to “evidence-based medicine’– in many of the ways that Atul Gawande describes in his most recent New Yorker article, “Big Money”

    I urge everyone to read it. I’m not so much persuaded by the efficient restaurant chain analogy as I am by everything Gawande says in the second half of the article about “standardizing medicine” based on scientific evidence. See the part about his mother’s operation.

    Pat S.– I understand that you’re frustrated that we are not moving faster toward evidence-based medicine. But the fact is that it will take time to persuade U.S. doctors to accept the fact that science, rather than habit, “doctors druthers,” their intuition or their confidence (I know what I’m doing–how dare you?! ) should determine how they practice medicine.
    Studies show that doctors in Europe are much better about following guidelines. The problem lies in our medical culture and can be traced all the way back to how we train medical students.

    Cultural change takes time. I would estimate that in 10 years, we could have a much better health care system.
    Over those ten years, many young doctors will join the system who are more open to new ways to thinking (this includes women) and over that time, many of the dinosaurs will retire. Some will retire early because they won’t be happy with the changes.

    But what about the deficit? you ask. As Peter Orszag, Robbert Kunter and Ezra Klein have all pointed out recently, the deficit is melting, and the trends sugges that it will become manageable– without cutting entirlements, rationing benefits, or shifting costs to patients.
    SEE MY REPLY TO BOB,Barry & Pat S. below dated

    Pat– By the waym CAP calls for accelerating the move away from fee-for-service by a year. If we can do it, that would be great. But figuring out how to divide up the bonuses and losses among individual doctors and a hospital involved in the course of care will be difficult, to say the least. It is going to take strong leadership to accomplish his. (Perhaps cloning Don Berwick, Atul Gawande, Elliot Fisher and a few others, and making them the CEOs of 300 or 400 large hospitals?)

    Seriously, we do need to “stadardize” medicine , as Gawande puts it, using science.
    But this will require long-term continuous improvement. After all, we have only the human mind with which to understand the mind/body. This means that, at best, we
    might achieve a stand-off. . . .

    • Maggie —

      I don’t argue that CAP’s ideas are not good ones, and I am well aware of the savings attained through the ACA — I have done presentations about it myself, using you as a source.

      The deficit is not exactly melting, but it is improving. In the short run it would be foolish, at least until the recession is well and clearly ended and until employment stages a lasting recovery to acceptable levels, to pursue aggressive cuts in spending. However, I have not encountered a single economist or economic writer (including everyone on your list,) no matter how left leaning, who does not believe that it is also true that in the long run we do face ongoing deficit problems related to health care costs unless there is much more improvement in cost — not just containment but rollback. Orzag published an article just last week arguing that short term concerns about the deficit are overblown but that we need to start now redoubling our efforts on cost control and rollback in health care.

      I agree that switching to employee models for doctors does offer some potential for improvement in practice patterns, but for that to work we have to also move to prospective payment patterns that will encourage the employers of physicians — mostly large hospital groups and large integrated health groups — to work to cut costs. I live in the heartland of the integrated health care movement and have worked for and with large integrated groups my entire career, and unfortunately many of those groups, although certainly outperforming non-integrated groups and hospital groups on the coasts or in the Sunbelt, are very resistant to giving up the profit windfalls that occurred in the last fifteen years in hospital care and acute care management.

      Although there are many reasons for optimism — especially the ACA and its provisions — we are not even close to what we need for cost control. The cuts from the ACA and the cuts recommended by CAP amount to only about $100 billion a year combined, which will barely keep up to cost growth even at the historically low rates of growth we are now seeing. We need additional savings of $250 billion a year from Medicare and Medicaid, and $500 billion a year from private insurance.

      We need a lot more, and we need to get at it rapidly in order to have the system in place to deal with the expansion of costs we will see in the next three decades. If we do not, the alternative will be rationing of care by cost effecting low income and middle income people, both retired and working.

      I commend the efforts of everyone to do a little bit more, including CAP, but we cannot congratulate ourselves just yet. In order to make the change in medical culture you envision in the next ten years, we have to have the systems coming into place in training programs and in centers of excellence to model the changes we need, and we need to have them beginning now.

      BTW — O’Neill was just the front man for his project, which was actually done by people from Pitt, Penn (where Emmanuel is now,) and other Pennsylvania institutions. His results are duplicated completely by the more recent study by the Institute of Medicine, staffed by many of the people you mention. Both Berwick and Gawande have written articles in the last year calling for major overhauls in medical management in the next few years in addition to the ACA plans, and Gawande of course is recently on record suggesting that there is a lot more that health care can learn from business models than people in health care like to think — although he used the Cheesecake Factory, not Toyota, as a model. Citing Toyota was more a Don Berwick trope when he was rising to national prominence fifteen to twenty years ago as a proponent of quality assurance measures — can’t tell you how many times I heard references to Toyota at meetings from Berwick himself and from his disciples, back when Toyota was considered a model for quality control.

      • Pat S.

        First, thanks very much for your long comment. It set me thinking about what I call “Deficit Hysteria” I argue that entitlement (healthcare) spending did not create the deficit—or the recession. At the end of the 1990s, we were running a surplus,not a deficit. And we were spending a great deal on Medicare & Medicaid back then. Indeed, healthcare spending had been rising for two decades.

        At the beginnign of this century, two very expensive wars and tax cuts for the wealthy created the deficit. In the years that followed risign health care spending contributed to it–but did not create it.

        You write: “The deficit is not exactly melting, but it is improving. In the short run it would be foolish, at least until the recession is well and clearly ended and until employment stages a lasting recovery to acceptable levels, to pursue aggressive cuts in spending.”

        I agree—and this is what both Paul Krugman and Peter Orsag have been saying: stimulate the economy now, focus on reducing the deficit later.But when you refer to “the short run” I’m not sure how long you expect the recession to last.

        The Economy is Still Very Weak

        Some may say that the recession is over—or “ending” –but the economy remains extremely weak. Economic growth for the foreseeable future is likely to be about 1 ½%. (This is compared to 3% to 4% growth in the past.) Corporate profits may appear promising, but this is because corporations have been keeping wages down.(The stock market does not tell you how the economy as a whole is doing.) Because wages have been flat to down,, the middle-class cannot afford to spend. (See retail numbers from this past Christmas.)

        Higher withholding on their paychecks means that they’ll be spending even less this year. Real unemployment (counting everyone who has given up looking for working, and everyone who lost a full-time job and is now working a part-time job) is in the double-digits.

        The White House is the only source predicting 2 ½% economic growth next year. People I respect (Felix Zulauf for one) predict 1 ½ percent—at best. (

        And jobs are growing very, very slowly. Most are low-paying jobs. Meanwhile interest rates are near zero, and all the Fed can do is to print money. They’re pushing on a string. (Once rates reach very low levels, you’re not going to stimulate much investment by lowering the cost of borrowing by another ¼%. For businesses to invest, and create jobs, they need customers. )

        I don’t try to look out more than three to five years, but I would say that over that span, we will need to be stimulating the economy by spending on infrastructure repair, education, the environment and anything and everything that would create useful jobs. (By useful I mean jobs that let people do things that add to the wealth of the nation. We don’t need more telemarketers.)
        Short-term (3 years at least) This should be our first priority. If we do this, more people will be working, earning better wages, and they will be paying taxes. This will help reduce the deficit. Fewer will be on Medicaid and this will help reduce the deficit.

        Taking that three-year time frame where the economy is still likely to remain in the doldrums, it becomes clear that it would not be wise to Rush to try to Reduce the Deficit Now by slashing health care spending. (There are other reasons to begin reining in health care spending as soon as we can, but —carefully– to reduce the waste that hurts patients, and to make sure that, over the long term, health care remains affordable for all Americans. I’ll get to that in another comment or post. But “reducing the deficit’ is not the main reason to curb health care inflation.

        Meanwhile, the deficit will disappear—over time.

        We’re Making Progress on the Deficit

        As former Congressional Budget Director Peter Orszag points out, we’re making progress. “Last year, the Congressional Budget Office estimated that the gap between revenue and expenditure in the next 75 years would amount to 8.7 per cent of GDP. Since then, enacted revenue increases and an improved underlying budget outlook have reduced the gap to perhaps 7.5 per cent.”

        Of course 7.5 percent of GDP is still far too high. But we’re moving in the right direction.

        And note his emphasis on “revenue increases” as key to shrinking that gap. As part of reducing the deficit—and raising the funds needed to stimulate the economy. We will need to lift taxes, at least for those earning over $200,000 ($250,000 for couples), increase taxes on capital gains, raise inheritance taxes further, close loopholes for hedge fund operators, etc.

        The wealthiest 10% of Americans are still paying historically low tax rates, and this undermines both the economy and the society (by widening gaps between the top 10% and the rest of the country.)

        I think that most Americans do not realize how much we have already done toward slicing the deficit. As CAP recently pointed out:

        “Since the start of fiscal year 2011, President Barack Obama has signed into law approximately $2.4 trillion of deficit reduction for the years 2013 through 2022. Nearly three-quarters of that deficit reduction is in the form of spending cuts, while the remaining one-quarter comes from revenue increases. As a result of that deficit reduction, the projected rise in debt levels from today through 2022 has decreased by nearly 10 full percentage points of gross domestic product. In fact, under today’s policies, debt levels in 2022—as a share of GDP—will be only slightly higher than they are expected to be by the end of next year. That doesn’t mean there is no more work to be done, but it does show we’ve come a long way already.”

        The authors of the CAP report then talk about what Congress already has done to reduce the deficit, and conclude:
        “Since the start of fiscal year 2011, Congress and the president have cut about $1.5 trillion in programmatic spending, raised about $630 billion in new revenue, and generated about $300 billion in interest savings, for a combined total of more than $2.4 trillion in deficit reduction. The result is a substantial cut in how much publicly held debt the country is expected to hold 10 years from now. Instead of reaching nearly 93 percent of GDP, debt is now projected to total about 83 percent of GDP—fully 10 points lower. And while that won’t be enough to finally put the budget onto sustainable footing, it is a massive improvement. In fact, it’s about two-thirds of the way toward stabilizing the debt-to-GDP ratio.I

        “It’s been a bumpy few fiscal years. But don’t let all the twists and turns obscure the simple fact that we actually have accomplished a significant amount of deficit reduction along the way. Three-quarters of that deficit reduction has been achieved through spending cuts totaling $1.8 trillion, with only one-quarter coming from revenue increases.”

        The Deficit as Fiscal Iceberg .

        Pat, this is why I say the deficit is “melting”—slowly, the way icebergs melt, not the way ice cubes melt. Conservatives like to compare the deficit to a “fiscal iceberg” drifting out there, waiting to wreck the ship of state, unless “we turn the wheel to avoid disaster.”

        My point is that we do not need to turn the wheel –recklessly–to avoid an economic disaster. If we want to avoid a meltdown, we need to create jobs, raise wages for the middle class, and improve education.

        Recently, Paul Krugman wrote about deficit hysteria in a column titled: “The Dwindling Deficit”
        It’s hard to turn on your TV or read an editorial page these days without encountering someone declaring, with an air of great seriousness, that excessive spending and the resulting budget deficit is our biggest problem,” he writes. “Such declarations are rarely accompanied by any argument…; it’s supposed to be part of what everyone knows.

        “This is, however, a case in which what everyone knows just ain’t so. …“Still, will economic recovery be enough to stabilize the fiscal outlook? The answer is, pretty much.. the budget outlook for the next 10 years doesn’t look at all alarming.” In other words, over the next 10 years, the deficit will dissolve.
        He adds: “The deficit scolds dominating policy debate will, of course, fiercely resist any attempt to downgrade their favorite issue. They love living in an atmosphere of fiscal crisis: It lets them stroke their chins and sound serious, and it also provides an excuse for slashing social programs, which often seems to be their real objective.

        But neither the current deficit nor projected future spending deserve to be anywhere near the top of our political agenda. It’s time to focus on other stuff — like the still-depressed state of the economy and the still-terrible problem of long-term unemployment.
        “It’s true that right now we have a large federal budget deficit. But that deficit is mainly the result of a depressed economy
        — and you’re actually supposed to run deficits in a depressed economy to help support overall demand. The deficit will come down as the economy recovers. Indeed, that’s already happening.

        The Conventional Wisdom

        Pat, you write: “I have not encountered a single economist or economic writer (including everyone on your list,) no matter how left leaning, who does not believe that it is also true that in the long run we do face ongoing deficit problems related to health care costs unless there is much more improvement in cost — not just containment but rollback.”

        As Krugman says, the notion that the deficit (rather than unemployment) is our biggest problem has become the conventional wisdom- to a point that people just repeat the theme, without feeling a need to offer any evidence. Economists, in particular, tend to repeat the orthodox view. (If they don’t, they don’t get tenure. This has been true for about 20 years—maybe longer. As the country became more conservative, so did the Ivory Tower.)

        I have known many economists in academia and on Wall Street, and with a few outstanding exceptions (Krugman, Joe Stiglitz, among others) there is a reason they call it the “dismal science.” Creativity is not encouraged. Thus economists run in packs.

        I also greatly respect Orszag. But while he urges “doubling-down” on health care reforms, he also writes “the good news is that there appear to be significant opportunities to reduce health-care costs over time without impairing the quality of care or outcomes.”

        Note the time frame Orszag is envisioning in this paragraph: “Health-care costs are already so high and the power of compound interest so strong that reducing the growth rate by 1.5 percentage points per year would save substantial sums. It would reduce national health expenditures by more than $2 trillion over the next decade — and could help to put roughly $2,500 in the pockets of the average American family every year.
        (I would add that under the ACA Medicare is trimming spending on hospitals, nursing homes and surgical centers by 1% a year. And they represent roughly 1/3 of all health care spending. The same compounding effect applies.)
        Orszag continues “A slower growth rate in overall health-care spending would help to promote and sustain a slowdown in Medicare and Medicaid spending, too. If cost growth slowed by that much in the future, Medicare and Medicaid spending would reach only about 10% of GDP by 2050 — half the level than if historical growth rates continued.

        Pat, as you note, Orszag says that “short-term concern about the deficit is overblown”. By short-term he doesn’t mean this year—he is taking a longer view. And he knows that health care spending already has owed due to what he calls “structural changes”—not simply because of the recession. We just need to maintain that slow-down, and then gradually, get spending down to a lower percentage of GDP.

  5. BOB, Pat S, Barry (& Everyone)

    On the deficit Peter Orszag recently published a piece in the Financial Times where he points out that health care spending is driving the deficit. (Not SS or anything else of importance.) He also observes that a huge portion of our health care spending is sheer waste. We squander more than one-third of our health care dollars on over-priced drugs and devices, unnecessary tests, surgeries and procedures, procedures and longer hospitalizations needed to correct for preventable medical mistakes, and over-payment for certain services, especially to brand-name hospitals (which charge far more than other hospitals for some of the same basic services) and some specialists.
    We don’t need to ration care, Orszag argues, we need to reduce the waste.

    “The good news,” he adds, ” is that recent developments in health costs are better than many appreciate. Cost growth has slowed dramatically, and spending on the Medicare program for the elderly and disabled has led the way. Last year Medicare spending rose by 3.2 per cent, compared with 4 per cent for total national health spending. With such slow growth rates, health spending as a share of GDP has remained flat in the past three years”

    Both Orszag & I have been writing about this since the summer of 2011. At the time, many people didn’t believe this–or thought that the recession was causing a slow-down and was the recession ends, we’ll be facing run-away health care inflation. But as Orszag points out: in this recent op-ed
    “If this were entirely cyclical (i.e. if the slow-down were caused by a weak economy) it would be odd for Medicare to slow more than other health spending. Most beneficiaries have some form of supplemental insurance and so face very low out-of-pocket costs. Also, for most, their primary source of income is Social Security, which is protected from economic downturns”
    He continues:
    ” Medicare covers a disproportionately high share of expensive cases – and we would expect structural change to affect such cases most, which would explain the pattern we have seen. Three shifts support this idea: a move to value-based payments; digitisation and associated management changes; and better-informed consumer behaviour.
    “To see what a big deal slower growth in health costs could be, consider this: if they rose 50 basis points faster than income each year, they would still be rising much faster than the growth rate of the past three years. And yet, with that more moderate growth assumption, our long-term fiscal gap would look almost manageable.
    “Last year, the Congressional Budget Office estimated that the gap between revenue and expenditure in the next 75 years would amount to 8.7 per cent of GDP. Since then, enacted revenue increases and an improved underlying budget outlook have reduced the gap to perhaps 7.5 per cent.
    “Achieving the lower health-cost growth would knock another 2.5 per cent of GDP off, bringing the long-term fiscal hole down to 5 per cent of GDP – a greater impact than any policy change currently being debated in Washington. Moderate revenue increases and Social Security reform could then reduce it further, bringing us within reach of long-term fiscal balance.
    “How do we do this? Three steps would be particularly helpful – starting with the acceleration of the shift from paying for specific services to paying for “value”. Second, promote evidence-based medicine by connecting electronic health records with patient registries and by prohibiting malpractice suits when doctors follow professional guidelines” .
    Note .the three reforms that he stresses are all in CAP’s report.
    Finally note that ORszag is suggesting is that by “doubling down” on the reforms that are already in the ACA, “fiscal balance” is in reach– the deficit becomes manageable, without reducing so-called “entitlements.”

    Next, consider what Robert Kuttner recently wrote on The
    American Prospect: “The consensus around debt reduction is beginning to crumble. Some straws in the wind are more careful attention to the actual numbers, as well as public conversions by such key players as Larry Summers and Peter Orszag, two former top aides to President Obama . .. ”
    Kuttner points out that “In the era of the Bowles Simpson Commission, the Peterson Foundation’s regular emergency fiscal summits, and President Obama’s own conversion to the deficit-hawk side (2010-2011), a number was regularly tossed around: $4 trillion. That was the amount of deficit reduction over a decade supposedly necessary to stabilize the debt-to-GDP ratio.

    “Left out of these calculations was the fact that too steep a path to deficit reduction would lower the growth rate, reduce revenues, and widen the deficit anew. But as experts have taken a closer look at deficit-reduction already legislated, it’s increasingly clear that so much deficit cutting has already occurred that we are almost at the point where the debt ratio stabilizes without further cuts.”

    “Richard Kogan of the Center on Budget and Policy Priorities calculates that only $1.2 trillion of additional cuts over a decade (counting interest savings) would stabilize the debt ratio, and the Economic Policy Institute reckons that the number could be half that much. Get economic growth up slightly, and no further deficit-cutting is necessary at all.”

    “Ezra Klein had a nice piece ratifying the shift

    “But what about those relentless increases in federal health spending/” Kuttner asks. “. Don’t we need a drastic solution, like raising the Medicare eligibility age? The United States is a total outlier when it comes to health costs, spending nearly double what the typical advanced nation spends, and getting less care for a smaller share of the population”.

    “That’s because our commercialized health system spends too much money in the wrong places, chasing profits, adding middlemen costs, and foregoing public health gains..”

    This is the waste that results from money-driven medicine.
    This is the waste that the ACA addresses by cutting over-payments to Medicare Advantage insurers, refusing to let insurers count the money they pay to middlemen (insurance agents and brokers) as “medical expenses” under the 80/20 rule, expanding our commitment to public health (by doubling the capacity of community clinics, making preventive care free (no co-pays), insisting that insurers cover essential benefits, giving the secretary of HHS permission to cut overpayments for “overvalued services,” and providing financial carrots and sticks that will move providers away from fee-for-service medicine.

    Finally, here’s the link to the Ezra Klein piece Kuttner refers to, titled “The Case for deficit optimism” The sub-head reads:
    “Here’s a secret: For all the sound and fury, Washington’s actually making real progress on debt.”
    Klein argues that e truth is that deficit reduction is going better than you’d think from listening to the sniping in Washington. So why the continuous freaking out over the deficit? In part, it’s because deficits offer a convenient excuse for politicians to push policies that the American people wouldn’t support on their own terms. Republicans have long wanted to devolve Medicare to private insurers, for instance, but they didn’t get any traction with the idea until they cloaked it in the guise of deficit reduction.
    In general, if someone says he thinks the deficit is the most important issue facing the country, but he doesn’t think it’s important enough to merit raising another dollar in taxes, he probably doesn’t really think the deficit is all that important an issue.
    If you want to worry over the economy, don’t worry over future deficits, which we can and will get under control. Worry over the labor market, which is in worse shape than predicted a few years ago, and which exhibits fewer bright spots than the budget. The recession was deeper than expected, the recovery has been slower than predicted . . . “

  6. Maggie,

    I agree about the magnitude of waste in our healthcare system and the need to move away from paying for volume in favor of paying for value.

    However, I don’t think it will be so easy to identify waste at the individual patient level before services are rendered. Moreover, even if we can do it sometimes or even frequently, the combination of physician fear of litigation in a litigious society and perceived patient expectations, especially in areas like imaging, will likely cause much of this waste to persist.

    With respect to surgical procedures, I am optimistic about the potential of shared decision making to reduce the number of elective procedures such as hip and knee replacements and back surgeries.

    Prices per service, test, procedure, drug and device are higher in the U.S. than in other countries especially for hospital based care, and prescription drugs, particularly the ultra expensive specialty drugs to treat cancer and MS. Specialty drugs now account for 25% of all spending on prescription drugs and that could easily rise to 40% over the next five years or so.

    Even if we can move payments away from fee for service toward bundled payments and, ultimately, capitation or global budgets, the payments are still likely to reflect embedded high costs that reflect our culture of litigiousness and patient expectations along with physicians’ determination to avoid lawsuits at all costs. Finally, to some extent, regulations such as minimum nurse staffing ratios contribute to high hospital costs as compared to other countries as does the trend in recent years toward more single rooms which are believed to help reduce infections, improve the patient’s ability to rest and generally promote healing. They are, however, more expensive to build and maintain because of the need for twice as many bathrooms as there are in double rooms.

    I have come to believe that the culture of patient expectations in the U.S vs. other countries is a big deal, especially for tests that are non-invasive and not painful like imaging. Patients seem to like them because they can often definitively rule out or confirm the presence of a specific disease or condition. Neither doctors nor patients care much about the cost as long as a third party will pay for it. If it were just a matter of getting doctors to follow evidence based guidelines where they exist, cost mitigation would come sooner and more easily. I think it will be a lot harder than that.

    Perhaps Pat S. can give us his much more expert perspective than I can offer.

    • Barry —

      “However, I don’t think it will be so easy to identify waste at the individual patient level before services are rendered…”

      The entire basis of modern medicine is the concept that through scientific research we can identify the probable utility of various interventions before we make them — not of course for every patient, but certainly in statistical aggregate. The problem you are identifying is not that we can’t tell what is wasteful or even harmful based on scientific information, but rather that there is a huge back pressure for doctors to use wasteful or harmful management based on a laundry list of things: widely circulated poorly done research, habits acquired in training before good scientific information was available, patterns of practice in communities, articles planted in popular media, and the widespread conviction of many surgeons and medical specialists that the results they attain are superior to those reported in critical scientific studies — an opinion usually arrived at without actual analysis of personal results.

      However, the most important factor in this behavior is probably the promotional efforts of companies vested in various treatments and procedures. Evidence is rapidly accumulating that promotions occur and friendly “studies” are published despite results which at best are no better than older, less expensive approaches, and at worst outright harmful to patients. Observers currently are being treated to a civil trial which so far seems to show that one of the largest health care corporations knowingly not only sold but actively promoted a device for several years after becoming aware that the device did not perform well and led to harm to patients, and that this knowledge extended from the top levels of the company.

