Breaking the Curve of Health Care Inflation

The evidence is building:  As we move toward making the Affordable Care Act a reality,  Medicare spending in slowing, and even in the private sector, for the first time in more than a decade, insurers are focusing on reining in health care costs .  

The passage of reform legislation two years ago prompted a change in how both health care providers and payers think about care.  The ACA told insurers that they would no longer be able to shun the sick by refusing to cover those suffering from pre-existing conditions. They also won’t be allowed to cap how much ithey will pay out to an desperately ill patient over the course of a year –or a lifetime.  Perhaps most importantly,  going forward, insurance companies selling policies to individuals and small companies will have to reimburse for all of the “essential benefits” outlined in the ACA–benefits  that are not now covered by most policies.  This means that, if they hope to stay in business, they will have to find a way to “manage” the cost of care–but they won’t be able to do it by denying needed care.

As for providers, they, too, will be under pressure. A growing number will no longer be paid “fee for service” that rewards them for “volume”–i.e. “doing more.” Bonuses will depend on better outcomes, and keeping patients out of the hospital–which means doing a better job of managing chronic illnesses.  Meanwhile, Medicare will be shaving 1% a year from annual increases in payments to hospitals. If medical centers want to stay in the black, they, too, will have to provide greater “value” for health care dollars– better outcomes at a lower cost.

This