      The two counterweights to all this are education of providers and patients and the refusal of third party payers to pay for wasteful or harmful care. Education, unfortunately, progresses slowly, and is resisted every step of the way by those who have vested interests in continuing poor practice patterns. There was a recent study that indicated the average time to change 50% of practicing physicians’ pattern of care was 15 years. In fifteen years, even if the current slower rates of cost growth continue, Medicare will claim at least 10% of GDP and health care overall at least 25% due to both continued, albeit slower, growth of costs and to population increase in the number of patients of all ages. Most people think that is too much by some bit.

      The other approach — the power of third party payers to require appropriate care — works much better. HMO’s, ACO’s, and so on will help that a lot. But the most powerful player in the game is still Medicare, which has the power to make rules and stick to them. In my own field, I have seen many imaging techniques that had heavy backing by academic radiologists and by manufacturers fall by the wayside — so-called “virtual colonoscopy” being one recent example — because Medicare refused payment in the face of research that demonstrated failure to provide value.

      Medicare continues to make these kind of nips and tucks in health care all the time, and private insurers, given cover by the Medicare refusal, follow along happily. Such changes are always accompanied by wails of anguish from invested physicians and companies and from patients who have read or heard about the techniques in popular media or by word of mouth, but in the end resistance is futile.

      We don’t pay for rhino horn powder, and we shouldn’t pay for a lot of other things. Medicare has the power to make that happen and to thereby stave off efforts to cut spending in ways that harm patients by the happy alternative of cutting spending that is either useless or harmful. We need to use it.

    • Barry–
      You write:
      “Cost of procedures, drug asnd device are higher in the U.S. than in other countries especially for hospital based care, and prescription drugs, particularly the ultra expensive specialty drugs to treat cancer and MS. Specialty drugs now account for 25% of all spending on prescription drugs and that could easily rise to 40% over the next five years or so.

      “Even if we can move payments away from fee for service toward bundled payments and, ultimately, capitation or global budgets, the payments are still likely to reflect embedded high costs that reflect our culture of litigiousness and patient expectations along with physicians’ determination to avoid lawsuits at all costs.”

      Yes, costs for drugs, devices and procedures are much higher in this country, But this has nothing to do with patient’s demands or providers’ fear of malpractice suits. Patients don’t set the prices for drugmakers and devicemakers. Doctors have no reason to want the prices for drugs or devices to be sky-high (unless they have a patent on the device, and very, very few doctors have patents.)

      So who insists on such high prices for drugs and devices? The folks who manufacture them, and their lobbyists, These lobbyists have consistently blocked efforts to set up registries so that we can look at the effectiveness of devices (something that other developed countires do.) The manufacturers don’t want head-to-head comparisons. Republicans also have blocked all efforts to let Medicare set up a formulary of drugs that it will pay for (based on medical evidence) and refuse to pay exoribitant sums for new cancer drugs (and others)
      that are hugely overpriced.

      You asked for (Dr.) Pat S’s more expert perspective on the issue, and he responded.
      (Everyone — see Pat S’s comment below.) He writes:

      “The most important factor . . . is probably the promotional efforts of companies vested in various treatments and procedures. Evidence is rapidly accumulating that promotions occur and friendly “studies” are published despite results which at best are no better than older, less expensive approaches, and at worst outright harmful to patients. Observers currently are being treated to a civil trial which so far seems to show that one of the largest health care corporations knowingly not only sold but actively promoted a device for several years after becoming aware that the device did not perform well and led to harm to patients, and that this knowledge extended from the top levels of the company.”

      (Barry– as you probably have read, Johnson & Johnson was selling a hip implant that failed 40% of the time. They knew this, but kept on selling it for 4 or 5 years, without disclosing the problem. If we really want to weed out fraud and corruption in our health care system, the people at J&J who knew about the defect should go to jail. But they won’t–just as Rick Scott was never even indicted.

      Corruption and greed in our money-driven for-profit health care industry is, as Pat S. suggests, the major problem. This is why we pay too much for everything.
      Patient expectations don’t drive prices.

  7. I agree that new taxes are needed for Medicare. To put it crudely, we cannot pay for heart transplants on 90 years old with just payroll taxes on dishwashers.

    There are 36 million Americans between ages 55 and 65 today.
    Perhaps 10% of them will die before they turn age 65, but that leaves about 32 million persons who will join Medicare in the next decade.

    Also, several million persons will have logged in two full years on Social Security disability, and they too will join Medicare under current law.

    Of the 45 million persons now on Medicare, about 20% of them (9 milllion) will die in the next decade.

    Based on all the above, Medicare will have close to 70 million enrollees
    by 2021 or 2022.

    The current average spending per Medicare enrollee is $11,000.
    I do not know anyone who believes that we can hold this absolutely flat. None of the reforms discussed in this blog would alone hold per-person spending absolutely flat.

    If the average goes to just $14,000 each in 10 years, we will be doing OK.

    $14,000 each times 70 million equals close to $1 trillion a year for Medicare. (and another $600 billion a year minimum for Medicaid.)

    If we do not increase any taxes, then these two programs will eat up about 50% of all federal revenues in 2021.

    Now, there are Canadian provinces right now where health care is half of revenues, and Canada is not in crisis.

    That is because Canada has a tiny defense budget, and also has large sales taxes.

    As Maggie documented, we are starting to increase taxes a little bite at a time. This is not easy when both political parties treat taxes as some kind of evil invasion, as opposed to just paying for what we have “ordered”. Americans are treated like fiscal children by both parties.

    My feeling is that the ‘cats and dogs’ or ‘grab bag’ types of tax increases and subsidy decreases that Maggie describes in the ACA will not be enough.

    I think we may need a president who wears a green eyeshade instead of that mindless flag lapel pin. A President who would say, “America, the bill for Medicare this year is up by $50 billion. If Congress does not pass a tax increase or a defense budget cut of $50 billion, then Medicare will stop paying for elective tests and surgeries in the 12th month of the fiscal year. Next question, please.”

    • Bob–

      As Barry suggests in his commment below, your estimates on the numer of Medicare patients are high.
      In addition in other countries where the population is aging more rapidly than in the U,S,.
      (Sweden, Germany, etc.) health care costs have not sky-rocketed. In Sweden they have remained relatively flat– despite aging.
      This is because THE Major Cause of health care inflation is not the aging of a population but a country’s willingness to pay more for so-called “innovation”. (See Princeton economist Uwe Reinhardt on HealthBeat. You can Google it..)
      Some of these technological “advances” in how procedures are done (robot surgery), how tests are done (using enormously expensive equipment) and new devices and new drugs actually that are supposed to improve care for patients just haven’t advanced outcomes.

      Unfortunately, in recent years (roughly the last15 or 20 years) we have found that most of these innovations don’t provide benefits that offset the risks (or the higher cost) .

      From the 1950s through some point in the 1980s, technological advances really were improving care.

      But now, we’ve hit a flat point in the curve. Most new drugs are just “me too” drugs that are not making any signifcant improvments on older drugs.
      Most new devices are, as one device manufacture explains in my book ( Money-Drven Medicine) just an old device,that is painted a different color, and packaged and marketied differently. For example: “Knee implants made especially for women”) Old wine in new bottles.

  8. Pat S. –

    Thanks very much for your response to my previous comment. I especially agree about the need for Medicare to provide political cover for private insurers regarding changes in payment policy. There is a lot of special interest money and power aligned against such changes though.

    Bob Hertz –

    For the most recent year we have data, roughly 2.5 million people died in the U.S. of which 73% or about 1.8 million were 65 years old or older. Slightly less than half of those 2.5 million deaths were due to heart disease and cancer. So, over the next decade, allowing for population growth and no huge medical breakthroughs in treating the two big killers, the total number of deaths of people 65 and older should be around 20 million, not the 9 million you estimated.

    Regarding the need for higher taxes, at all levels of government – federal, state and local, the majority of the population simply wants more in government services than they are willing to pay for. They all want someone else, mainly the rich, to pay or they want cuts in someone else’s program(s) but not theirs. I’ve said many times that the broad middle class needs to pay for the broad middle class. Democrats need to be more honest with the middle class when it comes to the level of taxation needed to sustain these programs over time even if we can enact some of the health insurance reforms that Pat S. described above. Soaking the rich ad infinitum won’t cut it.

  9. run 75411 & Barry –
    run 75411–
    I like the idea of long-term incremental tax increases. BUT we do not want to tax the middle class (by which I mean households earningsomewhere between rougly $75,000 and $50,000. (Median household income is around $63,000, so I’m lookinng at a broad band on either side of that number and calling it “middle class”. )
    And we definitely don’t want to raise taxes on households earning less than $50,000.
    Why don’t we want to raise taxes on the middle class? Because our middle class is hurting, and hurting badly. It’s skating on thin ice, and It’s shrinking. This isi a threat to the stability of our society and our economy.

    Barry & Run 75411.

    Barry you say that the “middle-class should pay for itself.” (See my comment to run 75411 above on how I define as middle class.)

    First, this nation’s tax system is based on the notion that wealthier citizens help pay for others. Our income tax is founded on the notion of “social justice.” This is why, before WW II, the middle-class paid no income tax.
    Then came the war and the govt needed to raise more revenue.
    So it began to tax the middle class. But the upper class paid a far higher rate–“the average effective rate for the top 1% of taxpayers climbed from roughly 20% in 1940 to almost 60% in 1944. On the other end of the scale, the marginal tax rate in the bottom bracket in 1940 was 4.4% and it began after an $800 exemption for individuals. In 1944, the exemption was $500 and the rate was 23%”

    After the war, rates fell , but wealtheir Americans still paid far higher rates than the middle-class. The vast majority of Americans felt this was fair.
    This allowed the middle class to grow and prosper in the 50s and through much of the 60s. As a result, the middle-class created a solid foundation for the nation.
    It was only in 1980s (known as “TheGreed decade”) that we began to cut taxes for the rich and shift the burden to the middle class. Meanwhile companies raised pay for those at the top while refusing to lift wages for the middle class.
    This is why the middle class has become poorer and poorer over the past 3 decades while the rich (and here I’m thinking of the top 10%–not just the 1%) -have gotten richer and richer.
    If you look at current tax rates for the top 10% you’ll find that historically, they are very low. If you add in sales taxes and state taxes, you find that the middle-class and the poor are paying more and more.
    Barry, you say you would like the middle class to pay for themselves?
    The problem is that they don’t have the money. You can’t get blood from a stone.
    I would suggest that anyone who does believe this adopt two young children, rent an apartment or a house, and see how, 2 adults and 2 kids far living on $50,000 a year–before taxes. (To make it a fair experiment, both adults should work.. Most middle-class women work. Thus, the wife won’t be home to take care of the kids. they’ll have to send them to day care–which you will find is expensive.
    Even when they begin school, they’ll need care and supervision after school.
    Of course, at a certain point, they’ll no longer need after-school care, but their clothing, equipment they need for sports, grocery bills etc. will become increasingly expensive.
    Now, trying saving to pay for the children’s college tuition-or at least part of it.
    Not so long ago, middle-class families could afford to send their kids to
    college. They had to save to do it, but they had enough discretionary
    income to do it. Now, they don’t. (We no longer send a larger percentage of kids to college than a number of other countries.)
    The fact that the middle-class cannot afford college will hurt the entire country. Fewer educated workers means that we are not as competitive globally. Fewer educated voters mean that there are fewer people capable of seeing through Big Lies like
    “Death Panels” or the notion that Obama isn’t a U.S. citizen.
    If you look at who supports the Tea Party, you find that the educational level if low. If you look at who voted for Obama you find that the educational level is pretty high–especially among younger voters.
    In a Democracy, Americans get the government they deserve. If we
    want to a smart government, we need smart voters.
    Sure, some people are smart without going to college, but 4 years of
    college gives young people 4 years to read, and to learn how to think– not just in classrooms but by talking to each other. It gives them a chance to learn history– which is the only way we can avoid making the same mistakes over and over again. Not all students make good use of theopportunity (which is why I think some should wait until they’re 21 or 22 to go to college. ) But those who do take advantage of it growenormously. I’ve seen the change– in my kids, in their friends, and in the college students I once taught.
    Here are some numbers on the middle class:
    ” Adjusted for inflation, real wages have stagnated or fallen; a typical male worker’s income in 2011 ($32,986) was lower than it was in 1968 ($33,880). Lower tax receipts, in turn, have forced state and local cutbacks in services vital to those at the bottom and middle.”
    Upward mobility has all but disappeared. ” Children in other rich countries like Canada, France, Germany and Sweden have a better chance of doing better than their parents did than American kids have. More than a fifth of our children live in poverty — the second worst of all the advanced economies, putting us behind countries like Bulgaria, Latvia and Greece.”

      • Peter–
        I have a hard time believing that you actually mean that.

        Sure, I would agree that a poor couple shouldn’t have 9 children because they won’t be able to afford to give them good care.

        But today, many middle-class couples cannot afford to have 2 children and send them to college (or save for their own retirement while raising 2 children.)

        If you are suggesting that a low-income or middle-income couple earning $25,000- $50,000 don’t have a right to have two children, what you are saying just isn’t something that most Americans would accept. The right to give birth is a human right that the U.S., as a democracy, has always supported. The notion that poor people should be sterilized so that they don’t reproduce (or sterilized after one child) is an idea that goes back to Eugenics. (Think Nazi Germany)

        Moreover, we need greater diversity in our population. If only people earning over, say, $90,000 a year had 2 children, we would have a greatly diluted gene pool. (People in this group tend to marry each other. We know that inter-marriage within a class or group leads to all sorts of genetic problems.)
        The U.S. population is stronger because it was built on immigrants from many different gene pools, all intermarrying.
        Today African-Americans, Latinos, Asians, and other new immigrants are reproducing at a faster rate than white Americans. They also are beginning to intermarry with white Americans. And, as the old “minorities” become the new majority, intermarriage will increase.
        Inbreeding–whether you are talking about humans or cocker spaniels– weakens the breed (I mention cocker spaniels only because I have one, and know about the problems that have resulted from inbreeding “top of the line” cockers.)

        • Maggie,

          Frankly i don’t believe that most people on welfare want to have as many children they have. If we offered men say 500.00 to have a vasectomy, i believe that they would run in their Air Jordans to have this procedure done. For woman we could offer more money since it is a more intensive procedure. These are options that i believe many people would seriously consider. How about cutting off help for those on welfare that have more than one child they can’t support them? How about personal responsibility?
          As far as the gene pool–this is not an Amish or Jewish intermarriage issue.
          Along time ago i made the decision that i would not have children since i would not make more than 40,000/yr. I didn’t think it would be right to ask other people to support children that i couldn’t provide for.

          • Peter–

            Since you don’t have children, this may be hard to understand. But most poor
            people love their children very much. They enjoy them. And poor people especially
            need every bit of pleasure that they can find in this world.
            As for cutting off help for those on welfare if they have more than one child– I
            presume you are suggesting that we let that one child go to bed hungry every night?

    • Maggie —

      Just a quick correction: “Median household income is around $63,000,”

      That number is the median income for households headed by couples. The median household income in the US is now about $50,000, including households headed by a single adult.

      This, of course, strengthens your argument rather than weakening it.

      • Thanks Pat–

        “Median income” is always tricky because there is “median family income” (people in one household who are related) “median household income (could be 3 unrelated young people)
        and “median income” (which includes households with only 1 person).

        So I tend to use the higher number so as to be conservative in what I assert.

        But you’re entirely right “median household income” is lower, and that fact only strengthens my argument..

  10. Maggie –

    First, World War II was a highly unusual time in our history which required huge sacrifices on many levels including taxation. Second, when income tax rates were highest from after World War II until JFK’s tax cuts in the early 1960’s, very few people actually paid the highest rates because of the availability of tax shelters – oil and gas drilling, real estate, cattle, etc. Also, the top capital gains rate even in the 1950’s and early 1960’s was only 25% which many wealthy people were able to take advantage of in ways outside of the stock market. By the way, that’s not much different from the 23.8% rate that the highest income people are paying now effective January 1, 2013. Tax shelters continued to significantly mitigate the tax burden paid by most of the wealthy throughout the 1960’s and 1970’s as well. Also, state income taxes and local property taxes are now much higher than they were 50-60 years ago in many heavily populated states including CA, NY, NJ and IL. Finally, we didn’t have the now hugely expensive Medicare and Medicaid programs prior to 1965.

    I choose to define middle class the same way President Obama and his allies in Congress do – less than $200K for a single person and less than $250K for a couple. This is the political definition as opposed to the statistical definition that you focus on. You can have a progressive tax structure within that range that raises enough money to pay for the entitlement programs that benefit the middle class, I believe. The wealthy can pay for the poor as well as themselves which is fine.

    • Barry

      You write: “I choose to define middle class the same way President Obama and his allies in Congress do – less than $200K for a single person and less than $250K for a couple.”

      As you know people in that bracket earn more than 97% of all Americans

      They are very definitely NOT in the middle class.

      You can choose to define middle class however you wish, but this only reminds me of the truism that “Everyone has a right to their own opinions, but not their own facts.

      And Obama and his administration do not define Middle-Class as people earning $200,000.
      They have been very clear on that. For the time being they are keeping Bush tax cuts for those earning between $200,000 and $400,000, but this is a temporary compromise.

    • Barry–

      Today, as I’m sure you know, tax rates for those earnng over $200,000 are historically very low.
      (You can look up the history of tax rates, including state taxes and sales taxes and find that this is true.)

      If you want to define “middle class” as individuals earning over $200,000, and say that they should
      take of themselves, I would agree with you.

      But when most people use the term “middle-class” they are not talking about the wealthiest 3% of all Americans

  11. This is an excellent exchange, but Maggie, I feel like my warnings about future Medicare obligations are being ignored.

    We need at least $1.5 trillion to pay for Medicare and Medicaid in 2022.

    I believe that the total payroll of all Americans today is about $6 trillion. It is not going up very fast, if at all, thanks to automation and outsourcing and attacks on unions.

    The rich get perhaps $1 trillion of this payroll, plus their dividends and sub-S profits.

    How can we pretend any longer that a 2.90% payroll tax will pay for Medicare?

    The Germans have a 14% payroll tax and barely squeak by.

    If we do not want that — and I understand — then we had better have a national sales or value added tax very soon.

    What I like about sales taxes is that wealthy elderly persons pay them every time they fly to Florida or Arizona. Whereas the elderly avoid payroll taxes for the most part.

    • Bob–

      I agree that this is an excellent thread. I love threads like this because they make me think.

      No one knows what Medicare and Medicaid will cost in 2022.

      We know (more or less) how many Americans will be over 65. That’s about it.

      Here are some of the variables: In 2022 will Medicare and Medicaid be negotiating with drug makers and device
      makers for discounts. (Drugs and devices–including both drugs you purchase in a pharmacy and drugs that show up on your hospital bill) now account for 17% of all health care spending.)

      I’m quite certain that in the next couple of years, Medicare will begin negotiating for discounts. Obama tipped his hand in a 2011 deficit speech:
      “We will cut spending on prescription drugs by using Medicare’s purchasing power to drive greater efficiency.”
      That wasn’t “We might” that was “we will.” Medicare/Medicaid is by far the biggest pruchaser of drugs and devices in the nation. They have the market leverage to do this. (It’s what every other government in the developed world does.)

      The VA uses its sizee and clout to negotiate for discounts on drugs and as a result pays 40% less than Medicare does. Even more could be saved on devices which are even more overpriced. (Large device makers enjoy double-digit profit margins.)

      The Incidental Economist estimates that if Medicare followed the VA’s example it could save $140 billion over 10 years (that’s in 2009 dollars and prices. It be more in 2013 prices) And that doesn’t’ include devices. So we’re looking at potential savings of well over $200 billion.

      Probably Medicare wouldn’t tighten its formulary as mcuch as the VA has–though it should. (There
      is no medical evidence showing that VA patients suffer by not having access to the most expensive drugs which, often, are no better, and usually are riskier (because they’re newer and we know less about them. ( For a specific patient who cannot tolerate or benefit from older, less expensive drugs, exceptions can be made.)
      Vets have been spared some dangeerous new products that were later withdrawn from the market.

      Then there are all of the reforms that CBO couldn’t “score”. In other words, they can’t even begin to estimate how much be saved, though everyone agrees that the potential for enormous savings is great.

      If providers are forced to practice evidence-based medicine (and are financially penalized, both by Medicare and by insurers if they don’t)) no one knows exactly how much we would save. But it would be huge. (

      A major reason why healthcare is So much less expensive in Europe is that most doctors there follow “guidelines” based on medical evidence. Our doctors follow guidelines around half of the time.

      But that will change as we address the malpractice issue by creating “safe harbors” for doctors and hospitals that follow evidence based guidelines. These safe harbors will protect them from lawsuits.
      For instance, if a doctor doesn’t recommend PSA testing –or doesn’t recommend surgery following PSA testing–and the patient develops prostate cancer, the doctor would not be liable because all of the medical evidence shows that PSA testing does more harm than good. The Preventive Services Task Force has already said that it does NOT recommend PSA testing, so this would be easy to put into a safe harbor law.

      We also know that the procedures to use on cardiac patients suffering angina are useful only about half of the time. And we know exactly which patients won’t enjoy any long-term benefit. Their angina will disappear over the short term, but then come back. And the procedure does not reduce their risk of dying of a heart attack. It’s just a quick temporary fix for the angina. They might better change diet, exercise, and take certain low-cost medications.

      We also know that spine surgery for lower back pain is usually not effective.

      And Ww know that if you tell patients about all of the risks as well as benefits of hip transplants and knee transplants, 30% will decide not to have the surgery. Shared decision-making (telling patients about risks so that they can make informed decisions could easily be part of “safe harbor”

      Do you have any idea how much money this would save?? I don’t. No one does. It’s impossible to estimate. (This is why I say that no one knows how much Medicare/Medicaid will cost in 2012.)

      But even if only some of the above happen, the savings ft would be huge. And it’s very likely that these things will happen as we move away from paying “fee for service” and begin paying for good outcomes at a lower price (with doctors and hospitals assuming the financial risk that if they don’t achieve better outcomes for less, they will see their incomes fall.

      This is the first time in U.S..medical history that we have tied payments to results. In the past, a doctor and hospital always got paid–whatever the outcome (unless they were clearly negligent.) That will no longer be the case. They will have “skin the game” which will encourage hospitals that focus more on co-ordinating care and avoiding preventable errors. And it will encourage doctors to try following evidence-based guidelines For more on how hospitals are agreeing to share in risk in their contracts with insurers see the HealthBeat post “Breakfast with Atul Gawande.” Also, please Google Gawande’s latest
      New Yorker article “Big Medicine.”

      Bob, I realize that the newspapers are full of quotes from politicians and others saying that in 2012 Medicare will cost X Y or Z & bankrupt the country

      These people know very little about reform and the many unknowns about how much it could save. If one in 500 has actually read the ACA, I would be surprisd.

      They are simply repeating the conventional wisdom. And the conventional wisdom is often wrong. Not so long ago, the same people were saying that global warming didn’t exist–because they knew nothing about the science which explains global warming. In the 1990s, these same people said that U.S, stocks could only go up–and that there was no stock market bubble because they knew nothing about finance or financial cycles. They said that if we raised taxes (which we did in the 90s ) productivity would drop and the wealth would stop working. (It didn’t– and they didn’t.)

      Paul Krugman and some of other people I quote know a great deal about economics. (What I know I have learned from them over years of reading–I’ve been following finance and the economy since I went to Barron’s in the late 80s and began writing cover stories about all of these issues (I’m not an economists–but I’m a good student.)

  12. Maggie –

    The private sector Medicare Part D plans already use formularies. Some are much more restrictive than others.

    I think what we need to deal with the ultra expensive specialty drugs is for the leading cancer centers to stop using some of these drugs because they are no more effective than much less expensive treatments. As you know, Memorial Sloan Kettering did exactly that in one case recently. It would probably also require oncologists to be more honest in communicating prognoses to patients and families rather than holding out false hope and recommending 4th, 5th and 6th line treatments after the more conventional treatments fail. They shouldn’t consider it a personal failure if they have to say I’m sorry but there is nothing more that we can do for you aside from comfort care.

    Medicare, for its part, could either refuse to pay for expensive treatments like proton beam therapy for prostate cancer because it’s no more effective than considerably cheaper IMRT. Or, it could subject the proton beam approach to reference pricing which means it would pay no more for it than it does for IMRT. It currently pays about 68% more for proton beam than for IMRT. That’s $32K vs. $19K. Providers could be given the chance to balance bill for drugs, devices and procedures that are subject to reference pricing but they would have to inform patients of the precise incremental cost they will face ahead of time if they really want the more expensive treatment. Obviously, not too many seniors could afford to pay the incremental $13K for proton beam therapy but, if it’s not more effective than the cheaper alternative, it’s wasteful and taxpayers shouldn’t have to pay for it.

    When more surgeons become employees of hospital systems, it should be easier to standardize on the most cost-effective devices. As we move toward bundled payments and even capitation, it should get easier for hospital led ACO’s to enforce this approach.

    I think we’re in agreement on the value of shared decision making for elective surgical procedures and the need for safe harbor protection from failure to diagnose lawsuits for doctors who follow evidence based guidelines.

    We will still have to overcome the issue of often unreasonable patient expectations which will likely be reinforced and supported by groups like the AARP. That could be the biggest challenge of all.

    • Barry–

      Medicare Part D’s “formularies” bears little resemblance to the VA’s formulary.
      (I think you know this. You have read a great deal about healthcare, and have been reading HealthBeat
      for more than 5 years.)

      As the Incidental Economist explains: “A formulary is a list of drugs covered by a health plan.) The VA’s national formulary covers 59% of the top 200 drugs while Medicare PDPs cover between 68% and 93% of those drugs, averaging about 85% covered. .

      Covering 85% of the most popular 200 drugs is very, very different from covering 59% of the 200 most popular.
      The VA is very discriminating. Medicare is not.

      This is because drug company lobbyists control many Congressmen, and up unti now, Congress has been Medicare’s board of directors. If Medicare tried to do anything that would upset drug companies,
      Congress stopped it.

      But under the Affordable Care Act, this is changing. Congress no longer has nearly as much control over what Medicare pays for. The Department of Health and Human Services and CMS (the Centers for Medicare and Medicaid) have much more control. Even if the Indepenent Advisory Board is eliminated (which I very much doubt will happen) the law says that the Secretary of Health and Human Services takes on all of the power of the Indepedent Adviosry Board.

      Why did the majority of Congress vote to give away so much power? Because the majority realized that Congressment are not medical researachers and are not doctors. They really are not in a position to make decisions about what drugs Medicare should or should not cover. And many Congressmen are uncomfortable with the pressure that lobbyists exert. By handing the power over to medical reserachers and scientiests, doctors and other heatlhcare experts at HHS and CMS, they are saying “We know we don’t have th expertise to make these decisions. Now, when lobbyists come to us and complain about a drug that Medicare is no longer covvering we can say: ‘We agree with you– but we dodn’t have any control over this.'” This gets them off the hook. And leaves the decision-making to people who have the knowledge.

      As for private insurers, most cover anything that is popular–regardless of what medical evidence says sabout risks.
      The one exception: Non-Profit insurers and integrated health care systems. Kaiser (non-profit) and Mayo Clinic (which has a pretty tight formuarly
      based on medical evidence) do not cover drugs if medical evidence suggests that
      benefits do not outweigh riks.
      (Today, or-profit insurers do cover these drugs because they are primarily concerned about not losing market share, and don’t want to lose customers.

      But as Medicare gets tougher, for-profit insurers will follow. In the new regulated environment, it will not be nearly as easy for insurers to pass on over-paying for drugs to customers (in the form of higher premiums.

  13. It is true that Kaiser and Mayo Clinic are much more careful about cost-effectiveness in medical care.

    However, I need to introduce some potential rain on the evidence-based parade —

    Kaiser and Mayo are not cheaper.

    Frankly I do not know why, as my own expertise is insurance and not medical administration.

    Cost control in health care is an endless uphill battle, and this is partly because even an intervention that works may cost more in the long run. We all have anecdotal evidence of persons whose lives are saved by one medical intervention, only to need even more expensive interventions later on.

    This is very severe in Medicare, since almost all the participants are retired. Even an economical and justified and successful back surgery on a 75 year old will just free him up play golf or do nature hikes again. It will not send him back to work where he will start paying taxes again.

    Even an efficient Medicare will lead to longer life spans — it already has– and longetivity is very costly to our nation.

    It is not the worst problem imaginable –i.e. I would sooner deal wtih longetivity than a plague or a world war — but longetivity requires more savings and higher taxes, and we are seeing precious little of either one.

    • Bob–

      You’re right that, overall, Kaiser and Mayo are not cheaper.
      But they offer much better care than average. Outcomes are better and
      patient and physician satisfaction are better at Mayo.
      And in Northern California heart disease is not longer the leading cause of
      mortality thanks to Kaiser’s management of heart disease.
      In other words, at Kaiser and Mayo we are getting much better value for the same
      number of dollars.

      That is the goal of reform. And long-term, if we managed to improve value for health care dollars
      nationwide, this would lead to a healthier population, and lower health care costs.
      (Our biggest expense is chroni
      c diseases, not end-of-life care, or care for the elderly.
      Chronic disease are so expensive because, by definition, they are “chronic”– the patient can live for years with a chronic disease. But if we manage to get ahead of the curve of the disease’s progress– managing it from the beginning, and
      teaching the patient how to manage it– we can avoid the costly hospitalizations and surgeries so often associated wtih
      chronic diseases.

      One reason health care is less expensive in Europe than in the U.S., according to Don Berwick (former head of Medicare) is
      because they are better at managing and treating chronic diseases. (See the film version of “Money-Driven Medicine” where
      he explains this)

      I agree with you that longevity is not the worse problem in the world. Particularly if, as Barry suggests, we lengthen the period of time that people are relatively healthy so that the period of serious illness is much shorter, and in many cases
      the body just wears out.

      But there is one major problem with longevity. Too often the body outlives the mind. As more of us live into our 80s, many, many more of us are going to suffer from Alzheimer’s or some other form of senile dementia. This will be very expensive but
      Alzheimer’s patients need care 24/7. We have made llittle progress in tackling this disease, and I doubt that we will anytime soon. Meanwhile it is a terrible disease that causes enormous suffering for patients and their loved ones.

      The only solution that I can see (and the goal here is to reduce the suffering, not to save money) would be to make
      physician-assisted suicide legal (only for physicians who wanted to participate)–only in cases where the patient himself or herself asked to consult with a physician about this possibility while still able to make decisions–and only in cases wher eat least two physicians could confirm the diagnosis. But this open’s a pandora’s box. Do we want to make physician-assisted suicide legal when patients are suffering from other diseases? Which diseases?
      The danger is that we begin to focus on saving money rather than reducing suffering. And there is a great danger that relatives would become involved in these decisions . . .

      • The lower or higher cost of Kaiser, Mayo, and similar institutions is interesting, since that question does not have just one answer.

        Mayo and Kaiser and other similar institutions are less expensive for Medicare. Lower costs there have been well documented by the Dartmouth investigators and others.

        Mayo and Kaiser are not cheaper, and in fact are often more expensive, for private insurers. The reason for this, in Mayo’s case and the case of other large integrated systems, is that the private insurance market for the last ten or fifteen years has seen a major trend of health care vendors who have either strong regional market penetration or have regional or national prestige that makes their inclusion in insurance plans almost obligatory using that market power to extract higher payments from private insurers who have little or no choice in electing to include them in their plans. While nationwide the difference between Medicare payments and private insurance payments averages less than 25%, some of these market dominant providers have been able to extract payments from private insurers that are as much as 300% of Medicare rates, and can often extract payments that are much higher than smaller or less well known competitors.

        Kaiser is in a slightly different situation since it is not only a provider but an insurer. Kaiser has the pricing advantage of having its largest presence in several regional markets that have very high costs by national standards. In pricing its contracts to buyers it obviously takes competition into account, as well as the possibility that it can actually extract some bonus due to the higher quality of care Maggie discusses above as well as to the fact that it offers a more comprehensive care package than many competitors.

        The role of market power in extracting bonus payments has been best documented in a series of investigations of the position of the Harvard Affiliated system in the Boston area by local news media and by others, but the same game is being played on a widespread basis. To get a better idea of what provider groups really can do in terms of cost, comparison on the level playing field of Medicare is much more accurate, which is why the Dartmouth Group has spent most of their attention there.

        • Pat–

          I do hope that, under health care reform, we can address some of these discrepancies in what
          providers charge that have nothing to do with better care, and everything to do with market clout.

          This is already beginning to happen in Massachusetts, where the Boston Globe and the
          state attorney general did a good job of exposing how prestigiouos hospitals overcharge
          for the simplest procedures.

          In Cincinatti, one insurer is offering insurance that will pay all hospitals 40% more than
          Medicare pays. Period. The insurer is willing to pay 40% more across the board in order to
          save the administrative costs of negotiating (behind closed doors) with each hospital.
          This seems to me a splendid idea.

          Of course the hospitals are very upset. They say “We should
          each be able to set our own prices.” In other words, they want to be the “price-makers”
          leaving the rest of us to be the “price takers.”

          This should be illegal. Some hospitals should be paid more than others only if they provide better care
          (as measured by evidence-based guidelines and analysis of outcomes, patient satisfaction, etc) for less.
          Under the ACA, this is the goal.

          In Maryland, they have an “all payer” system which says that both Medicare and private insurers
          must all pay all hospitals the same fees for specific procedures. (This means Medicare pays more than it does in other
          states, but this law has actually curbed health care inflation in Maryland when compared to other states in the North
          East that have a mixed population with many poor residents.)

          Admittedly, fees are adjusted to pay certain hospitals more because they treat a dispropotionate share of
          poor and uninsured people, and fees are adjusted to pay academic medical centers more to cover the costs of
          teaching medial students and the new technology that they need. (Though, by and large, academic medical
          centers are overpaid–but that’s another post.)

          Maryland’s all-payer system used to be the law in many states. But as Republicans took over state governments,
          they abolished it. Republcians tend to believe that “market competition” will keep prices down. Of course, it
          hasn’t worked out that way . . .

          As reform unfolds, and if Democrats re-take statehouses in some states (as a result of changing demographics)
          I wonder if, at some point, other states will look into Maryland’s system?
          (The all-payer approach is also used in some parts of Europe.)

  14. Bob –

    Longer life expectancy does not necessarily imply higher healthcare costs. If we can lengthen what I call health span or the period of good health and comparatively low healthcare costs, average lifetime health spending could shrink even as a much higher percentage of it comes at the very end as the body just wears out and starts to shut down.

    On the subject of end of life care, though, I read the extensive press this week about the death of former NYC mayor, Ed Koch a couple of days ago at age 88. He died of congestive heart failure and had numerous trips to the hospital over the last several months for that condition. Less than four years before he died, he had quadruple heart bypass surgery and had his aortic valve replaced at the same time. I would love to see a discussion about how elderly patients with these medical issues, especially advanced congestive heart failure probably coupled with a very low ejection fraction, would be treated in other developed countries and at what cost.

    For patients with ESRD, in the UK we are told that all of these patients who need dialysis get it whereas in the U.S. everyone with renal failure is offered it. There is a huge difference. I saw an article recently that suggested patients over 80 years old don’t live any longer with dialysis than they would with medical management without dialysis which would cost far less. This is all part of the management of chronic diseases and conditions that account for 75% of our healthcare costs but practice patterns, especially in end of life situations, can and probably do differ materially among developed countries.

    The most obvious high cost cases among the elderly are patients suffering from Alzheimer’s or dementia who need long term custodial care and can live for quite a long time before they ultimately die. I wonder how many needless surgical interventions that will accomplish little or nothing for their quality of life are performed on these patients and at what cost.

    In any given year, about 4% of the Medicare population dies and, according to Ezekiel Emanuel, account for 27%-30% of Medicare costs in that year. End of life care is a pretty big deal for Medicare but not nearly so much for commercial insurers covering a younger population. However, the more people who execute a living will, advance directive or POLST, the better.

    • Barry–

      I’m afraid you misquoted Zeke Emanuel– it’s 6%, not 4%–and you ripped his comment out of context, distoring his meaning.

      (In the future, if you’re going to quote someone, or cite a fact, it would help if you could include the URL. It took me some time to find what he actually said. I searched because I know Zeke and I knew he would never agree with the thrust of your argument.

      Here is what he actually said: “It is conventional wisdom that end-of-life care is an increasingly huge proportion of health care spending. I’ve often heard it said that people spend more on health care in the year before they die than they do in the entire rest of their lives. If we don’t address these costs, the story goes, we can never control health care inflation.

      Wrong. Here are the real numbers. The roughly 6 percent of Medicare patients who die each year do make up a large proportion of Medicare costs: 27 to 30 percent. But this figure has not changed significantly in decades. And the total number of Americans, not just older people, who die every year — less than 1 percent of the population — account for much less of total health care spending, just 10 to 12 percent.

      The more important issue is that just because we spend a lot on end-of-life care does not mean we can save a lot. There is no body of well-conducted research studies that has proved how to save 5, 10, much less 20 percent.

      Recent studies find that hospice may reduce costs in the last year of life for cancer patients by 10 to 20 percent. But they find no savings from hospice care for patients who die of other conditions, like emphysema or heart failure. No one is sure why hospice care doesn’t save more. It may be because patients are enrolled in hospice care too late, or because hospice services themselves are labor-intensive and not cheap.

      Even if we can never save a dime, however, there are good reasons to think about changing end-of-life care practices. While end-of-life care has improved considerably over the last 30 years, many Americans still die in hospitals when they would rather die at home. Nearly 20 percent of deaths occur in an intensive care unit or immediately after discharge, and too many patients experience symptoms like pain that are controllable with appropriate palliative care.

      Here are four things the health care system should do to try to improve care for the dying, even if they won’t save money.

      First, all doctors and nurses should be trained in how to talk to patients and families about end-of-life care. When I was starting out, I was lucky enough to be able to witness how a great oncologist communicated with patients and their families when it was clear they were going to die, but I received no formal training whatsoever. It is hard to improve care for the dying if health professionals don’t know how to talk about it. Fortunately, there are excellent communication techniques and training programs available — they don’t have to be invented from scratch.

      A related intervention — an idea that never actually was in the Affordable Care Act but inspired the death panel accusation — is that physicians should be paid a one-time fee to talk with patients about their preferences for end-of-life care. Even if physicians are well trained in communication, these conversations take time and are emotionally draining. This should be recognized through compensation.

      Third, every hospital should be required to have palliative care services available both in the hospital and at the homes of dying patients who are discharged. Over 40 percent of hospitals with more than 50 beds do not have palliative care services. And we don’t know how many actually have palliative care services once patients are sent home. These services should be delivered by trained experts in diagnosing and managing common symptoms of the dying, like pain, nausea, insomnia, shortness of breath, fatigue and depression.

      “Finally, we need to revise eligibility for hospice care. Right now doctors must certify that patients have six months or less to live and patients must agree to forgo life-sustaining treatments. The decision about whether to put a patient in hospice care should not be based on unreliable predictions about how long he has left to live but rather on his needs for specialized care, like morphine infusions.

      “These changes could be made in at least two ways. The Joint Commission — the nonprofit group that certifies health care organizations — could make training physicians and nurses to talk about end-of-life care and having palliative care available a requirement for hospital accreditation. Alternatively, Medicare, private insurers and, after 2014, state exchanges could require hospitals to provide communication training and palliative services as a condition for payment.

      “Unfortunately, there is no evidence that these interventions will save money. And I can’t definitively prove they will make the care of dying patients better. But doing nothing to try to help the dying when the rest of the health care system is improving care is not an option.”

      Barry this is one of the most intelligent things I’ve ever read about end-of-life care. Our goal is to help the dying. Period. Our primary goal is not to Save $$$.
      Caring for the dying is labor intensive. I recall Diane Meier, the palliative care specialist talking about how just being there, sitting there, with a dying person, for hours, can be a tremendous comfort.

      That’s what I mean about labor intensive.

      Having someone sign an end-of-life directive often does very little good. (If a relative can’t find it and bring it to the hospital it will be ignored.The patient can also change his mind at any time. Or a relative can report that last week, before he went into a coma he said he would never want to be deprived of food and drink.)

      What is needed is a long conversation that, as Emanuel says, is emotionally draining, for the doctor as well as for the patient. This is what I mean by labor intensive.

      Bottom line: Emanuel is saying that we may be spending money in the wrong way. We should spend more on palliative care. All hospitals should have palliaitve care teams. Many more patients should have the chance to die at home–with palliative care.
      All doctors who might be in contact with dying patients should be trained to talk to patients and relatives about dying.

      All of this would cost money, and it would be money well spent.

      Finally, Barry, when you & I are dying, I very much hope that the people caring for us will put caring first– Not Saving Money.

  15. Maggie,

    I know that Dr. Emanuel said 6% of Medicare beneficiaries die each year, not 4%. The fact, though, is that of the 2.5 million people who died in the U.S. in the most recent year we have data for, 73% were 65 years old or older. That’s 1.8 million people. Even if there were another hundred thousand under 65 who qualify for Medicare because they were disabled, that’s 1.9 million deaths at most among Medicare beneficiaries or approximately 4% of the 48 million total Medicare beneficiaries. Just because Dr. Emanuel is a high profile, well known healthcare expert doesn’t mean he is always right in everything he says or writes.

    Second, if our practice patterns were more in line with some of the other developed countries, end of life care might still account for 27%-30% of Medicare spending but it would likely be 27%-30% of a considerably lower total spending base. If liberals want U.S. healthcare to be more like the European systems, maybe we should adopt some of the European practice patterns and the European litigation system too, not just for end of life care but for all care. Copying some of the European payment policy, especially for high cost drugs and devices, would also likely be useful as a cost mitigation mechanism.

    Finally, on a personal note, I’ve executed the documents that I often talk about for myself and my wife has too. As a general rule, if I’m not willing to spend my own money for treatments of dubious value even if I can afford to, I don’t think I should spend insurer or taxpayer money either. When the end comes, I hope I get the care that I want and don’t get the care that I don’t want.

    As someone who spent my career in finance and with a longstanding interest in economics, markets, and efficient resource allocation, I would like to see the economy be as prosperous and efficient as it can be and I would like to see that prosperity widely shared. Money spent on futile and wasteful healthcare can be put to much better and more productive use elsewhere in my opinion.

  16. Barry–

    My point was not that you said 4% when Zeke said 6%. My point was that you used his good name to suggest that he supported the idea that we should make cutting the cost of end-of-life care a priority.

    Read his column: He doesn’t.

    The numbers you’re citing about how many disabled Medicare beneficiaries there are, and why you think it should be 4% rather than 6% really aren’t important. .

    Here is the number that is important: “And the total number of Americans, not just older people, who die every year — less than 1 percent of the population — account for much less of total health care spending, just 10 to 12 percent”

    End of life care is not the major cost of health care in the U.S . It represents just 10 to 12 percent.— a sizable sum, but far less than we spend on chronic diseases.

    So it’s foolilsh to focus on it as the end-all and be-all of health care spending.

    Over-pricing of drugs, devices, hospital services, and some doctors services easily account for 10% to 12% of health care spending.
    We should focus on that profit-driven waste and over-payment, not how much it costs to ease a patient’s passage from this planet.

    The main reason health care costs so much less in Europe is because in Europe health care is not a for-profit enterprise. It is not seen as a “business.”

    Europeans (including European doctors that I have talked to ) are shocked by the way we see heatcare as a as a business like any other.

    Insurers in Europe are almost all non-profit. They are not trying to return profits to shareholders. Hospitals are non-profit. Doctors make much less (even after accounting for the fact that medical education is subsidzed and differences in cost of living.)
    It is very rare for hospitals to have marbled lobbies, waterfalls, mahogany paneled doctors’ lounges, private rooms, art work, or spa-like amenities. Hospital CEOs are not paid millions of dollars.

    We are the only country in the developed world that has chosen to turn healthcare into a profit-making enterprise.

  17. For most of human history, (and even today in the 3rd world), the early death of children and young adults was the gravest threat that people could imagine. I am old enough to remember the excitement when Dr Salk’s vaccine cured polio for children.

    The result is that we are to some extent “hard-wired” to cheer when medicine saves lives. Our mental picture of medicine is dominated by the fact that relatively tiny expenditures in sanitation and food safety and salk vaccines saved millions of lives.

    For this reason, it is hard for most people to digest what has happened in the last 40 years — when medicine for the elderly may entail huge expenditures to save a tiny number of lives.

    The money spent on Koch’s surgeries could probably have wiped out malaria in entire tribes (this is just a metaphor, I know nothing about malaria).

    It will not be easy to impose cost controls on over-80 surgeries.
    Barry’s comments on how dialysis may not extend lives is the best way to go at this. Doctors will respond to the science in his comments.

    Another solution is to pay much less for surgeries over 80. If a typical heart surgery is reimbursed at $30,000 by Medicare, drop that to about $10,000 for anyone over 80.

    • Bob,

      Yes, the way to approach this is by looking at the science. The question to ask is: “will this treatment help the individual?” No6 how old is he?

      Ed Koch was leading a useful and productive life. I used to see him on the street– for many years he appeared to be in good health.

      I don’t know why people worry so much about the cost of Koch’s surgeries at the end of his life.
      He cost us far less than many people who suffer from chronic diseases, have a knee replacement (so that they can continue playing sports), and/or a hip replacement (without even trying physical therapy), two heart surgeries (without ever changing their diet) etc. etc.

  18. Pat S.

    As tiered network and narrow network insurance products gain more traction in the marketplace, they will help insurers to create some countervailing power against large hospital systems with significant local or regional market power or a national brand name. Attempts by some of these hospital systems to refuse to sign contracts that placed them in anything other than the most preferred tier can be declared illegal by either state insurance regulators or legislators. As millions of employees learn for the first time as they get their W-2 forms how much their employer is paying for health insurance on their behalf, there could be a lot more willingness to live without the big name medical centers in their network. For the limited number of procedures that the well known academic medical centers really are the best at, they, at least in theory, could be included in the most preferred tier for those,

    Most routine care can probably be delivered competently at almost all community hospitals. If we had price transparency that required disclosure of actual insurer contract reimbursement rates as opposed to artificially high list prices, both patients and referring doctors could learn of huge price differences among providers and more easily choose the most cost-effective high quality facility.

    • Barry–

      I agree that charging lower premiums if customers choose networks that provide “better care for less”
      is a good idea. But insurers need to make sure that these doctors and hospitals do actually
      provide high quality care. We don’t want middle-class and low-income people
      to wind up being funneled into mediocre hospitals staffed by mediocre physicians simply because
      they are cheap.

      But too often, we’re paying a premium for networks that include recognizable names simply because they are preceived as better (based on hotel-like amenities, reputation, and the fact that they charge more. In Manhattan people brag about
      how much their doctors charge.

      At the same time, I wouldn’t say that ‘routine care can be delivered competently at almost all community hospitals.”
      Some are worse than mediocre. The rate of preventable medical mistakes is very high at some.
      I had a couple of frightening experiences when living in suburban Connecticut. (Fairfield County– a wealthy
      part of Connecticut but this doesn’t mean that medical care is good. )

      In general, I like Atul Gawande’s model of “big medicine” and “big hospitals.”
      There, if a “routine case” goes sour (as my daughter’s did after childbrith) there will be
      someone in the hospital who has the expertise to figure out what’s going on.
      (In this case the head of infectious diseases had to get involved.)
      This was a good large hospital, but understaffed, and it was August. The resident on her floor had been a doctor
      for one month. No one seeme to be supervising him, and according to the nurses he was “useless” and
      “afraid to ask questions.”
      It took 4 days to get the head of infectious diseases involved (during which time she was running a 103 degree fever) but I hae to think what would have happened if she had been at a small community hospital.
      (Turned out she had a kidney infection and was on the verge of going septic.
      It had been mis-diagnosed and so they were giving her the wrong antibiotics–which is why they couldn’t
      bring the fever down. )

      • Springing to the defense of “small community hospitals,” I have to point out that data from Dartmouth and others show that small community hospitals — here I am talking about those with around 100 beds, typical of small cities in the 10,000 to 50,000 population range — actually often do a very good job of taking care of patients with infections and other common problems. Where they sometimes get in trouble is with attempts to overreach, doing a small number of more technical procedures or case management a year without ever acquiring the experience they need.

        In fact, with a conventional problem like postpartum fever and infection, i expect that smaller hospitals staffed by physicians with experience in care of common problems might outperform large teaching hospitals with large numbers of inexperienced physicians, large numbers of staff absorbed in research to the detriment of clinical care, and with subspecialty parsing of care to smaller and smaller bits and a lack of generalists able to see the forest for the trees.

        The reason the Upper Midwest performs so well on all sorts of national analyses of effectiveness, efficiency, and outcomes is not because of the small number of excellent specialty centers like Mayo but because of the large number of very well run small community hospitals able to do an excellent job of routine care — and these days affiliated with larger regional centers to act as backstop resources when needed.

        Kidney infections are common and treated every day in small hospitals. This is not a case of not solving a highly technical problem, but of not thinking of a routine problem in a slightly unusual setting. Fortunately, someone realized of that in time, despite the handicap of being a large training and research center 😉

        • Pat–

          I suspect the community hospitals in the Upper Midwest are quite different from
          the community hospitals in Fairfield County, CT, and other affluent NYC suburbs.

          And they may also be quite different from community hospitals in upstate NY (Syracuse)
          where I grew up. My father died in one of them,on the operating table, after being given a dye
          he was allergic to. (He had had an allergic reaction to this dye at the same hospital,a few months earlier, and this was in his chart.
          My nine-month old sister died in a community hospital in Syracuse about 5 hours after the doctors at the hospital told
          my parents that there was “nothing wrong with her” that they were “overly protective” and sent them home.

          Other relatives died under less than ideal circumstances.

          Maybe the hospitals in the Syracuse area are better now. I don’t know.
          But when I went to Yale as an undergraduate I was struck by the difference between Yale-New Haven, and
          the doctors there, and the doctors we had seen in Syracuse. .
          As Atul Gawande has written, doctors, like everyone else, exist on a Bell Curve.
          Too many of the doctors we saw in Syracuse were on the left end of that curve.

          My information on community hospitals in NYC’s most affluent suburbs is more
          recent. Our community hospitals in these areas are quite expensive –probably more
          expensive than in the Upper Midwest. They can be as expensive as Yale-New Haven.

          Typically, they boast the hotel-like and spa-like amenities that attract suburbanites.
          And docs in Fairfield County are very well paid. They don’t have the technology that Yale-
          New Haven has, and in my experience the doctors are not brilliant.

          These suburban community hospitals draw business from patients who don’t want to go to the “city”
          (New Haven or NYC) for care because “I wouldn’t want to park my car there” –or they don’t feel comfortable with
          doctors and nurses who don’t look like them. (More foreign doctors.) Also, it will be harder for relatives to visit if they are in a city hospital that is an hour.

          From where I was in Fairfield county, it
          was about an hour’s drive to Yale New Haven
          I had both of my children at Yale New Haven–wouldn’t even consider the local hospital.
          I had heard too many stories from other women–including my closest friend who was a nurse and
          knew the local hospitals well–all too well.

          I did not want to be talked into a C-section. I wanted to do natural child-birth –which I did.
          At the time, natural childbirth wasn’t as popular in the suburbs. Also at Yale New Haven, they
          had nurses who helped you learn how to breast-feed. (Not as popular in the suburbs.)

          This meant that when I had my second child, I would up having her in Yale-New Haven’t Emergency Room There wasn’t even time to
          get me in the elevator. But it was fine. Everyone was very competent. They reacted immediately, got me on a
          got, and got a doctor down there to deliver. And I knew that if something went wrong, they
          had the technology to do whatever could be done. The docs were excellent
          (I never saw a resident) And when you compare Yale-New Haven to other big academic centers (in Boston and New York) according to the Dartmouth
          research, it is not nearly as wasteful as many.

          I can’t say the same for academic medical centers in Manhattan. My daughter had her baby at
          Maimonides in Brooklyn. I urged her not to come into Manhattan. Too many C-sections. Some
          academic medical centers in Manhattan won’t let midwives deliver babies.

          Private rooms and spa-like amenities, yes, midwives, No.
          Her kidney infection wasn’t discovered quickly largely because it was August and the 1st-year
          resident was useless–and afraid to let on that he didn’t know what to do. Also my son-in-law felt
          strongly that he would take of his family and didn’t want me, his mother, Emily’s father or
          his father to talk to the doctors or nurses.

          Finally, I had a terrifying experience at a Fairfield County community hospital when my
          daughter was about two. One morning, she woke up, for a couple of hours, seemed fine. Then
          she sat down on the rug. Then she stopped talking. By the time we got her in the car she could
          no longer sit up. She was in my lap, and appeared to be in a coma. We didn’t dare drive to Yale-New Haven
          (probably we should have called an ambulance to take her there.) By the time we got to the local hospital
          she totally non-responsive. The nurse admitting us could see that but insisted that we had to fill out
          insurance forms and provide other information. I just wanted a doctor. After about 10 minutes of this,
          I demanded–and got–a doctor.

          Emily was in a coma for two days. The doctors had no idea what was wrong with her. They ran some tests to
          check for poisons. They suggested that she might have had a seizure–they just didn’t know. I wanted her
          transported to Yale-New Haven but they said this wasn’t possible. (It’s not as easy to get transferred from
          one hospital to another as Barry suggests. Hospitals worry about malpractice. When Emily had the kidney infection
          I wanted to transfer her to another hospital and a doctor who is a close friend told me:’No hospital in NYC is going to take her–
          they don’t want to be involved. And Maimonides is not going to let a doctor from outside in to see her. he
          also said it sounded like she was going septic, and that I should go in there, ignore my son-in-law and insist that
          someone from the hospital’s infectious diseases dept. look at her. Ultimately, Emily’s father (who is an attorney) and his
          wife (also an attorney)went to the hospital, and presented their cards. Within a very short time the
          head of infectious diseases was in Emily’s room.

          I don’t know if this would have happened in the Upper Middle West. Hospital may not be as competitive as they are here–perhaps she
          would have been transferred to a larger hospital. But the suburb community hospitals are intent on competing with the city
          hospitals. They do organ transplants–when they shouldn’t. (Their surgical teams don’t have enough practice.)
          In this part of the country, medicine is truly money-driven.

          I envision the upper Midwest as quite different in this regard.

          Finally, on the second day, Emily responded. I said “knock knock” and very faintly, she replied: “Who’s there?”

          They never figured out what caused her condition and theorized that she probably had a seizure disorder and would have
          seizures in the future. She never did.

          Would Yale New Haven have diagnosed it? More likely. I certainly would have felt safer.

  19. Maggie,

    Like Mayor Koch, my father suffered from congestive heart failure toward the end of his life along with a couple of other co-morbidities including ESRD. Also, like Koch, he had at least a couple of trips to the hospital to have fluid pumped out him. What I question is the practice pattern for treating congestive heart failure, especially for the oldest patients with the condition. Why isn’t there more honesty regarding the prognosis? In many of these cases, the heart’s ejection fraction is probably extremely low. A trip to the hospital to remove fluid and a message to minimize salt intake probably isn’t going to do much good if the EF is really low. However, each visit does generate considerable revenue for hospitals.

    This is another circumstance that I wonder how the Europeans handle. Are they quicker to say I’m sorry but there is nothing more than we can do for you? I suspect the answer is yes and that’s at least part of the reason why their costs are lower. I also wonder what the maximum age is that patients are even eligible for a CABG or an aortic valve replacement in most of Europe and how that compares to the U.S. practice pattern.

    • Barry–

      As far as I know, the UK is the only country in what we call ” Europe” (the continent plus UK)
      that rations care by age. This was part of Margaret Thatcher’s legacy.

      This would be unheard of in the European countries that I know best(Italy, France,
      Germany, Denmark.) In these countries,respectfor older people is part of the culture.

      Congestive heart failure is not like cancer. Doctors don’t know when a patient might die.
      And treatments can keep patients alive and fairly comfortable for quite a while. This is
      why doctors continue to treat patients suffering from congestive heart failure.

  20. Pat S.

    I would be interested in your estimate of the percentage of medical care based on both dollar value and the number of patient encounters that could be competently delivered by most community hospitals and other local providers including independent imaging centers, labs, rehab centers and doctors and how much should be ideally handled at an academic medical center.

    From a layman’s perspective, I would probably want to go to a well regarded academic medical center for an organ transplant, neurosurgery, probably heart surgery and treatment for a rare cancer. I’m told though that 80% of cancer treatments can be competently handled in a community setting. I’m not sure how good community hospitals are at hip and knee replacements. Common procedures like colonoscopies and gall bladder removal are routinely done in community hospitals as I can personally attest.

    While any hospital, including the most sophisticated centers, sometimes make mistakes, if most care can be provided in a lower cost community setting, maybe with price transparency tools, referring doctors could more consistently steer patient toward the most cost-effective high quality providers. Insurers and employers could help this process along through wider use of tiered insurance networks that require patients to pay significantly more in coinsurance if they want to go to a more expensive facility even when its care quality is no better than its lower cost competitors.

    • Barry —

      I have no actual numbers on this, but I would believe that over 95% of health care management could be successfully performed by smaller hospitals and clinics. Common things occur commonly, and community hospitals and clinics that are well run are geared to management of common things.

      I make the assumption here that not only would smaller centers manage more routine problems, but that they would decrease the overuse of some treatments and procedures. One unfortunate thing about larger centers is their tendency to over utilize more technical interventions they are equipped to do — especially since high degrees of specialization creates providers for whom the old adage “when you have a hammer, everything starts to look like a nail” becomes true.

      This model — community centers that manage most care affiliated with a system of more advanced centers that take referrals of more complex issues — is used successfully in most other countries, and I believe is part of the reason they produce better results than we do.

      Two notes:

      First, I must qualify this by saying that I have some issues with very small hospitals — under 25 beds — and their ability to deal effectively with many problems. They are able to act successfully as a type of intermediate care center — a step up from a nursing home — but often are poorly equipped to deal with more complex issues. In situations where possible, I would prefer seeing patients have to travel 30-45 minutes to larger centers, although I acknowledge that there are many places in the US where distance requires that hospitals of this size exist. I have hopes that the increase in telemedicine will help these places.

      Secondly, I am an opponent of free standing for-profit imaging centers, surgical centers, and so on. I am will aware that these centers provide care for less cost than hospital or clinic affiliated centers, but there is an important reason for that: they skim off the more simple and more profitable procedures, leaving the other centers to provide care they are unable or unwilling to do — including Medicaid and uninsured patients — while slashing the profits that are used by hospitals and clinics to underwrite less profitable care. They specialize in care of patients who are easy and well insured, sometimes marketing their services in ways that lead to overuse as well.

      If there is significant reform in the direction of capitated reimbursement, that will become less of an issue. For now, while these centers are beloved by insurance adjusters they are making things worse in many parts of the country.

      • Pat S.–

        You write: “I would believe that over 95% of health care management could be successfully performed by smaller hospitals and clinics. Common things occur commonly, and community hospitals and clinics that are well run are geared to management of common things.”

        The key phrase, I think ,is “that are well run.”

        While writing the book, I learned that healthcare in the U.S., like real estate, is all about “Location, Location, Location.”

        And that there are huge variations in the quality of care available both in different areas and in different hospitals in the same region.

        Research suggests that this is particularly true in parts of the country where Medicine is more “Money-Driven” (the Northeast,south of New England, Southern California, and the South: Texas, Louisiana and Florida . .

        There are more doctor-owned surgical centers in Texas and Louisiana than in any other states in the nation.

        I totally agree with what you say about very small hospitals and free-standing imaging centers and surgical centers.

    • Barry–

      On community hospitals, you write: ” I’m told though that 80% of cancer treatments can be competently handled in a community setting.”

      Do you realize that many/most of those community hospitals don’t have palliative care? Would you want to watch a loved one die in horrible pain?
      Most doctors are not trained to adjust pain medications to keep patients out of pain but conscious so that they can talk to relatives.

      As you suggest, we don’t just need price transparency– we need to measure the quality of care. Most people don’t realize how sharply the quality of care at hospitals varies. When I was writing the book, one doctor once said to me: “There are some hospitals where I wouldn’t take my dog.”

      Talk to nurses about hospitals–it’e eye-opening.

      In addition, medicine is complicated—and full of surprises. It’s never entirely clear when a cause is going to be “routine.”

      When having a baby, for instance, I wouldn’t want to be in a small community hospital, unless I was very confident about the quality of care. And confident that they would transfer me–quickly– if something went wrong. You just don’t know what may happen–as so many women have discovered–even if you are young and healthy and the pregnancy appears to be uncomplicated.

      See my story below (in my reply to Pat) on why I had both of my children at Yale-New Haven, even when I lived an hour away, in Fairfield County.
      And see my story about what happened when my daughter was 2 and wound up in a small community hospital.

      Finally, not all academic medical centers are as overpriced and wasteful as some of the big brand names in the NorthEast and in L.A.

      If you look at the Dartmouth research you’ll find quite a few that score quite well in terms of cost and efficiency when compared to other hospitals. As I recall Yale New- Haven is one of them, as is Dartmouth-Hitchcock. Dartmouth makes very make good use of shared decision-making and evidence based medicine. And some Boston hospitals will be getting better. See the HealthBeat post “Breakfast with Atul Gawande.”

  21. Pat S.

    Thanks very much for your response.

    It seems that there is enormous potential for the combination of price transparency and more general patient education to convince both employers and much of the patient population that there is no need to go to a high cost well known academic medical center for most medical care.

    I also note that well regarded centers like the Cleveland Clinic recently entered into agreements with several large employers including Boeing and Lowe’s to provide heart surgery at a very competitive bundled price for employees and family members who need it. The price even includes transportation and accommodations for a spouse or companion as well. Normally the CC charges very high prices within its home market but its home market isn’t growing and the CC most likely has excess capacity. So, it’s willing to offer competitive prices to attract patients from afar that it would not otherwise treat. I think there is a lot of room for similar kinds of medical tourism within the U.S.

    I understand your argument about the independent imaging centers and surgical centers skimming the well insured comparatively easy cases though I can also understand why patients who are either uninsured or have high deductible insurance plans want to go to one of those imaging centers when their prices can be as little as one-sixth of what a nearby hospital charges and sometimes even less than that.

    • Barry–

      Let me just weigh in to add that, under reform,there will be many fewer uninsured Americans. And when insurers are selling to individuals or small companies, they won’t be able to sell high-deductible plans. Thus, there will be less consumer need for those free-standing imaging and surgical centers that skim younger healthier patients.

      If Centers of Excellence offer better prices to employers, including transportation, this should be good thing. We will have to see how it works out.

      But when you suggest that “there is enormous potential for the combination of price transparency and more general patient education to convince both employers and much of the patient population that there is no need to go to a high cost well known academic medical center for most medical care,” I have to disagree.

      “Price transparency” only tells patients and employers where health care is cheaper. It does not tell them anything about the quality of care.
      And neither patients nor most employers are in a position to judge quality. They didn’t go to med school.

      In the long run, we, as a nation, will rein in health care spending only if we steer patients to providers that provide higher-quality care.
      If we do that, costs will come down because patients will be getting better care and we’ll be doing a better job of managing chronic diseases.

      Again, the biggest chunk of our health care dollars goes to treat patients suffering from chronic illnesses over a period of years.

      Focus on quality,and savings will come. Focusing on costs first is short-sighted.

  22. Maggie –

    Uwe Reinhardt’s most recent post (February 1st) on his New York Times Economix Blog discusses the complex and challenging subject of defining and measuring quality in healthcare. We have a long way to go in this area. The comments are pretty interesting as well. If you have the time to check it out, I would be interested in your reaction.

    • Barry–

      Thanks– I did read it and actually am planning on writing about it.
      I want to talk to Uwe first.
      I thought it was an excellent column and am interested in finding out
      more about how private insurers are addressing measuring quality.

      As Uwe says, our quality measurements will be far from perfect,but we have to
      start somewhere and his list of ways to measure quality is very good–as is the
      NYT piece that he links to.

  23. Regarding Medicare costs, I sometimes wonder the following:

    If we could stop payment on every questionable back surgery and every questionable heart surgery, how much would total costs go down? I do not know. I suspect the answer is not a great deal.

    My personal hunch is that get some serious cost savings, we would have to stop treating late stage cancers. I have read a few studies that suggest this is what some European nations do.

    One other point:

    Americans are the most discount-crazy shoppers in the world on most items. But this trait departs in health care. Some of the HMO’s in the 1980’s bragged that they kept premiums lower by using the lowest-bidding hospitals and doctors. And in fairly short order, this kind of marketing was crushed and disappeared.

    Per Alain Enthoven, this was because employer contributions were shielding the full cost of using expensive hospitals. This is still true I believe.

    • “If we could stop payment on every questionable back surgery and every questionable heart surgery, how much would total costs go down? I do not know. I suspect the answer is not a great deal.”

      Coronary artery intervention accounts for about 19% of Medicare’s budget. Research estimates suggest that about 85% of that intervention has no positive effects on subsequent health. That suggests savings of as much as $85 billion a year. Similar savings could be attained by private insurance if they were emboldened to follow Medicare’s example.

      Limiting back surgery and imaging to people who have either shown motor findings or who have failed a 90 day course of conservative therapy (the standard of care in Europe and elsewhere) is estimated to save about $70 billion a year overall, about $25 billion of which would be in Medicare. Again, research suggests this would result in somewhat better, not worse, results for patients.

      I do not argue that it is worthwhile to address excesses in cancer care and in end of life care, but people often lose sight of where the money is in health care. As I said earlier, common things occur commonly, and the majority of health care costs in this country go to management of congestive heart failure, coronary artery disease, chronic obstructive lung disease, asthma, and depression. There are on the shelf solutions that could reduce costs of management of these diseases by significant amounts while improving patient quality of life, but these require commitments to a style of medical practice — high intensity/low tech care — that is popular in other developed countries but unpopular in the US, where high tech acute intervention is the preferred option.

      It is also worth noting that one of those conditions — congestive heart failure — is the largest cause of readmissions of Medicare patients in both medical and surgical cases, and that there is research suggesting that admissions and readmissions for CHF can be cut by as much as 75% through use of easily available management techniques. Some centers, including especially Kaiser, have been very successful in this, but Kaiser of course has a direct motivation to hold down admissions and readmissions because of their payment model, while many other centers have the opposite motivation.

      There is also good evidence that significant savings can be attained in the management of back pain, as already noted, and joint pain, saving tens of billions while actually improving patient results, but again these procedures are supported by a huge acute management industry that is both central to many providers philosophy of care and to the income of both doctors and hospitals.

      So by all means elimination of questionable care for cancer patients and end of life is an important topic in cost control, but the Willie Sutton rule tells us that management of the “big five chronic diseases as well as areas like back pain and joint pain management are where the highest priorities should focus.

      • Sorry, I missed one important other chronic disease. Diabetes makes the “big five” the “big six” these days, and cost of diabetes management also can be strikingly reduced by high intensity/low tech management, a model widely and successfully applied in Europe, resulting in lower costs and better results.

        On an amusing side note: I don’t have the reference, but I recently read about a project in the US where diabetics received lottery tickets as a reward for meeting goals for weight loss and other self care steps. Results were quite good, and the cost of the lottery tickets — supplied by the state — was offset by orders of magnitude in savings to the state’s Medicaid program. The authors noted that cash in the same amounts — about five dollars per intervention — did not motivate people as much as the tickets.

      • Pat–

        I agree that if we “follow the money” the bulk of health care spending is devoted to the “big five chronic disease (congestive heart failure, coronary artery disease, chronic obstructive lung disease, asthma,and depression) as well as areas like back pain and joint pain management.

        At the same time, health care reform has two goals: to make care affordable, and to protect patients. Unnecessary cardiac surgery and back surgery causes unnecessary suffering, and can lead to death. Also, by emphasizing the waste in these areas, we may be able to make patients more aware that many surgeries are unnecessary. Most patients don’t really want to go under the knife unless they must. This is where “shared decision-making” comes into play. If we pass laws that protect
        doctors against malpractice suits if follow evidence-based guidelines AND shared-decision-making protocols, informing patients about both risks and the statistical likelihood that the surgery will succeed, patients themselves might help reduce the number of unnecessary surgeries. (We know that when shared decision-making is used with patients contemplating hip or knee replacement, 30% to 40% ultimately decide against it.

        As you say, “these procedures are supported by a huge acute management industry that is both central to many providers philosophy of care and to the income of both doctors and hospitals”–we need to enlist patients in the campaign to reduce unnecessary surgeries. (In the past 10 years, my husband has said “No” to three surgeries, and this has turned out well.)

        That said, I totally agree that one of major reasons why healthcare is so much more expensive in the U.S. than in Europe is because we do a poor job of managing chronic diseases.

        But I am hopeful that both medical homes, and greater use of nurse-practitioners can begin to address this issue. Research shows that nurse-practitioners often are better at listening to and talking to patients–and that is what is needed to involve patients in management of chronic
        diseases. In addition, as more insurers follow the Kaiser model, joining “accountable care organizations” where the payor and provider share the same goal (keeping patients healthy before illness reaches an acute stage) we may well see more chronic disease management.

        Finally, I would like to know more about how Kaiser is reducing readmissions. As you know, some doctors and hospitals are questioning whether this can be done .
        Would you like to write a post about this?

  24. Bob –

    I suspect that most of the European systems may treat many late stage cancers more conservatively than we do in the U.S. but I don’t know. I think we also may find and treat many more early stage cancers such as prostate and breast cancers that may never have caused harm. That’s also impossible to quantify if it’s, in fact, the case. We may also do more surgical interventions on patients with advanced Alzheimer’s or dementia than they would in other countries.

    At the same time, data I’ve seen from the Commonwealth Fund suggests that the number of physician consults per capita is below the OECD median. The average hospital length of stay is also shorter in the U.S. but treatment is more intensive while the patient is in the hospital. Drug consumption is roughly comparable or even a bit lower in the U.S. We do more imaging than they do in Europe but Japan does even more than the U.S. does. However, the Japanese readily accept as good enough less sophisticated equipment that costs one-tenth as much as U.S. machines. That approach would never pass muster in the U.S. given our litigation system.

    That all said the biggest single reason why healthcare spending is higher in the U.S. both per capita and as a percentage of GDP is that prices per service, test, procedure, and drug are considerably higher in the U.S. particularly for hospital based care, drugs and medical devices.

    Doctors make more money in the U.S. than their counterparts in other countries due to both high debt upon graduation from medical school and higher opportunity costs to make more money in other fields like finance and real estate.

    It also appears that U.S. hospitals have more employees per licensed bed than European and Canadian hospitals for a variety of reasons that include more billing clerks, more private rooms, fewer patients per nurse, and the need to do credentialing of physicians which is done at the state level in Germany like issuing drivers licenses in the U.S.

    As I’ve said numerous times, I’ve never seen a study comparing the number of employees per licensed bed or total employee compensation per licensed bed in U.S. academic medical centers and community hospitals vs. similar hospitals in other developed countries. Uwe Reinhardt of Princeton told me that it would be complicated and expensive to do such a study but I certainly don’t think it would be impossible. Maybe CMS or a large foundation that focuses on healthcare issues should take it on.

  25. Barry & Bob-

    Using evidence-based guidelines to decide which patients should have
    heart surgery
    back surgery
    surgery or raidation for prostate cancer,
    a C-section
    a hip replacement
    a knee replacement (everyone should be required to try physical therapy first as well as pain medications– and every patient should be told about the high failure rates
    Shared decision making for every elective surgery (this means giving patieints full information about risks– 30% to 40% decide not to do the surgery)
    . . .
    And that’s just a partial list.

    Then negotiate for discoutnt on drugs (easily savings 20% of current spending) and devices (saving 30% of current spending) would be
    Drugs and devices now account for 17% of health care spending.

    (And Barry– we are over-medicated. The only countries that are more
    over-medicated are Switzerland (drug industry a big part of the economy) and Japan (a cultural aversion to surgery means that patients are much more likely to take drugs than to go under the knive.)

    And this is only a partial list of savings we could achieve if we insisted that doctors and hospitals follow evidence-based guidelines, or leave themselves exposed to malpractice suits (legal protection only for those who followed evidence-based guidelines) while watchign their incomes shrink (if they can’t achieve better outcomes for less, the financial sticks in the ACA would cause their incomes to shriink.

    On care for late -stage cancer — as I have explalined over and over,
    end of life care is not that costly. People exaggerate what it costs.
    As Dr.Zeke Emanuel points out end-of-life care accounts for just
    10 to 12% of annual health spending in the U.S. (See my comment above.)

    (Barry: you commented: “Just becuase Emanuel says it doesn’t make it true.”

    First: Emanuel is brilliant. As he said once when an interviewer asked him about his two brothers, “Once of us got the power” (Rahm) One of us got the looks (the brother who is a Hollywood agent)
    and– he grinned, “I got the brains.” (And Rahm is pretty smart.)

    This is true.
    Iin addition, I’ve read practically everything he has ever written, and have never spotted a factual error.

    Finally, he made that statement about end-of-life care in the NYT where a huge number of people read it.
    If it was factually incorrect, they would have gotten letters, and on something like this (a number that can be checked) they would have run a correction.

    Moreover, as Emanuel said, we really cannot reduce spending on end-of-life care–though we could spend the moeny differently (Less emphasis on “cure” more emphais on “care”– giving the patient a chance to decide if he or she wants to continue aggressive care, etc.

    If he chooses hospice or palliative care, research shows that he is likely to live longer than if he stays in the hosptial. We’re not going to save a huge amount of money– palliative and hospice care are labor intensive. . We think some patieints live longer because they are not as stressed. They’re not in pain., They’re getting counseling that helps them deal with their fear of dying. Hospice and palliatve care make it possible to have a “good death.” That should be our goal. Not to save money.

    Bottom line: this country we are not going to cut off care for a dying person because it is expensive. There will almost always be a doctor or hospital that thinks it can do somethign for that person–if only give him another few weeks. And in the U.S., a great many people want to live as long as they possibly can.

    In Europe, attitudes about death are different. ,As I have said in the past, when my husband’s oldest friend (an Italian who lived in Rome) was diagnosed with live cancer and told that nothing coudl be done, he accepted this and went home. (The doctor gave his wife morphone
    so that she could keep him out of pain.) In this country, almost any wealthy (or well insured) American would want a second opinion, probably a third opinion. He would expect to be hosptialzed. He would expect someone to DO SOMETHING. And since U.S. doctors have been trained to be proactive, there will always be doctors who are eager to do something (even if they are not paid fee-for-service.)

    Finally, we exaggerate the importance of cancer
    as a part of total health care spending. Globally, we spend
    $895 billion on patietns with cancer. We spend more than twice that just on patients with heart disease, chronic pulmonary disease,, diabetics and patients who have suffered strokes. (And that doesn’t include the $200 billion spent on people who have been in traffic accidents or the $200 billion spent on patients with HIV/AIDS).

    As I have said before , the most expensive care is care for chronic diseases. Even people who have suffered a stroke often live a long time and need intensive care.
    And, keep in min that “end of life care for cancer patients is a tiny amount of the $895 billion we spend treating them, and sometimes curing them
    We exaggerate the importance of cancer as part of health care spending because we exaggerate the importance of the disease. Something about “Cancer” captures our imaginaton–we fear it so that we blow it up in our minds.

  26. run 75441-

    I don’t think we want to raise taxes so that we can spend more money on healthcare. We already spend too large a percentage of GDP on
    heatlhcare– and about 1/3 of that money is wasted.

    We might much better raise taxes so that we can spend more money on education (while we spend more than any other deveoped country on healthcare, we spend less than quite a few countries on education.)

    We also should raise taxes to address poverty, unemployement and environmental problems.

    Is there wasteful spending in any of these areas? Sure, but not nearly as much waste as in healthcare.

    When it comes to healthcare, many of us are overtreated, and we over-pay for virtually every product and services.

    Meanwhile, we pay publilc school teachers too little, are stingy with the poor (we have more children living in poverty, as a % of the population, than any other developed country) , and ignore the environment–even though it’s becoming clear that we’re destroying the planet.

  27. Probably a numbers glitch, but if we truly spend $895 billion on cancer, isn’t that one third of our health care spending?

    Seems like too much given the high mortality rates.

    I rather like the British approach,, which seems to be just refusing to buy any drug that costs $100,000 and only extends life by a few months. Hard to do that in the USA, with Sarah Palin watching, though.

  28. I’m all for following evidence based guidelines and engaging patients in shared decision making where appropriate as well as providing safe harbor protection from lawsuits for doctors who follow evidence based guidelines. I would also like to see more honesty in cancer prognoses, especially in late stage cases. At the very least, doctors should ensure that patients and families fully understand their options and the quality of life implications of each so they know what they are signing up for. If doctors think there is nothing more that they can do aside from provide comfort care, they should say so.

    I think we should also explicitly take cost and cost-effectiveness into account in deciding what to pay for and not pay for, especially when it comes to ultra expensive specialty drugs to treat cancer and MS. In a world of finite resources and lots of other worthwhile priorities outside of healthcare, I don’t think we can afford to indulge the attitude of I want what I want when I want it and I expect someone else to pay for it.

  29. Bob & Barry
    That’s Global spending on cancer.
    We spend more than most countires on cancer, but we also spend more than most on heart disease, strokes, etc. That’s why i made
    I pointed to these comparisons.
    We spend far more (total) on other deadly diseases than we spend on cancer, people are always pointing to “end of life cancer care” as the
    place where we waste money.

    If we want patients to get the truth about their prognosis then we
    need palliative care teams in all hospitals.
    Oncologists are trained to avoid using the word “death.”
    They won’t do it. Some argue that it takes away the patients’ “hope”
    Iin the future, I think we should insist that med schools require classes in which students learn how to talk to patients about death–and why
    this is important if we want to lift quality of care.
    But even then, most doctors are not going to be very good at it.
    It’s hard. As Atul Gawande admits in a New Yorker article titled “Letting Go.”
    That’s why we need palliatve care teams in every hospital.
    Admittedly, this is an added cost–it’s time-intensive work.
    But if, as a result, fewer patients end up in ICU’S–OR having yet another surgery, the savings will balance out any costs.
    (This is one reason why Zeke is saying that we probably can’t
    save on end of life care, but we can make it much better by
    spending the money differently.)

  30. I agree that all hospitals should have palliative care available except maybe for very small hospitals in rural areas which could access a team from a larger hospital when needed. If a hospital has 25 beds or less, there is likely to be a considerable percentage of days when there are no late stage cancer patients that need such services.

    I think I am more optimistic than you are that honest diagnoses, especially in late stage cancer cases, combined with palliative care can save money vs. aggressive treatment by an oncologist that can’t or won’t let go and be honest with the patient and the family. I have no data of course. It’s just a feeling. To protect against doctors who won’t let a palliative care team near his patients, access to a team needs to be part of a patient bill of rights and nurses should be empowered to make patients and families aware of the resource if the doctor hasn’t or won’t.

    I also think we need to try to change the culture of aggressive treatment across the U.S. medical culture. To start to do that, I think it would take sensible tort reform including safe harbor protection from lawsuits for doctors who follow evidence based guidelines. It will also take education and other steps to make both patients and doctors more aware of costs and for CMS to stop paying for care that costs far more than it’s worth vs. alternative drugs and therapies.

    Separately, with respect to hospice care, a colleague’s mother spent the last month or so of her life a few years ago in a well known hospice facility in metropolitan NYC. The cost at the time was $1,200 per day for very high quality care. That should provide an upper benchmark for how much hospice care might cost at least in our area. It’s probably considerably less in most of the rest of the country.

  31. Pat S.

    I would be interested in a little more detail about what high intensity / low tech management of congestive heart failure actually means in practice. My perception is that it includes reporting weight and blood pressure daily but I also thought that patient behavior is a significant issue here in areas like medication compliance, minimizing salt intake and generally adhering to an appropriate diet.

    I went through this with my father who also had diabetes and ESRD toward the end of his life. He was overweight for most of his adult life and when I would suggest he needed to show more willpower regarding his diet, his answer was “I have plenty of willpower; it’s the “won’tpower” that I don’t have.” He took in too many calories and too much of the wrong kinds of food. I’ll bet there are millions of people like that.

    • Barry —

      Your understanding is pretty much correct. What the method entails is getting patients to be more aware of the value of accurate daily weights in monitoring their condition, the value of salt restriction, the value of appropriate exercise, and especially the importance of taking their medications conscientiously and seeking consultation about fine tuning their medication intake based on their weight and symptoms. A key part of the programs is to get the patient in contact with a health professional they know and who knows them on a frequent and regular basis, and to train the patients to be alert to early changes suggesting developing problems and to consult their provider about the changes so therapy can be adjusted to head off crises.

      The Essentia Health CHF pilot project involves using nurse clinicians who meet the patient during either hospitalization or doctors’ visits and establish a relationship, who then contact the patients by phone as often as once a day, depending on need, and at least once a week. Essentia uses a scale given to the patients which can send daily weight results over either telephone modems or by internet connections. Part of the program is also getting the patients to understand that weight gain in CHF is due to water retention, not getting fat, and that conventional dieting is not the issue — although of course weight control can improve patient health as well by reducing strain on the heart. Cost of the program at Essentia runs about $1500 a year per patient, but avoiding a single hospitalization can pay for ten years of the program. Essentia itself profits by avoiding DRG exhaustion with the patients that would require eating large amount of uncompensated care, and will now profit by decreasing readmissions and consequently avoiding the associated penalties.

      In Britain, which is the original model for this type of program, the management involves frequent short visits to the patients’ general practitioners, sometimes as often as several times a week, for quick checks and counseling. The NHS pays GP’s a bonus for each CHF patient they can keep well and out of hospital, so the GP’s and their staff are generally motivated to engage the program. Again, paying the GP’s a substantial incentive is more than offset for the NHS by decreased hospital admissions and days.

      I am not personally sure exactly what Kaiser is doing, but they have reported large drops in frequency and duration of hospitalization for CHF and for coronary disease based on intense medical management of heart disease, with associated large drops in the numbers of surgeries and interventions. Kaiser of course profits immensely by keeping patients relatively well and out of hospital and actually also profits by keeping patients alive longer to continue to collect their yearly payments.

      On a personal note, my own father died of CHF after being sick with it for about five years. He was managed at a nationally famous center in Southern California which I won’t name, and was a member of their concierge medicine program, but his care was less than successful in that he was primarily managed by repeated hospitalization for tune-ups following exacerbations of his symptoms, with little effort to monitor his condition between episodes and with a poor job of getting him to understand and appreciate what was happening to him and how he could best manage it. He had five children who were health professionals, but refused to allow them to engage in his health management or even to talk to him about it — he relied on his own doctors and communicated with the family about his health through a son who worked in his business and who was not a health professional, all partly due to his desire to deny and minimize his condition and his desire to seek a “cure” rather than recognize he had a chronic condition which was incurable but which could be improved greatly by careful and constant management.. His results were better than those attained by many patients who have little or no contact with providers between hospital stays, but worse than those regularly attained by more aggressive management.

      As you suggest, there are indeed millions of patients whose CHF is poorly controlled and who are not enlisted in their own health care or monitored aggressively enough to attain good results. The same thing could be said of patients with coronary artery disease, chronic lung disease, asthma, diabetes, and depression. The management style for these conditions in the US is much less successful than that in many European countries, relying on hospitalization to manage acute crises rather than more frequent aggressive management contact from providers, with resulting increased cost, poor quality of life, and earlier death.

  32. Pat S.

    Thanks very much for the detailed explanation of CHF management. I can easily see how it could be much more cost-effective by minimizing hospitalizations. Your story about your father also suggests that patient denial and hope for a cure is a significant issue at well as it was with my father.

    The only other things I was wondering about regarding CHF are (1) are cardiac surgical interventions ever appropriate in fairly advanced cases or even moderately advanced cases and (2) is there an ejection fraction level below which even intensive medical management is unlikely to do any good for very long? If so, what, if anything, should patients be told about their prognosis?

    • Barry —

      In certain cases, mostly people with left ventricular aneurysms or other myocardial abnormalities, ventriculoplasty — surgery to remove some of the left ventricle to make the chamber smaller and more efficient by removing non-functioning parts — has been used. This is not a common surgery and is used only in very special cases, and is a huge procedure with many risks.

      Coronary bypass and angioplasty have been shown to be of little or no value in patients with pure CHF — another of many potential indications that have been proven by large studies to not work very well.

      The ultimate treatments for CHF, of course, are left ventricular assist devices and heart transplant — the Dick Cheney story. Assist devices are so far associated with many problems and complications, while heart transplant is still rare and often limited to younger people. Both involve major surgery with long recovery times, high risks to the patient, and need for constant monitoring and complicated ongoing treatment, including drug therapy and ongoing high risk of complications. Needless to say, both treatments are fabulously expensive initially and associated with very high ongoing costs. Patients are often disappointed that they have not become “normal,” but if they had previous severe CHF often feel better.

      Can’t answer the ejection fraction question, since I am not familiar enough with the science, and the questions of stroke volumes and other functions are important.

      Obviously I feel that clinicians should and must share the facts about prognosis with the patients, including lifestyle and quality of life issues as well as life expectancy. CHF is yet another condition where people need to understand the facts of their or their relative’s condition and to make plans for how to manage the future course of the disease, including how much aggressive management and what kind of management is desired.

  33. Pat S.

    Thanks again for your most recent response.

    On a personal note, I had a quintuple CABG in 1999 at age 53 and needed a DES in 2005. I’ve been on what I’m told is maximum medical management for most of that time and it seems to be working pretty well so far. I’ve never been overweight and never smoked though the diet in my earlier years left a lot to be desired. As a non-athlete, just about any exercise other than walking comes hard and I have to force myself to do it. I do give myself top marks for medication compliance and tracking my weight daily. While I’m just dealing with CAD now including a leaking aortic and mitral valve, CHF is probably in my future. The more I can learn about it now, the better so your contributions are very much appreciated.

  34. Apropos the central argument in the earlier part of this thread, here is Zeke Emanuel in the NYT 2/14/2013:

    “Regardless, the good news on health care costs shouldn’t make us complacent. Despite the slowdown, total Medicare spending is still rising, because more and more baby boomers are becoming eligible for the program every day. The number of beneficiaries is projected to grow 3 percent each year. As a result, total Medicare expenditures are projected to rise to over 4 percent of the G.D.P. by 2023 and to 6.7 percent by 2037. This is a looming threat to the nation’s long-term fiscal stability.”

    Yes, health care inflation is at a low point for the last 15 years and perhaps forever. But no, the problem is not solved and the crisis has not passed. The ACA and other downward pressures on health care costs have given us some breathing room. The deficit is not the problem that deficit hawks would like us to believe. But in the long run — 5 to 25 years — health care must be fixed or it will severely damage both the government and the general economy.

    Given that, we have a choice. We can adopt the policies advocated by some to make health care more difficult to access by reducing the value of both private and public insurance programs, increase out of pocket costs of patients, and gradually exclude low income, working class, and most of the middle class from all but catastrophic care. Or we can adopt scientific evidence based medicine as a standard for what will or won’t be paid for, create competitive bid systems for health care supplies and pharmaceuticals in both public and private insurance systems, and change the system of payment to de-emphasize volume and emphasize results as well as to de-emphasize high payments to procedure based specialties in favor of more fair payments to primary care providers.

    And that’s the way it is.

    • Pat S.

      First, note that you pulled just one paragraph from long Op-ed titled “The Good News About Health Care.” Zeke realizes that at this point in time,,the aging of the population is less important than whether we continue to increase spending on medical technologies.. (He has seen Uwe Rheinhardt’s charts and knows that the threat of an aging populatin is exaggerated.

      But the aging of the population is a simple idea that people can easily grap. And Zeke’s goal here is to persuade people that we need to continue to reform care, and make sure that healthcare spending continues to slow.

      Because his goal is rhetorical, he says “more and more baby boomers are becoming eligible for the program [Medicare] every day.”

      Zeke knows full well that the very oldest baby-booomers are now only 64. They haven’t yet joined Medicare. They’re not signing up tomorrow. And younger boomers won’t be signing up for a long time. The real bulge in the baby boom didn’t come until the 50s.

      The aging of the population is not a “crisis”

      This is why Zeke focuses on the aging of the popoulation having a signficiant effect “in 2027.”

      Maybe. We really don’t know what will happpen between now and 2027. Economic pojections that go past 5-7 years are generally considerd “guesstimates” and are usuallly wrong. CBO is forced to make long-term projections. That’s it’s mandate. But everyone involved knows that they are bound to be wrong.

      This is because, when it comes to economic projections there are so many variables — inflation (not just health care inflation but general inflation; the strength of the dollar; Wars; scientific advances (will we find something to control Alzheimer’s? That would make a major difference.)

      Between now and 2027 will we close many hospitals? (Probabably. Nationwide we have too many beds, and too many substandard hospitals where resdients work unsupervised and infection rates are high. Meanwhile, today, best practice often favors outpatient care. (Much safer.)
      Will specialist’s incomes gradually decline over the next 10-15 years? Probably. I would guess that in 15 years the average specialists income will be as much as 20% less than it is today (after adjusting for inflatin.)
      As more and more physicians work for large organizations, they will have to find evidence-based guidelines that aim for
      “bettter care for less” (and in many cases, less care–avoiding overtreatment.) On salary, these specialists will find that their annual income no longer turns on their entrpreneurial ability. On salary, their income will grow slowly. The model of “doctor as entrepreneur” is likely to fade.

      In addition, no one has really thought through what effect a growing Latino, African American and Asian population will have on the U.S. Will this change our priorities? Will voters want to spend more on education, and less on prolonging the lives of the elderly(who will still be mainly white)? As we have already begun to see (with the election and re-election of Obama, this demographic change could change U.S. politics and social values in ways that we can only begin to predict. I would submit that demographic change could turn out to far more important that the aging of the population.

      Then there are the wild cards:– an epidemic that kills many frail older Americans over 70; the unknown effects of
      global warming on the population and food prices(again the elderly could be vulnerable); a new disease that kills many older, frailer Americans. . (Current projections of costs assume that many Americans will be living well past 80. That could change.

      The aging of America just isn’t a crisis–not yet. (It will be in 20 -25 years if too many boomers live past 80 and develop
      Alzheimer’s along with other forms of senile dementia. Diane Meier (the palliative care specialist) believes that this is a real danger. As she puts it “As we try so hard to avoid dying from cancer and heart disase we are saving ourselves for Alzheimer’s. Be careful of what you wish for. Meier also points out that while most people in their 60s and 70s
      struggle against dying, once they reach their 80s, many more are willing to accept death.

      If that happens, will we pass laws making physician-assisted suicide possible for people diagnosed with some form of senile dementia? If so would we extend those laws to include people suffering from other types of painful, incurable diseases?

      Then there is the possibilty that we will decide to let inequality grow –limiting Medicare and Medicaid as well as other social safety net programs. In that case, lower-income and lower-middle income and even middle-income people will die much earlier than now projected.

      Finally, you and Zeke agree about what we should be doing– pursuing the structural changes that will change our medical culture, and make health care both better and more affordable.

      I think focusing on the aging of America makes sky-rocketing health care costs seem “inevitable”–baked into the cake.
      Of course they are not. But this Encourages and Supports Conservatives Who Would Slash Health Care Spending, Aruging that we Just Can’t Afford It.

      That’s the real threat to our society: conservatives and their fear-mongering.

      • Maggie —

        A bit of housekeeping — the baby boom is generally considered to have run from 1946 to 1964 — so the oldest boomers are now 66 going on 67, and both the class of ’46 and class ’47 (including yours truly) are already enrolled in Medicare.

        It seems to me that you think we are arguing over the notion of whether the conservative trope that the deficit is currently a crisis, as opposed to — as I have said — the crisis being some years — as Zeke Emanuel says, 2023 to 2037 — in the future. Assuming that the baby boom retirement will add 3% per year to enrollees and that the rate of increase in cost stays at the now historical low of 3%, that means that costs for Medicare will double in 12 years. It behooves us to begin planning for this now, and certainly begin to implement change by half that time — by 2018 to 2019.

        Facing that, it is imperative that those who want to offer an alternative to the conservative vision of privatization of Medicare and of gradually increasing the out of pocket expenses of the average enrollee to in excess of $10,000 a year, thereby making the plan actuarially much less valuable and effectively eliminating coverage for many seniors. I will say again, the CAP plan is fine as far as it goes, but the $38,5 billion a year they envision does not complete the job.

        The key as I see it is for people interested in preserving Medicare for current and future enrollees as a high quality insurance program that will ensure access to good quality health care as needed is dependent on advocates for Medicare and opponents of the Ryan plan to offer alternatives that can potentially cut costs more aggressively to halt and even reverse Medicare cost increases while improving the quality and efficacy of care. That is what the steps I outlined above do.

        • Pat–

          Thanks for your reply.

          I’m also a boomer, and have written quite a bit about baby- boomers. As it turns out, the definition is fraught.
          “The years 1943 and 1964 definie the baby-boom generation according to the U.S. Census Bureau. The term “baby boomer” is sometimes used in a cultural context. Therefore, it is impossible to achieve broad consensus of a precise definition, even within a given territory. Different groups, organizations, individuals, and scholars may have widely varying opinions on what constitutes a baby boomer, both technically and culturally.”

          The Census Bureau defines the boom as runnning from 43 to 64. Lanny Jones, author of the seminal book on the boom (Great Expectations) defines it as ’43 to ’60. You say 46 to 64. I (and others) say ’49 to early 60s.

          Statistically, if you look at a graph of live births in the U.S. , you see a one-year spike in ’47, but then live births fall. The boom didn’t really get going until ’51. In ’47, returning servicemen who were already married began having babies. But most soldiers weren’t married. It took them a while to find a girl, court her, and put together enough money to marry. Then it’s another nine months until they have a baby . . . (What I like about demographics is the story-line.)
          This is why I pick ’49 as the starting point.

          On a chart of live births, The big sustained bulge runs from ’52 to 62.

          It’s important, I think to know that roughly half of all boomers were born between between 56 and 64.
          They’ll begin turning 65 between 2021 and 2029. And they’ll age as they were born, gradually, over decades.

          Pat, I realize that you understand that we’re not facing an imminent crisis.
          But a great many people talk about the aging boomers as if this tsunami that is going to suddenly hit us–and this is what the American public hears. This is why so many think the Republicans are not unreasonable in their demands that we slash SS &Medicare.

          The idea that the greying of the boomers will add 3% a year to Medicare enrollments, and thus to Medicare costs is a guesstimate. We really don’t know how much care boomers will need as they age. One big question: how much better will be get at managing chronic diseases (and teaching them how to manage chronic diseases?(Boomers are better educated than earlier generations of seniors, which suggests that they will be better able to absorb the information and help themselves.)

          The ACA puts aside funding for this effort. Other countries do it. With the financial carrots and sticks in the ACA we should be able to do it. Reserach suggesets that a growing number of nurse practioners will help. If chronic disease management improves, we’re looking at many fewer hospitaliations–and fewer inpatient beds.
          Another important variable: how many boomers will live long enough to
          suffer from senile dementia–and then live another 10 years? Or will we, like other countries, begin to approve doctor-assisted suicide? Boomers are different from earlier generations of seniors in many ways. Ideally, many of them will live into their 80s, remain fairly healthy –and out of the hospital– and then die quickly, after a brief hospital stay.

          Moreover-and this is most important, if Medicare spending grows by 3% a year, that wouldn’t be too bad. GDP growth,which is now 1% to 2% a year will return to 3%–or more at some point. This could happen in 3 or 4 years– if the dollar doesn’t tank. If it does, we’re looking at a much lower standard of living, and health care spending exists in a very different context. At that point, my guess is that we’ll make spending on health care for the elderly a lower priority. The boomers have never been a wildly popular generation. )

          But let’s assume the economy chugs along. Orsag and other economists always talk about Medicare spending as a percent of GDP for this reason: If GDP is growing by 3% or 4% than government revenues (including Medicare payroll taxes) are growing
          by roughly that amount. The deficit shrinks. We can afford 3% growth in Medicare spending. Of course it would be nice if GDP grows 4% and
          Medicare spending grows by only 1% to 2%– Orszag and Emmanuel think this may well happen because of the structural changes we are seeing in health care spending, and the many limits on spending aleady baked into the ACA cake. They’ve read the bill–they realize that much of the savings is guaranteed. It doesn’t depend on doctors and patients doing the right thing, or responding the way we want them to respond.

          Payments to Medicare Advantage payers will be shrinking. Payments for drugs
          will be shrinking. (The drug industry is just waiting for the other shoe to drop. Requiring discounts for dual eligibles is only the beginning.) Device-makers are a ripe target. IF Medicare spending does begin to increase, IPAB can hit them without need ing permission from Congress. )Drugs and devices now equal more than 17% of all health care spending. (This includes drugs and devices administtered in hospitals)

          On top of that,I think that many of the structural changes in how we pay for care WILL be very effective. Instead of asking patients to have “skin in the game”– we have begun to ask doctors and hosptials to have “skin in the game.” They will have to share in the risk of healthcare–if outcomes aren’t good, and costs aren’t falling, they will be paid less.
          (See part 2 of this post. Hospitals are already signing contracts with Medicare and private insurers that put them at risk if they don’t achieve better outcomes for less. This will make hospital CEO’s far more intersted in improving safety, reducing errors, and following evidence-based guidelines.)

          Again, both the current slow-down in spending, and the many provisions in the ACA that target fraud and waste suggest that the conservatives are wrong when they say that Medicare will be unaffordable.

          Things are going pretty much as the refomers hoped–and the ACA has barely begun to be implemented. Setting up the Exchanges, and applying the rules will be messy, but it will happen. If the states don’t do it, the law says the Federal govt will do it.
          (I frankly, would rather see the Federal govt do They have the computers– the technology that many states lack.)

          This is why people like Orsag and Emmanuel are optimistic. They’ve read the law. They know how much it does. And they’re watching the spending numbers fall acrossthe board. They also talk to many hospitals and doctors, and know that, even if many are unhappy, they’re taking this seriously.

          Pat, I realize that you talk to many people who just don’t get it. They don’t realize how mcuh health care will have to change. This includes many doctors. At that breakfast with Atul Gawande that I wrote about a few months ago he talked about how angry docs at his hospital are because they are being told that they have to save money, follow guidelines, etc.
          His hospitals has signed contracts with insurers that will cost the hospital millions if they faiilto rein in costs and improve care.
          As he noted, it reallly doesn’t matter if they are furious. They don’t have a choice. (A growing number of doctors are employees–as he is–and going forward the number in private practice will continue to shrink.)

          Often, when change happens in this country,it happens both at the top, and in the grassroots–not in the middle. I think of the Civil Rights Movements.LBJ, Martin Luther King, Malcom X and the people who marched with them and supported them (usually very young or very poor) created a revolution. Much of the upper-middle class and middle class in this country was not happy. (This includes in the North; I witnessed the rage. Mothers in Boston stoning school buses.) They moved to the suburbs. That’s all they could do.

          My guess is that some doctors who oppose Obamacare will retire early (the equivalent of moving to the surburbs). That’s all they will be able to do.

          Younger doctors, women doctors, and minority doctors and nurse practioiners will be taking their place. The majority are eager for change, and much more open to the ideas about reform that you and I believe in.

          As you know, I think it’s very important for us to remain optimistic. That’s the energy that will keep things moving forward. It’s going to take years, but our children will be living in a better world. (Or, at least, U.S. health care will be better. And the cast of characers in power will change.)

          • Just one quick point —

            The cost growth rate of 3% for Medicare is the growth of the payment rate. The total spending growth is the sum of cost growth plus enrollment growth. The rate of enrollment growth that Zeke Emanuel cites in his NYT article is, of course, an estimate, since it assumes that baby boomers and older enrollees will continue to have life expectancies similar to existing trends, that they will enroll in Medicare at the rates that have historically occurred, and that once enrolled they will stay in the program until they die.

            But that 3% increase in enrollment plus the current 3% rate of increase in costs adds up to a 6% increase in total Medicare spending a year, a rate of compounding that would double the Medicare budget every 12 years. That is the figure that Zeke cites to predict the impact on spending as a percent of GDP, and to voice concern over the time horizon of the next 30 years.

          • Pat S–

            Thanks again for your comments. Not only I, but many readers appreciate them.

            I understand that the total cost would be a combination of growth in enrollment and growth in costs of caring for patients, per patient.

            My point is that Medicare costs are now growing at only about 3%–and Dropping.

            There are many reasons to believe that costs per patient will level off, and then dropfurther. (There are also reasons to think that this generation will cost us less per patient.) This means that we can afford the growth in enrollments.

            Zeke is talking about what would happen over the next 30 years if we don’t pursue the reforms in the ACA–or let Republicans trash it.

            He doesn’t think that will happen. (Which is why his headline suggests “good news” )

            My point is simply that we don’t need new broad reforms. The provisions in the ACA are sufficient, even when you factor in more enrollees.

  35. Pat S is correct that at some point, we need Medicare to refuse to pay for care of low value.

    That might be a legally and emotionally bruising confrontation. Imagine a familly being told that their aged parent has advanced CHF and there should not be another surgery — unless they pay for it themselves.

    People who spend hours reading about health care economics (like me) can probably make a decision and live with it. Some people will completely come apart, however.

    I sometimes think that given this kind of turmoil and given the unemployment that would result from health care rationing, we might be better off to leave Medicare essentiallyt alone and just raise taxes to pay for it.

    By raising taxes, I mean on everyone. The ACA tax that expanded the Medicare tax to non wage income raises $31 billion a year.
    We need about 10 times that amount a year by 2020 to pay for an unreformed Medicare.

    Raising payroll taxes on dishwashers won’t do it. We need a national sales tax or something that dramatic.

  36. Bob–

    I greatly appreciate that you care about the “emotionally bruising confrontations” that could result if a familly were told that their aged parent has advanced CHF and there should not be another surgery — unless they pay for it themselves

    But there is absolutely no need to to cut people off in that way.
    First of all, at least 1/4 of our health care dollars are spent on complete waste that has nothing to do with end of life care. If we cut that waste, we could easily continue to give people as much end of life care as they need (it is much less expensive than treatments for chronic disease, which can continue for years.)

    And much of the waste in our heatlh care system has to do with money spent on healthy people: I’m talking about all of the unnecessary MRIs, full body scans, unnecessary surgeries, hospital stays, doctors appointments and over-priced devices and drugs that healthy people who are experiencing no symptoms consume.

    Secondly, we have great evidence that palliativecare and hospice care can address most of the cases where the patient is suffering from congestive heart failure (CHF) and won’t benefit from treatment.

    For one palliative care specialists understand that this is not the famiy’s decison, but the patient’s decision. They talk with the patient and find out what he or she wants.

    Then the palliative care team explains that to the family: “This i what your mother wants. And it is up to her. It is not your decision” (They explain it gently, and kindly, but the fact is that the family cannot overule the patient. And palliative care specialits give patients a chance to express what they really feel–not what their families want to hear them say.)
    Too often adult children want to keep their parents alive because the idea of one’s parent dying is so frightening– it means that you, too, will die.)
    Bobe, please read this post on palliative care.

  37. Good comments! The overspending on healthy persons is indeed extensive. The challenge is how to stop it in Medicare.

    Conservatives like John Goodman favor a $5000 deductible, with HSA’s for the first $5000 to be subsidized by the govt right now but eventually be a solely private responsibility.

    The IPAB solution is much too timid. The studies will take years and Congress can ignore them.

    The Japanese solution is to pay so little for ambulatory care that even with a ‘quantity rebound’ the costs stay in control.

    More comments?

    • bob–

      If Congress doesn’t like one of IPAB’s suggestions for cutting costs it has a limited time (a few months if memory services)
      to come up with an idea that will save the same amoutn of money without rationing care, lowering hte
      quality of care, or shifting costs to patients.

      In most cases, Congress won’t be able to agree on cuts. Lobbyists willmake sure of that.
      AT that point, IPAB is free to (is actually required to) ignore Congress and go ahead with cuts.

      AS for how long it will take to do the research — WE already have the reaarch.– a great deal of
      evidence about what treatments are ineffective. We just haven’t applied it. Why? The lobbyists object.

      Probablyl IPAB won’t have to do much because it comes into play only if Medicare begins to grow quickly, and I
      believe that the current slow-down will continue.

      As for the Japanese– they have less ambulatory care because culturally, they are opposed to surgery.
      Very opposed. (Think Hari Kari). For that reason docotors are paid very little for perfomring surgery.
      Many don’t even break even. I once asked: “Then why doyou do it?”
      The reply “Because it’s a challenge and intellectually interesting.)

      Becuase they are so few surgeries, the Japanese take more medications than we do.

      They have done a good job of keeping costs down. It’s called government regulation.

  38. Maggie –

    According to the CBO’s most recent Monthly Budget Review, adjusted (for timing of payment differences), Medicare spending for the first four months of the current fiscal year, is up 9.0% from the comparable period a year ago. The federal share of Medicaid spending is up 10.6% from the prior year, also on an adjusted basis. While cost growth did slow considerably for several years through last year, it appears to be reaccelerating again. I think it’s far too early to declare victory here.

    We need fundamental changes in practice patterns with respect to the management of chronic disease. I think we need to be able to identify and highlight the physicians and hospitals that are managing, say, CHF cost-effectively and achieving favorable outcomes at the same time. For those providers who are generating much higher costs and less favorable outcomes, we should pointedly ask why? We should do the same in the areas of cancer care and end of life care as well. It’s a disservice to taxpayers to just blindly continue to pay for volume whether it’s appropriate and effective or not. At the very least, high cost providers who can’t point to higher quality as well should be publicly identified so patients and referring doctors can more easily avoid them.

    • Barry

      Spoke to sources about the number you cite. Not a problem.
      (If you think about it, it’s very unlikely that quarter-over-quarter
      Medicare spending would spike by 9%.)

      And one Q’s data just isn’t meaningful. .

  39. There is an interesting op-ed piece in today’s Wall Street Journal suggesting that most ACO’s will not be successful. The authors are high powered people in their fields.

  40. Maggie —

    Emanuel is not warning what will happen if we don’t follow the ACA plans to cut costs, he is saying we need to do even more. He is pushing additional what he calls “common sense reforms.” Here is the last paragraph of his piece:

    “The moderating of health care spending is fantastic news. But now we just have to work harder. If we can push the rate of growth even lower, we will come close to solving our nation’s long-term financial problems.”

    I stand by my position that the ACA is a good start, but only a start. A lot more is needed, along the lines of what I have suggested above. Not only does Emanuel make that same point, but in the last two weeks so have Ezra Klein, Paul Krugman, Brad De Long, both Aaron Carroll and Austin Frakt, David Leonhardt, and Barack Obama, all of whom have called for additional reforms beyond the ACA to further drive down the rate of growth of both public and private health insurance costs.

    Progressive voices must continue to acknowledge the need for further reform and to point out the ways that can be done, or we will be drowned out by the reactionary voices calling for the effective end of Medicare and health care insurance as we know it.

  41. Another comment on the quest for lower health care costs.

    There is a recent trend of articles — Ezra Klein among others — raising the concern that effectiveness research could lead to INCREASED spending. It is true that scientific evaluation of effectiveness does sometimes show that expensive innovations are worth utilizing on a widespread basis. Colonoscopy would be a good example, at least as things stand.

    However, the balance of evidence from effectiveness studies so far shows a litany of evidence that stopping spending for many newer techniques is appropriate, with potential savings in the hundreds of billions of dollars per year in the US if recommendations are followed. Given the state of research and development in modern health care, I would expect that that trend would continue for the foreseeable future.

    There is, of course, a reasonable concern that when new technology is shown to be effective, there will be widespread promotion of the results by stakeholders, while when procedures and techniques are shown to be ineffective the same stakeholders will try to silence and squash the results. I can agree with that concern, but that just makes it more important that honest scientists, media people, bureaucrats, and politicians continue to publicize and push for the implementation of policies based on good scientific evidence.

    • Pat S.

      This trend “raising the concern that effectiveness research could lead to INCREASED spending” is all part of the trend towar seeing heatlh care reform as all about reducing spending–and reducing the deficit. As Don Berwick puts it, when thinking about any reform,the first thing you have to ask is “Is it good for the patient?” Not, “how much would it save.”

      First as I have pointed out, health care spending did not create the deficit. In 1999 we were running a surplus. Then tax
      cuts for the wealthy and two wars created the deficit.

      Secondly, the goal of the “Patient Protection and Affordable Care Act” is, first, to protect patients, secondly to make
      health care affordable. Both common sense and the research showing that improving the quality of care will ulimately
      reduce costs. Even if the technology used is expensive, if it is Effective, then it reduces the need for further interventions.

      On the ACA Zeke Emmnuel has suggested that we must “double down” on what we are already planning to do. (For instance, he favors speading competitive bidding to other areas–but if course,politicallly that will be difficult. It would have to go through Congress and I very much doubt we could get the votes now.)

      This could mean speeding up the introduction of Affordable Care Organiations (ACA) –this is one of the things that
      the CAP report (which you find so inadquate) proposes– moving the target date up by a year.

      BTW, Emanuel is on the health policy team at CAP and was one of the authors of the report. When introducing it, he said: ”
      It’s important that this plan contributes substantially to deficit reduction,” said Dr. Ezekiel Emanuel, Senior Fellow at the Center for American Progress. “But more importantly, the plan includes systemic reforms—moving to market-based prices, ending fee-for-service, and empowering states to control costs—that will modernize Medicare and transform the entire health care system to improve quality and bend the cost curve over the long term.”

      This is what CAP emphasized: “. All told, the plan would produce federal savings in excess of $385 billion over 10 years. In addition to the plan’s savings, its tax policies related to health care would generate up to $100 billion over 10 years. But most importantly, the plan includes an array of systemic reforms that would transform the health care system and bend the cost curve over the long term.These structural reforms include changing how we pay for care– the Accountable Care Organiations, etc. Those savings are not part of the $385 billion. No one can “score” (or estimate) how much they could save. But they will be long-term savings that we’ll begin to see over the course of 10 years. Not in 2014 or 2015. What’s key is slowing the GROWTH of spending by bending the curve of health care inflation. That’s the long-term project.

      The savings produced by shaving payments to hospitals by 1% a year for 10 years are real savings (compounded we are talking about serious money). But what’s more important is if the financial pressure of reduced revenues causes hospitals themselves to begin to focus on becoming more efficient, reducing errors etc. (No one can estimate how much that would save) MedPAC reports that when hospital revenues decline, many hospitals do adjust by becomign more productive– i.e. introducing better systems that help their workers become more productive. We have to incentivize hositals to change themselves. Eventually, those that can’t adjust to
      lower revenues will wind up in the red. They won’t be able to get funding from bond markets to continue to pay down their debt, and they’ll be closed down. This is good. We have too many inpatient beds.

      We don’t need new ideas. We already know what needs to be done– much of it was laid out in the Medicare Payment Advisory
      Commission reports that came out every 6 months and date back at least, to 2006. Few people read those reports; they were very long and dense with evidence and ideas. I began reading them when I started the blog in 2007. I realized that they were a gold mine.

      But the people who wrote the ACA read them.(IF you know the MedPAC reports well, you’ll spot their ideas throughout the
      legislation. I was astounded by what a good job lawmakers (actually their staffs) did of incorporating those ideas into the

      I should add that most of the ideas about what needs to be done date back to the days when Ted Kennedy almost succeeded
      in getting reform (the Nixon era) and Paul Ellwood’s came up with the idea of “Managed Care.” (I wrote about Ellwood and managed careback in 1990– a cover story for New York magazine. As Ellwood envisioned it, managed care would be all about HMOscompeting on quality, not price, Lower prices would follow from higher quality care. You talk about chronic diases management. That was at the heart Ellwood’s vision. (Did you ever know him? A wonderful man)

      But the managed care companies of the 1990s were, by and large, interested in reducing their costs NOW–not in long-term reforms that would make people healthier and thus reduce costs.

      (Toward the end of his life Ellwood was so very sad to see how “managed care” was being implemented. As for chronic diseases, in our last phone conversation I recall that he rueflly reflected that he now suffered from at least 3, maybe 4 of the leading chronic diseases.)

      Pat, when you say that the ACA must do more–I’m wondering what exactly you have in mind?

      Are you talking about new ideas, beyond the 240 providisions that Medicare’s TRustees say would imrpove care, reduce costs and tackle fraud?

      Are you talking about reducing the cost of drugs? The president is already calling for deep discounts for some Medicare patients, and before long, he will be calling for deep discounts for all Medicare patients. Devices will be next.
      Wall Street is just waiting for the other shoe to drop.

      Specially, what idea are Not included in the ACA?

      Or are you talking about “doing more” in terms of implementing those ideas.

      How, exactly would you do that? We can’t force doctors and hospitals to change how they practice medicine. We can encourage them; we can bribe them (the ACA does that–family homes as well as ACOs); we can insist that they have skin in the game
      (the ACA does that); we can give the Secretary of HHS the power to “reduce payments for overvalued services and
      lift payments for undervalued services” (the ACA does that); we can insist that manufactuers who sell equipment to Medicare
      engage in compeittive bidding (the ACA makes that a requirement, nationwide, for durable equipment manafactuers (and the
      CAP proposal(which doesn’t go far enough”) would extend that to drugs, and many other medical technologies.
      The ACA gives the Secretary of HHS the power to expand any successful pilot program nationwide–without going through Congress. (Thus, they are extending competitive bidding beyond durable medical equipment, and are implement “bundled payments” for cardiac procedures. (A Pilot program showed how succesful this was in reducing mortalities and saving costs
      5 or 7 years ago. Congress (lobbyists represnting cardiologists and others) prevented expansion of the program.

      As always, I could go on.

      But the fact is that it will take time to implement these proposals. You’re right, Chronic diease management is essential.
      But it is not part of our medical culture, and it will work only if patients co-ooperate. Most cardiac patients don’t want to change their diet and exercise. They want a quick (if temporary) fix for their angina– surgery.

      It will take patience-and time- to persuade diabetics, people suffering from asthma and many other diseases to
      participate in improving their health. A great many doctors are inclined to lecture patients, or try to humiliate them into
      managing their problems. This does not help. (And this is probably one reason why nurse practioners have more sucess in this are. They have been trained to listen to patients, with sympathy, not talk at them. Berwick’s idea of patient-centeredness
      is crucial. This requires real humilty on the part of the doctor.

      Chronic depression is one of the most expensive–and devastating–chronic diseases. Medication seems to do some good –though it may be primiarly a placebo effect. If so, that’s fine. But then the drugs should be much,much less expensive.
      Talk therapy could do some good, but again it takes a great deal of time, and only works for certain people.

      My feeling is that if we want to tackle depression, we should first tackle poverty. WE know that children who grow up in poor families are much more likely to suffer depression later in life–even if they move out of poverty and are very
      successful. The scars of that insecure childhood never heal.

      But those who talk about how we must do more to rein in health care spending and shrink the deficit never, ever want to talk about poverty.

      Of all of the people who write about reform, Atul Gawande is the most realistic about how long it will take. He
      understands that we are talking about cultural change. (Google “Big Medicine” and the New Yorker”– skip the first 3rd (about restaurants) and go to his mother’s hip operation and remote observation to make sure doctors follow evidnece-based guidelines. And, as a doctor, he is extraordinarily humble. He doesn’t think he is a magician. He doesn’t expect instant results. He expects imperfect results. He also is patient-centered.

      I can’t recall him every talking about “the Deficit.” He doesn’t buy into the paradigm which suggests that is what
      healthcare reform is all about.

      ACOs are a fine idea. Evidence-basesd guidelines are aboslutely necessary. But in some places they will succeed, in others they will fail. I can predict,with some certainty, that at the end 2014, and throughout 2015, we’ll hear conservatives say:
      “We told you the ACA wouldn’t work. We told you that ACOs wouldn’t work. IF they work, SHOW US THE MONEY.”Ultimately, when I read that CAP’s proposals “don’t go far enough” or that the ACA “doesn’t go far enough” I think of the
      many extraodinary people who have worked, for years, to bring about change. Topher Spiro, head of health care at CAP, was
      on Ted Kennedy’s staff when the bill was being drafted. He agrees if Kennedy had died a year or two earlier, we wouldn’t
      have any health care reform–adequate or inadequate. That’s the political reality. There were a moment in time, when it
      was possible to push it through Congress. Kennedy was needed to make that happen.

      Spiro is just one of so many that no one has ever heard of who helped create this legilstaion.
      Then their are the known names: Don Berwick, the folks on the Medicare Payment Advisory Commission, Paul Ellwood, people at AHRQ, hundreds of other have devoted a significant part of their lives to getting us to where we are today. And now people on the sidelines are saying “this isn’t good enough.”

      Most of them (not you,Pat, but most of them) want big simple solutions. Let’s spend less on end-of-life care! (As Zeke points out that wouldn’t work) Let’s just slice doctors’ salaries. Let’s get rid of all of the insurance companies–that’ll do it for sure! Simple, clear solutions for complicated problems are, as Mencken said, inevitably wrong.

      You’re right, chronic diseases are at the heart of our problems. But addressing them require patience, and solutions tailored to individual patients’ needs.

      Let reform begin to play out, and we will see where we need to make revisions and additions. But don’t set the bar so high that
      in 2015, conservatives can say “Look, we still have a big deficit. Reform failed.

      Of course we’ll have a big deficit in 2015. Deficits are cyclical. It takes a long time to build them up and an even longer
      time to bring them down. That’s reality. AS I’ve said before, conservatives exaggerate the importance of the deficit, not because they care about the deficit but because they want to get rid of entitlement programs. If they cared about the
      deficit, they would back increases in income taxes for the top 10%, steep increases in inheritance taxes, increases in
      capital gains taxes, closing the loopholes for hedge-fund operators etc. etc. That would reduce the deficit.

      Finally, if you’re concerned about the economoy collapsing, don’t worry so much about the deficit. Worry about unemployement, povery, poor public education, and inequality. As Krugman and others realize,that’s our number one problem.
      Americans are no longer upwardly mobile. The U.S. is less and less competitive globally. Other countries no longer trust that our GDP will begin to once again grow by 4% a year. This undermines faith in the dollar. If the dollar tanks, oil will be priced in another currency–or perhaps
      the currency will have to be backed by gold.

      Sorry to go on at length. I just didn’t have the time to make this shorter.

      • I am not worried about the economy collapsing.

        I am worried about three things regarding health care costs. First, the “crowding out” of other government programs as health care costs for Medicare and Medicaid rise, making it hard to do the other things the government needs to do — like address unemployment, education, the environment, inequality, basic and applied science research, and so on. Second, rise in health care costs leading to rises in the cost of private insurance gradually increasing costs to businesses and motivating businesses to reduce the quality and value of insurance offered so as to gradually deprive working class and middle class people of good access to health care. Third, the suggestion by many reactionaries that decreasing the value of health insurance is a good way to solve this problem, and that patients themselves are well positioned to manage their own health care with out of pocket expenses under those circumstances.

        For that reason, I believe that reform advocates must adopt the position that there is a real oncoming crisis in health care costs in the US, and that we need to find savings of not $40 billion a year for Medicare but $200 billion, and another $400 billion for private insurance. Fortunately, there are models for doing that, almost all of which are being used in other developed countries to hold their costs to from 40% to 60% of ours while attaining better outcomes, many of which are being used in scattered sites in the US, and almost all of which have been endorsed by one or more of the many people you cite.

        In the end, I believe that the sense of urgency and the energy that health care activists dedicated to the issue of access prior to the passage of the ACA should now be applied, without missing a beat, to the issue of cost and effectiveness.

        • Pat S.–

          You still aren’t specific about what we need to be doing that the ACA isn’t setting out to do.
          You simply offer a dollar figure as a target–without saying how you would get there, or what is missing in the ACA.
          (You also don’t ignore the fact that what matters is not the dollar amount but the groth of health care spending in relation to the growth of GDP. I realize you are not an economist but as I tried to explain earlier, economic numbers are meaningful only in a context. If GDP is growing by 4% and Medicare spending is growing by 1% it will not “crowd out other spending. In fact, ofter time, as the 4% GDP growth compounds, more and more money will become available for other spending. )

          Perhaps most important you ignore the fact that the way that other countries hold their spending costs down to 40% to 60% of what we spend is through wage and price controls.
          The last time we had wage and price controls in this country was when a price freeze for health care services was applied at a national level during the first phase of the Nixon Administration’s ESP, from August-November 1971.
          I imagine you recall the political and economic fall-out.
          Here’s how wage and price controls work in other countries:
          the government either simply tells doctors what they will earn or
          the govenrmentor or a regional board negotiates with doctors and other heatlh care workers. (Some countries have medical unions that negotiate with authorities)In other cases In some countries (for instance Holland) (Physicians practice directly or indirectly under contracts negotiated with private health insurers. GPs receive
          a capitation payment for each patient on their practice list and a fee per consultation.
          In Canada, in some provinces, surgeons are told how many operations they can do in a given year. This puts a cap on total surgeries done and puts a lid on surgeon’s incomes.

          Doctors working in hospitals are usually paid set wages –and they are much, much less generous than the wages U.S. doctors earn
          The bottom line: doctors do not set their own prices and their prices (and incomes) are much lower than in the U.S., even after adjusting for differences in cost-of-living, physicians’ incomes net of practice expenses, and differences in financing the cost of medical education

          In the U.S. if you compare doctors’ incomes to those of other Americans, nearly all are are in the top 5%. Some are in the top 2-3% ($200,000 for an indvididual) Many are in the top 1%.
          In most European countries that is not the case.

          In every developed country, the government sets prices for drugs. and devices– often through negotiations. If the drug company won’t agree to the price the goft is willin to pay, the govt won’t cover it.. This means the drug may not be available in that country.

          A recent report shows that we
          spend 30% to 50% more than other countries for exactly the same drugs.

          I personally have no problem with wage and price controls–though it’s hard to impose them without creating serious dislocations in the economy. But I presume it could be done, over a period of time.

          But wage and market controls are anathema to Americans who believe in American-style capitalism and free market competion.
          And that’s the vast majority of Americans.

          I can only imagine how doctors would react if told the government or some other body (whether a canton or private insurers) were going to set their fees not just in the public sector but in the private sector–and that in most cases those fees would be lower that the fees Medicare pays today.

          In other countries, the government, territories, provinces or cantons set annual budgets forhospitals, with funding on the basis of case mix.
          I can only imagine how U.S. hospitals would howl if told they had to
          live under a global budget.

          And how Americans would react if hospitals rarely offered private rooms or most of the other amentiies available in our hospitals. Or how they would react is hosptials that couldn’t make their budgets were shut down.

          Yes, medicine in these countries is also practiced more efficiently, management of chronic disease is better and doctors are more apt to follow evidence-based guidelines. This is in part becuause many doctors are employees– like doctors who work for Kaiser Permanente or the VA, someone i is looking over their shoulder and they have to follow guidelines. Also, in these countries, doctors don’t see themselves as entrepreneurs–by and large
          they don’t judge themselves in terms of how much they are able to earn. And they don’t work the long hours that American doctors work.

          Physicians account for only about 7% of our health care spending. But the same theme runs throughout our health care system: we pay more for everything. A famous article published in Health Affairs some years ago was
          titled “It’s the Prices, Stupid.” When comparing U.S. hc spending to spending in other countires,it made a compelling argument that it’s not so much that we do more (more intensive aggressive treatments) but that we overpay for everything.

          That’s inevitable if providers and manufactuers are selling NECESSITIES in a free market. With no regulation of what they can charge they will charge as much as the market will bear. And the market (patients) will pay it if they possibly can –even if they have to take out loans or borrow money–because they don’t want to be disabled by illness–and most of all, they don’t want to die.

          I have long thought that wages and prices in our heatlh care system should be regulated, much the way we regulated (or used to regulate ) the price of
          electricity–becuase it’s a necessity.

          But relatively few Americans would agree with me. So, until we elect a Socialist government, it’s not going to happen.

          This is why we cannot bring our health care spending down to European levels.

          But we can make real improvements–both in terms of quality and in cost.
          The number to keep your eye on is growth of health care spending
          vs. growth of GDP. I think we could open up a 4% gap (with GDP growing 4%
          faster than healhcare.)

          • I thought that I have been fairly specific, but OK, here goes:

            1.) Stop paying for procedures and management that has failed to show effectiveness: stent placement or CABG in patients who do not have either acute (less than 24 hours) MI or unstable angina ($70 billion a year,) MRI and surgery in patients with back pain who do not have either motor findings or failure of at least 90 days of conservative therapy ($70 billion,) MRI and arthroscopy in knee pain patients over 55 who do not have clear acute onset of symptoms following acute injury ($40 billion,) proprietary anti-haypertension drugs in people who have not clearly failed treatment with appropriate generics and combinations of generics ($20 billion,) CT coronary arterial examinations (at least $20 billion a year, mostly due to work up of the huge number of false positives, and much more if implemented more widely.) There is $220 billion a year off the top.

            Implement bidding for all pharmaceuticals paid for by federal programs ($40 billion. Obama is talking about this, but this is not part of the ACA now.)

            Implement high intensity nurse clinician monitoring for all of the big six chronic diseases, with telephone contact or office visits at least once a week and more often until patient is stable. Pay a bonus payment to the health care system for meeting treatment targets. The nurse clinician establishes relationship with the patient by a meeting and discussion of the case and the goals with the patient and family during the patient’s initial presentation at office, ER, or hospital setting. Reduces hospitalization by 50 to 75%, depending on illness, improves quality of life and longevity, decreases necessity of high tech intervention. Save about $100 billion. There is some push in this direction under the ACA accountable care program, but the ACA plan is more amorphous and does not apply to the majority of potential treatment goals.

            Substantially reduce payments to surgical specialists, radiologists, cardiologists, gastroenterologists, and other high paid specialists, reducing their average incomes to around $300,000 to $400,000 per year. Spend half the savings to increase payments to primary care specialists, put half in the bank. Can’t put a number on this, but it is in the hundreds of billions, plus it would have a long term effect of improving the number of primary care doctors and shifting the management model in US health care to resemble other countries.

            Require all hospitals that collect Medicare payments to implement the checklist for all invasive procedures, implement the pre-procedure time out for all procedures, and install closed circuit TV monitoring at all scrub stations in surgery and other procedure areas. Savings are not clear, but complications related to errors that could be decreased by as much as 90% by these procedures cost in excess of $300 billion a year now. Let’s be conservative and say $100 billion a year

            Require that all EMR systems be capable of cross-talk with each other, and require that admission and ER evaluation include a search of all systems in a 50 mile radius for prior admissions, treatments, and tests. Again not clear about a solid cost estimate of savings, but repetition of recent tests, failure to recognize what medications patients are taking, and inadvertent administration of medications that either interact dangerously or excite known allergies costs at least $100 billion a year.

            Make doctors document reasons for dispense as written drug orders in the medical record, not just check a box.

            Require that new drugs and procedures approval process include not just efficacy assessment, but comparative efficacy against existing treatments, especially generic treatments.

            That is at least $500 billion a year in savings and possibly as much as $800 billion to $1 trillion. Not saying it is easy, not saying the forces of reaction and stakeholders won’t fight tooth and nail, which is why I say we need to start working aggressively now, with the same level of commitment that we brought to the fight for access. We need to push hard for an aggressive agenda, knowing there will be compromises and disappointments, just as there were in the ACA fight. Everybody else does it, we should too.

            Or make me emperor, and I will implement all this next week.

          • Pat– Part 1 of my reply

            No, make me Czarina and I will implement this tomorrow. (Or heads will roll. Think Catherine the Great) .

            Seriously– I agree with most of your proposals, but virtually everything on your list is either in the Afordable CAre ACT, or in the CEnter For American Progress’ “Senior Protection Plan” you feel doesn’t go far emough. (This is where our disagreement begain. I think you focused on the dollar amount that CAP said it could save, without realizing that CAP doesn’t try to “score” many of the structural reforms that it calls for (moving ahead with Accountable Care Orgamnizations more quickly.) No one tries to say how much can be saved in these areas, but structural reforms (changing how we pay for care) will reap the greatest savings. What can’t be counted will count most.

            See my comments on your list–beginning at the end of this part 1 of my reply.

            In addition, when you talk about how much health care spending can and should be reduced, I think you ignore the fact that the Affordable Care Act sets out to provide high quality care for all Americans. Today, millions receive little care or receive care too late. Others receive poor care. Here, I think of many patients on Medicaid who have a very hard time finding good specialists to care for them. In many cases, specialists who have a hard time building a practice (often, but not always becuase they are not very good, have drinking/drug problems, ar involved in Medicaid fraud, are not caring and compassionate etc.) are the only specialists who will see these patients becuase, as you know Medicaid pays about 35% less than Medicare for the same services.
            In order to provide better care for these patients we will have to raise specialist pay (and hospital reimbursemnts) for Medicaid patients to Medicare levels for most services. (In some casesa of course, Medicare overpays for services– those payments should be lower — and Medicaid payments shouldn’t be raised.
            We also will need to continue to provide subsidies for people earning below 400% of the FPL so that they can have insurance that covers all essential benefits.
            We will need to continue to provide (more) scholarships and loans for nurse practioners, and for physicians willing to work “where no one else will go.” This means scholarships for med students coming from low-income families (these are the students who are most likely to be willing to work in very poor parts of the rural South, inner city Detroit, etc. They genuinely want to help care for the people living in the communities where they grew up..)
            We’ll continue to need more funding for Community Health Centers that can provide prevetnive care for lower-income Americans at a much lower cost than ERS. (Some of that funding has been cut since the ACA passed.)
            As we become more and more aware of the need for chronic disease managment and the environmental favors that affect chronic diseases, we will need to invest in public health.
            This is extremely important.
            As we move away from care that just isn’t very effective (some of the kenee surgeries that you talk about) we need to invest more in what would be effective — for example, physical therapy. Physical therapy can be very expensive–$100 to $125 twice a week. But many patients could avoid hip and knee surgery if they had good physical therapy. (It helped me enormously.)
            Topday, most insurance doesn’t pay for it unless you have been hospitalized, or pays for it very poorly.
            As Zeke Emanuel points out, we need to improve care for the dying– focusing on shared decisoin-making and pallliative hospice care. He notes that this probably won’t save money– but we’ll be spending the money differently.

            This is true, in many areas. AS we remove waste from one part of the system, we will spend some (not necessarily all, but a good chunk) of that money to improve care in other places.

            You’re focusing on the waste in the system that cares for the wealthy and the well-insured. But much of that money will be needed to provide care for those who are now uninsured, underinsured, or on Medicaid.

            Turning to your list:
            –“Stop paying for procedures and management that has failed to show effectiveness: stent placement or CABG in patients who do not have either acute (less than 24 hours) etc.. . . ”

            — Medicare cannot simply tell seniors (and doctors) that they can’t have stenting, or CABG or spine surgery,etc. (I guess Medicare could try to make such an annoucement,but at that point you could look forward to repeal of the Affordable Care ACt. Neither the public nor Congress nor the majority of doctors would stand for the government simply telling us what procedures are effective on which patients and banning procedures that the govt says are ineffective.

            What Medicare CAN Do is tell hospitals and doctors that they are going to be paid more if they achieve good outcomes at a lower cost (sharing in the savings) –and that they will face financial penalities if they fail to do this.
            To help them, Medicare and HHS can give providers evidence-based guidelines which indicate which patients will or won’t benefit from various procedures.
            We can’t tell doctors that they “MUST” follow these guidelines. (That’s why they are called guidelines– in the UK and Europe doctors are not told that they MUST follow guidelines, but most do. In the U.S., where $$$ tends to be more effective than any other incentive, we will
            see more doctors and hospitals following guidelines in order to get the better outcomes Bundling payments to doctors and hospitals will encourage them to work together to achieve those better outcomes for less.
            With this in mind the ACA includes an “Acute Care Episode Program—which
            bundles payments for 37 cardiac and orthopedic procedures”
            CAP calls for
            — “expanding the Acute Care Episode Program—which
            bundles payments for 37 cardiac and orthopedic procedures—nationwide.
            The bundles should also include related post-acute care, such as rehabilitative
            and home health services, provided up to 90 days after discharge.
            • “By 2017 Medicare should make bundled payments for at least two chronic conditions,
            such as adjuvant therapies for five leading cancers and care for coronary
            artery disease.
            • “Within 10 years Medicare and Medicaid should base at least 75 percent of payments
            in every hospital referral region on alternatives to fee-for-service payment.
            Medicare and Medicaid should adjust all bundled payments based on the quality
            of care and health status to prevent providers from skimping on care or avoiding
            high-risk patients.
            This covers virtuallly everything on your list.
            The difference is that rather than “rather than government rule-making from on high” we provide incentives for health care providers to change the system from inside. That’s the only way to do it. Otherwise, they’ll just pay lip-service to reforms.
            For instnace, you can tell them they “MUST” use checklists– but, as Gawande points out, many will they’ll just go through the motions. That does no good. If, on the other hand, your pay for outcomes, they will find that if they take checklists seriously, they can reduce surgical errors, infectoins etc.– and will share in the savings.

            We know this works-we have pilot programs that show it works. But in the past Congress blocked rolling those programs out nationwide. Under the ACA, Congress can no longer do that. The Secreatary of HHS can expand a program nationwide without permission from progvrss.

            Next on your list: Implement bidding for all pharmaceuticals paid for by federal programs ($40 billion.) You note: Obama is talking about this, but this is not part of the ACA now.)
            Pat– Competitive bidding is a good idea, and the ACA already expands competitive bidding for durable medical equipment:
            “In 2011 competitive
            bidding for durable medical equipment, such as hospital beds and wheelchairs,
            reduced Medicare spending by more than 42 percent. The Affordable Care Act
            requires Medicare to expand competitive bidding for durable medical equipment,
            prosthetics, orthotics, and supplies to all regions by 2016.

            In addition, the Campaign for American Progress proposal
            calls for:
            “Extending competitive bidding by 2015 to medical devices, laboratory tests,
            advanced imaging services, and all other health care products (which presumably indcludes drugs/)
            CAP notes that” Competitive bidding for medical devices in particular would produce substantial
            savings” (VERY TRUE)
            My computer is freezing– so I’ll continue this in a second reply that I’ll lable Pat – part 2

          • Effectiveness is a gift that keeps on giving. Just today the “Choosing Wisely” project, a joint project of several specialty boards suggesting procedures and tests that should be avoided, added 90 more items to their original list of 45.

            To paraphrase a military commentator during the first Iraq war, there is no shortage of potential targets for meaningful cutting of waste, since we are in a target rich environment. It is not an accident that knowledgeable analysts looking at waste in US health care consistently suggest that from $500 billion to $1.2 trillion a year could be cut from US health care spending with only improvement of quality of care resulting.

  42. May as well throw in one interesting point that supports Maggie’s belief that changes in education of new doctors are changing the culture in favor of more rational use of resources. Over at “The Incidental Economist,” Aaron Carroll notes recent research that suggests that banning of gifts, meals, and promotions from pharmaceutical companies to med students and residents leads to a greater tendency to use generic and lower cost drugs as opposed to expensive proprietary drugs. I suspect that education by more conscientious physician preceptors is at least partly responsible as well, and that the banning of gifts may actually represent a result of changes in faculty beliefs that are then conveyed to the trainees, so that the banning of gifts is a marker, not a cause — but all of it is to the good.

    Here’s a link:

    • Pat:

      The ban on gifts was started by med students themselves in a program called “No Free Lunch”
      about 8 or 9 years ago.

      Those med students have since grown up and formed an excellent group called “The National Physician’s Alliance.

      They are excellent on reform as well as the idea that doctors should not take anything from lunch to free samples to consulting fees from manufacturers.

      The last time I saw them, the president was a woman, and if I recall, her predecessor was a woman.

      I believe the resereach that the ban leads to a greater use of generics etc. One important reason: these doctors don’t take free samples of prescription drugs. Once a patient begins taking the free samples, he/she then is likely to continue taking the more expensive version of the drug– assuming that this is what her doctor recommends. (This, of course, is why drug companies hand out free samples.) .

      Finally, I think that changes in how we educate students have only barely begun. (Med schools and academic medical centers are by and large, not exactly in the forefront of change–with a few exceptions.

      But as the demographics of the med students themselves changes, this may lead to change. MOre women doctors and med students makes a difference. With time, more minority med students could also make a difference.

  43. Over 70% of all prescriptions filled are now for generics though they account for only 10%-15% of the dollars spent on drugs. The prescription drug retailers and the pharmacy benefit managers (PBM’s) automatically fill a branded prescription with a generic if one is available unless the doctor checked the DAW (dispense as written) box on the prescription form. Quite a few blockbuster drugs have gone off patent in recent years including Lipitor, Plavix and Lexapro in the last year alone which largely accounts for a significant portion of the growth in the number of generic prescriptions.

    Specialty drugs to treat that mainly treat cancer and MS account for most of the growth in drug spending these days. These now account for about 25% of drug spending and could easily reach 40% within five years or so. This is an area where CMS needs to be able to specifically take cost into account in deciding what it will and won’t pay for.

  44. Pat S.

    Your point about the need for a sense of urgency to attack healthcare cost and effectiveness is an extremely important one, in my opinion.

  45. Barry & run 75411

    Barry– We don’t want CMS to refuse to cover any effective drugs for people suffering from MS. If it’s effective- they have to have it.
    We’re not talking about giving someone an extra week of life; we’re
    talking about slowing the progress of a tragic disease.

    In the case of cancer drugs, I do think we need to think about how we
    want define “effective”–

    Most of all, I think CMS has to insist that before a very expensive cancer drug is administered the patient & family must have (separate )consultations with a palliiative care team.

    Oncologists just aren’t trained to talk to patients about dying. Some firmly believe that it is wrong to “take away hope.” Others just don’t know how to talk about dying and so do a bad job of it. See Atul Gawande’s New Yorker article “Letting Go” where he admits that he, too, failed to tell a dying patient the truth.

    The palliative care team will make sure that the patient understands the risks and possible benefits of the drug. And if there the medication cannot and will not cure him, the palliative care team will make sure that thepatient understands that. When discussing potential benefits the team would explain how much more time the drug might buy, and what the likely side effects would be.
    Finally Medicare has to lift the pay for palliative care services. These are among the doctors who are underpaid, and this is one reason why some hospitals have been relulctant to hire them.

  46. Maggie,

    As you noted, I think we need to refine the definition of effective in determining what to pay for and not pay for, especially in the case of expensive cancer drugs. Nobody is suggesting that we shouldn’t pay for effective drugs, appropriately defined, to treat MS or anything else.

    In the case of cancer, we need to understand who is making the money. Some cancer drugs can be taken orally such as Temador for brain cancer and Revlimid for multiple Myeloma. Both of these cost between $8,000 and $12,000 per month. The drug companies that make those make most of the money in those cases. Others need to be infused but that can usually be done in an oncologist’s office which may or may not be part of a hospital system. An expensive cancer drug can generate significant profits for an independent oncology practice even if the percentage markup is relatively low. If the practice is part of a hospital system and the doctor is salaried, then the hospital will capture the profits from administering the drug in an outpatient setting.

    If the patient doesn’t need or has already had a surgical intervention, it would be relatively easy for oncologists to keep patients away from palliative care specialists if their goal is to maximize their income and minimize interference with or second guessing of their practice decisions and recommendations. Even if palliative care services were better paid, the bottom line is that more conservative treatment means less revenue for a hospital system. Moreover, I don’t think cancer treatment lends itself to capitated payments.

    There is probably an educational role for both PCP’s and insurers, including standard Medicare, to push back against these forces that have an interest in spending more on care rather than less because they make more money.

    • Barry–

      Oncologists can keep patients away from palliative care specialists only if a hospital’s administration let’s them do this– and if patients don’t know that they have a right to ask to see a palliative care team. (At some point, most cancer patients are hospitalized.)

      We need more news stories informing the public that palliative care is not juste for people who are dying– it is very anyone who is very sick and/or in great pain.

      Those stories need to tell people that if they are a loved one is very sick, before going to a hosptial they should make sure that it has palliative care. (Most large hospitals do. Many small hospitals don’t. You don’t want to go to the nearby small community hospital if it doesn’t have palliative care.

      For hospitals to avoid palliative care because it will reduce their revenues is immoral– and should be illegal. All hosptials should be required to open their doors to a palliative care team from another hospital (even if they don’t have one on site). And Medicare & Medicaid should hike reimubrsements for palliative care. For most patients, this is the most important medical care that they will ever receive.

  47. Maggie,

    For the record, the article, “It’s The Prices, Stupid,” was published in Health Affairs in 2003. Princeton professor, Uwe Reinhardt was one of four co-authors.

    I would hate to see wage and price controls return. When we had them between August, 1971 and April, 1974, they caused all sorts of distortions throughout the economy. When we finally got rid of them, there were large price spikes, especially in commodities like paper, aluminum and steel and a burst of inflation coupled with a significant recession. That was around the time, the term; “stagflation” came into popular use.

    High healthcare prices in the U.S. center on hospital based care, drugs and devices. Strangely, though, generic drug prices, which are subject to global competition, are actually somewhat cheaper in the U.S. than they are in other countries. Branded drug prices could be lowered through more aggressive use of formularies and refusing to pay for some of the ultra expensive cancer drugs that only extend life by a few months at best, often with low quality.

    In the hospital sector, I think we need a good benchmarking study that would give us more insight into why U.S. hospital costs, especially the number of employees per licensed bed, appear to be much higher than for hospitals in other developed countries. Let’s compare academic medical centers and community hospitals here vs. similar hospitals in Western Europe and Canada. We cam exclude the UK if we want to. Excluding doctors and maybe executives, I don’t think other hospital employees from nurses to housekeepers to transporters are paid more than similar employees elsewhere, at least as a percentage of per capita GDP.

    I don’t know if some of the cost differences might be regulation driven like nurse staffing ratios. One doctor who trained in Germany told me that physician credentialing is done at the state level in Germany like issuing drivers licenses in the U.S. but it’s done by hospitals in the U.S. Private rooms add costs but also contribute to fewer medical mix-ups and infections and generally promote healing. Maybe they’re worth the extra cost. Dr. Reinhardt says it would be complex and expensive to do such a study but I don’t think it would be impossible. CMS could easily fund one if it wanted to.

    We need price transparency in the medical device space. Let’s get rid of those confidentiality agreements that preclude hospitals from sharing what they pay for devices with other hospitals. Standardizing on fewer devices for surgical procedures could increase volume and lower prices for the selected devices while eliminating the rest. That should spur competition as well.

    I also think we need special rules regarding how much hospitals can charge for care delivered under emergency conditions on an out-of-network basis. Stories abound about charges exceeding 100 times the Medicare rate and sometimes being paid even by insurers. That’s an outrage on its face and should be stopped.

    We can let pharmacists, NP’s and PA’s practice at the top of their license. The physician lobby often fights this because it doesn’t want anymore competition. Doctors would continue to be paid very well as they should be in my opinion.

    Pat S. tells us that Essentia Health does an excellent and cost-effective job managing CHF patients at an average annual cost of $1,500 per year each. Why shouldn’t that practice approach be widely copied across the country if it works so well?

    The bottom line is there are lots of strategies we can employ to create competition and countervailing power in healthcare if we have the courage to stand up to powerful economic interests that benefit from the status quo. We don’t need the heavy hand of government wage and price controls to get this done.

    • Barry–

      The wage and price controls that we used in the past were crude, and as you say, hurt the economy.

      But we do need price controls on drugs and devices.

      Even with transparency, the market will not bring prices down. (This is why every government in the developed world negotiates and in some cases sets health care prices. It is now well-establised that when it comes to healthcare, market forces and market competitoin does not bring prices down. The only people who don’t understand this are some conservatives and libertarians in the U.S. who are blinded by their ideological beliefs.

      We need to have Medicare and Medicaid negotiating with drug maker and device-makers, comparing their new products to what exists, and saying We Will NOT cover htat product at the price you are asking.

      Consumers (patients) don’t have the power to bring prices down the way they do when paying for non-medical products becaue they don’t have the knowledge to measure whether something is better, and when sick, they will pay whatever they must for something that will help them or a loved one.
      Finally, in healthcare individual consuemrs don’t have the market clout to move prices. NOr do most indiviidual hospitals or doctors. Moreover, hosptials and doctors have no reason to negotiate for lower prices as long as Medicare & Medicaid cover those higher prices. (Indeed, too often doctors benefit from rich consulting fees if they agree to use the most expensive device.)

      Ultmately, as we move from fee-for-service, the government will negotiate with doctors and hosptital to how much we will pay for an episode of care– and this will include payments for drugs and devices as well as reimbursments to providers.

      No, we don’t have too many workers in our hospitals. Hospitals in some European countires may have fewer workers per bed, (though I’d like to see a study showing this.) If true,
      this is because much less is happening to the patient– fewer tests, fewer surgeries (they don’t do all of the stenting and CABG’s that we do here), fewer procedures of all kinds. Thus, fewer workers are needed per patient.

      I don’t know if you or a loved one has been hospitalized recently, but try ringing for a nurse. (And they’re not sitting around in a lounge somewhere drinking coffee. They’re running around, multi-tasking.) These days, relatives and friends are expected to change the patient’s sheets (or leave him sitting in human waste.)
      There just aren’t enough workers to do these things. (Here I’m talking about Manhattan’s best private hospitals. My best friend’s husband changed the sheets on a regular basis when her father was in a hospital).

      When my daughter had a baby and was running a high fever, there weren’t enough nurses to come quiet her baby when she went to the bathroom. (The bathroom was in her room, but when she left the bed and put her baby in her crib (also in the rooom) the baby began screaming. If you can imagine being very sick, trying to go to the bathroom as your baby scream . . )

      One night there weren’t enough nurses to get her another blanket (they would have had to go to a different floor to get it) when her fever had turned to chills adn violent shaking.

      And this is in the hospital in NYC that is considered the best for child-birth. But it was August– too many babies conceived during a cold holiday season in December. And like most NYC hospitals, not enough nurses.

      Of course, if you can afford to pay for private-duty nurses, 24/7, you don’t see these problems. But few people can afford that luxury

      You write: “Dr. Reinhardt says it would be complex and expensive to do such a study (on the value of staffing ratios) but I don’t think it would be impossible.” Barry, you have every right to your opinion, but Reinhardt is the expert. I would go with the expert. Also, since he comes from Germany–which has a far more efficient health care system than ours– he knows more about value in health care than most people. He is skeptical, not about staffing ratios, but about the amenities–private rooms, etc.– that in so many cases are not necessary.

      When compared to U.S. hospitals, German hospitals look Spartan. But they’re safer (fewer preventable errors)

      Finally, only government can stand up to the powerful monied intersets that profit from waste in our system- device-makerse, drug-makers, lobbies represnting specialists, etc.

      Unfortunately, we cannot depend on Congress to do it.(Too many Congressmen owned by lobbyists thanks to the high costs of our endless political campaigns.) So we need to give departments like CMS and HHS the power to do some things without going through Congress–for instance negoatiating prices on drugs and devices. CMS and HHS are staffed, not by bureaucrasts (as conservatives tend to claim) but by medical experts–reserachers, and physicians.

      The Affordable Care ACt purposefully circumvents Congress in many areas in dozens of sentences which begin: “The Secretary of HHS may.”

      Yes, I agree, medical workers should be allowed to practice at the top of their license–but only if they are well-trained. And then we need to pay them more. A nurse who gets a Ph.D takes on loans,just like a doctor. And if she is doing a PCP’s work, she should be paid a PCPs salary–even though, in most cases, she is a woman.

  48. “– Medicare cannot simply tell seniors (and doctors) that they can’t have stenting, or CABG or spine surgery,etc.”

    Yes and no. Medicare cannot tell doctors and patients they cannot do or have certain treatments, but Medicare can and already does tell them that Medicare will not pay for some procedures and treatments. However, the more common and more financially significant any type of ineffective care is the harder politically it is to fix.

    There are many things that Medicare has stopped paying for. For example, Medicare does not allow payment for CT colonography — often called “virtual colonoscopy” — because evidence indicates that despite heavy promotion by equipment makers and by academic radiologists it just does not work as well as alternatives. When it first came out, it was covered by Medicare, but when research showed it was less effective than initially claimed, coverage was dropped, with the result that it is rarely done.

    Thermographic imaging of breasts and other anatomy was initially greeted by great excitement, but when research showed it was not useful, payment was dropped and the technique disappeared.

    Internal mammilary artery coronary bypass was an initially popular technique that rivaled traditional venous graft bypass, but when research showed it was no better than placebo, coverage was dropped and the procedure disappeared as well.

    Most people who are not medical professionals are very surprised when they discover how much restriction public and private insurance places on the latitude of doctors to order procedures and treatments as they please, but these restrictions are extremely common. Lobbying by vendors and professional groups is very common as attempts are made to change rules in favor of various procedures they have a vested interest in.

    Of course, placing restrictions on a huge industry like coronary artery intervention or back pain diagnosis and surgery would be very hard in the US, even though almost all other countries do so already. In the US, huge sums of money are involved and procedures allowed to proliferate wildly without adequate evaluation first, where most other countries were slower to adopt the techniques, waiting for more definitive studies, and thus avoided much of the controversy.

    Although I generally agree with the ACA and its attempts to improve health care in the US, the language that authorizes IPAB is problematic, in that it forbids “rationing” in any form, raising potential problems with attempts to bring Medicare payment policies into compliance with good science.

    That is, of course, why groups like CAP avoid confronting the issue of waste and ineffectiveness head on — it is too controversial and too politically frought.

    I would not argue that this would be easy. I do argue that it will have to be done eventually if we are to avoid implementation of cost based rationing, and that advocates for health care reform should talk about this issue, as many of the people you have previously cited already do. We must remember that our stuttering approach to reform has been going on for 75 years now, and that results take a long long time.

    To return to our original argument, I believe that the reforms that CAP recommends, and that most of the recommendations the Obama administration is suggesting, are good steps. They will offer small amounts of help, and every little bit helps. But in the end they delay the reckoning we will face when we have to modify our patterns of care to match the much less costly, mush more effective systems of other countries.

  49. More:

    Competitive bidding: Although competitive bidding for equipment is good, the really big, easily accessed savings are in competitive bidding for drugs. Obama is talking about this, which is good, but many people are afraid of the power of the pharmaceutical lobby and PAC groups.

    “Doctors will just go through the motions.” Actually the good thing about many of these quality assurance initiatives is that if the doctors just go through the motions they will actually have done what they are supposed to. The only way that they could meet the requirements and not create the benefit would be by fraudulently reporting they “went through the motions” when they actually didn’t, a behavior that is first flat out illegal, second risks licensure, hospital privileges, and Medicare billing privileges, third risks malpractice with a fraud component that voids many if not most malpractice insurance policies and makes the doctor subject to paying the entire judgement our of pocket as well as voiding the statute of limitations, and fourth is very likely to be revealed, since these activities occur in team settings with many other people involved.

    Passing rules that doctors “must” follow is not by any means unusual. Doctors work under many, many rules, and usually comply willingly once the initial period of whining is over. This would be no different.

  50. Maggie —

    As you know, I am a huge fan of the ACA, worked hard to help increase support when it passed, and worked hard again in the last year to explain its value in the context of the election. I agree that it is the second most important health care reform in US history, after the 1965 passage of Medicare and Medicaid, and will help millions of people directly and all Americans indirectly. I also agree that the bundling provisions in the ACA associated reforms are valuable. The ACA will bend the curve of spending.

    However, where we seem to disagree is regarding the gravity and urgency of continued cost growth, albeit at a slower rate than most earlier periods, and of issues with effectiveness in American health care. I believe, along with most of the economic observers you yourself cite, that the growth of health care cost continues to be a severe problem, with a time horizon in the range of one to two decades. I believe that American health care wastes trillions of dollars on care that is ineffective at best, harmful at worst. And I believe we face a fortuitous situation where fixing the waste and ineffectiveness will also fix the cost.

    The ACA is good. It certainly helps the issue of access in a major way, and has a positive impact on the issues of cost and effectiveness. But it has not made all our problems go away, and health care activists now have the job of both defending the ACA and arguing that we have important agenda items that must be addressed further and more aggressively.

    It is not an accident that means testing, block grants, and privatization are key agenda items for reactionaries in dealing with health care. Their goal is to “solve” the cost crunch in health care by denying funding to more and more people, ending an entitlement to health care. As reformers, we need to compete with proposals that match or exceed the financial goals of the right wing in health care savings. That requires voicing goals that raise the stakes far above the nip and tuck approach and move on to aggressive reform. Of course congress is not going to pass it next week, but what we can do is change the “window” of discussion to include these proposals and to explain them to the public, laying the groundwork for another round of major reform in five to fifteen years.

    News like the CAP proposals is good news, but it needs to be greeted with, “OK, what next?”

  51. Pat–
    Regarding “gravity and urgency” of the growth of health care spending, Jared Bernstein is one of my favorite economists. Here’s what he says:
    “estimates CBO just published, compared with estimates made two years earlier, show a cumulative reduction in projected Medicare, Medicaid, and ACA spending of nearly $800bn from 2014-2021, or probably around $1 Trillion Over 10 Years.
    “To Put This In Perspective, while Congress has Been Debating Over the Last Two Years How to Reduce Medicare spending by a Few hundred Billion dollars–the President’s budget last year called for $300bn in Medicare cuts over 10 years, for example–Changes in economic assumptions Projections Have Reduced Projected Health Spending by Twice As Much…”
    This is how economies work– Bernstein is sophisticated enough to understand this. (Unlike many less sophisticated practioners of the dismal science.) He continues:
    “That’s most obviously relevant in terms of providing a bit of budgetary breathing room. It doesn’t mean we’re done worrying about long-run pressures from health costs, but . . it gives us time to figure out what works.”
    One thing I like about Jared is that he keeps things in perspecitve. He understands the numbers and puts them in context.
    Another column (Feb 10) begins:
    “Suppose, just for entertainment purposes, that we wanted to have a sane, rational, and even informative discussion about what to do about our public deficits and debt (the latter being the cumulative sum of the former)—one that asks the questions posed in the title but doesn’t automatically default to the “hair-on-fire, we’re Greece!, hard choices, serious sacrifices” that we too often get from the deficit reduction industry.

    “First off, “stabilizing the debt” means to stop the debt ratio—debt/GDP—from rising (where “debt” means debt held by the public—that’s what matters for all that follows). For our debt to grow more slowly than our GDP, our deficits don’t have to be zero, but they do have to be below 3% of GDP.–
    He goes on to explain that when we look at debt/GDP or healthcare spending/GDP we tend to
    put way too much emphasis on the numerator
    (health care spending) and way too little emphasis on the denominator (GDP and how fast it’s growing.)
    BernsteinHe also understands how works in DC
    where he has been for the 20-odd years I’ve followed him.
    During the first two years of the Obama administration, he was VP Biden’s chief economic advisor. After two years, he left. Biden wasn’t having much effect on economic policy. . But now Bernstein is doing some very important work. He’s often on television, writes constantly. I urge you to Google him.
    On doctor’s “going through the motions “. Atul Gawande, who wrote the book on Checklists, writes about this. He points out that at hopspitals where Peter Provonost has been involved in
    introducing checklists doctors truly get on board.
    Apparently he is charismatic and his commitment and enthusiasm are infectious. In cases where
    Provonost is not involved docs may simply “go through the motions.”
    “Implementation is sometimes spotty, partly because a procedure can become so routine that staff just go through the motions without really checking each item.”
    Someone checks the boxes, but the list isn’t read out loud. Unless the surgeon is on board, others on the team are afraid to speak up.. ..
    Gawande writes: “Two million patients pick up infections in American hospitals, most because someone didn’t follow basic antiseptic precautions. Forty per cent of coronary-disease patients and sixty per cent of asthma patients receive incomplete or inappropriate care. And half of major surgical complications are avoidable with existing knowledge.”
    This wouldn’t happen if doctors were more amenable to “following rules” (Most hospitals still don’t use checklists in their ORs).
    “The creation of standardized workflows, checklists, and protocols causes doctors to bristle even more. As Gawande notes, the training of doctors today is essentially unchanged from generations ago which valued physician autonomy. When asked to follow protocols, doctors often feel this freedom to practice medicine is threatened.” . .
    Only “he very best physicians follow procedures meticiously and thoughtfully whether placing a central line using the five critical steps as outlined by McArthur grant recipient and John Hopkins critical care specialist, Dr. Peter Pronovost, to eliminate risk of infection or taking seriously a surgical timeout to avoid wrong site surgeries.”

    Pat–at places like Kaiser or the Mayo Clinic, doctors follow rules because they are employees, someone is looking over their shoulder, and because many of them are among “the best doctors.”
    In Manhattan’s hospitals, by contrast, residents, nurses and even doctors talk about physicians who don’t wash their hands. One of our famed academic medical centers has infection rates that are among the highest in New York State.

    And this is not just true of New York City. Here’s another stunning example of doctors not doing what they are told they must do: When Cedars Sinai in L.A.
    introduced health care IT (at great expense) in 2003 or 2004, doctors simply refused to use it. Most doctors were not employee of the hospital, they were in private practice and had “privileges” at the hospital. They didn’t want to take time away from their lucrative private practice to learn how to use it.
    Ultimately Cedars Sina’s administration had to junk the IT. I interviewed the CEO about this when I wrote my book. He was not happy.
    My point is that there are medical cultures where most doctors follow rules, but in this country, there there are many more cultures where they don’t.

    AS Gawande has written, our doctors are trained to think of themselves as “cowboys” “not pit crews.” This has to change. But it won’t change by “telling them that they must.”
    Also, in Manhattan doctors and nurses do not work together in teams–and I’m told that this is the case in most of the U.S.
    Most of our med schools don’t teach doctors to work in teams.
    .On CABG and stenting–
    The vast majority of Americans woudl protest– and there would be an uprising demandinng repeal of the ACA — if CMS said that Medicare wouldn’t cover these procedures for a great many patients (because they don’t fit the profile for effectiveness.)
    CMS can’t even refuse to pay for unneeded (and potentially dangerous) mammograms for many women. It can’t refuse to pay for PSA testing– even though the Preventive Services Task Force does not recommend it.
    This is not a country that puts a high value on science. It prefers religion, and opinion.

    Meanwhile HHS and CMS have enough on their plates right now, implementing what is in the ACA–and going forward with a few other major reforms. (Obama has made it clear that he is going to cut drug prices. Wall Street knows this. The industry knows this-it’s just waiting for the other shoe to drop.
    He will begin with ‘dual eligibiles” then move on to
    all Medicare patients. Private insurers will follow Medicare’s lead. Devices will probably come next.
    Competitive bidding will also be expanded.

    But, Pat, when you propose that reformers go further, by insisting that “no specialist earns more than $300,000 or $400,000 . . . ?” How would you do that? What do you think would happen if CMS even suggested it?
    While we’re still using fee-for-service, CAP suggests reducing specialists fees by 3% a year.
    This is reasonable. Politically it may be impossible, but it’s not an unreasonable suggestion.
    But in cases where something is clearly politically impossible (making sure annual incomes in certain specialties do not exceed $300,000 or $400,000) it would be foolish to bang our heads against the wall.


    • The new Time Magazine has an extremely courageous discussion of health care costs and aggressively addresses some of the major roots of the problem. They come up with recommendations to save $500 billion a year and $5 trillion over ten years, overlapping with my list by about $150 billion but finding another $350 billion. Together we could save about $850 billion a year — $8.5 trillion over ten years..

      As to the cuts to high cost specialists, I would accomplish that first by simply cutting payments to levels that would produce those results — not that hard to figure out if you look at widely available data on average productivity in the specialties. In the end, i expect that most doctors, both specialists and primary care, are rapidly heading in the direction of being either real or virtual employees of health care organizations, and incomes would be set through their systems.

      In the end, Maggie and I are disagreeing over the economic impact of health care spending over a period of 5 to 20 years. She cites some economists who are more optimistic that the system that emerges from the ACA will solve our problems, and that spending cuts of about $1 trillion over ten years will be enough. I agree with recent articles by Paul Krugman, Uwe Reinhardt, Brad De Long, Ezra Klein and others that we will need considerably more aggressive cost containment in the long run to reach a position we need to reach. The combination of growth of health care costs at current levels, much less a return to historic levels, ongoing development of new and very expensive techniques, and the aging of the population with concurrent increases in Medicare enrollees and Medicare, Medicaid, and private health costs will necessitate more aggressive cutting.

      These beliefs imply that those of us who wish to seek solutions not involving cutting of access through increases in out of pocket costs and loss of insurance coverage need to bring this problem to the fore and educate the public. Time has done a great job of that.

      I do agree with Maggie that bringing costs under control on the East and West Coasts and the Sunbelt will be a lot harder than in parts of the country where effectiveness and scientifically based practice are more part of the culture. Bad habits die hard, especially when training institutions continue to teach them. It is an unfortunate truism that the institution that gave us Atul Gawande, Zeke Emanuel, and Don Berwick has an unfortunate record of waste and inefficiency in its own practice and of training young physicians to practice wastefully, and that those patterns permeate many other programs in the Northeast, the West Coast, and Sunbelt. Those training institutions need to change, and given that Emanuel, Gawande, and Berwick have not been able to accomplish that, I am pessimistic that those changes will occur without a strong push from payers, federal first with private following.

      Finally, I do agree with Time and with Barry that “safe harbor” rules for malpractice would be very valuable in helping address the anxieties of doctors and other providers in following less wasteful, more effective techniques.

      With that, I am going to sign off of this argument. My perceptions of the impact of payment changes as a health professional are different from Maggie’s, since I have seen changes in payment patterns and regulations have profound effects on medical practice, while she has observed mostly the screams of protest from doctors and other stakeholders. In my experience, the screams always come, but they are followed by grudging acceptance, then by forgetting we ever did it in a different way.

      For this thread, I will fight no more forever.

  52. I think many more, and probably most, doctors would be willing to follow evidence based rules, guidelines and protocols if they had safe harbor protection from malpractice lawsuits if they did so. Unfortunately, trial lawyers and their money will likely ensure that this doesn’t happen as long as Democrats control the senate and the White House.

    Separately, the most recent CBO projections of Medicare costs are little more than the extrapolation of the most recent trends. That’s pretty much what they always do. If Medicare costs continue to reaccelerate like they have for the first one-third of the current fiscal year, CBO’s future projections will go right back up again.

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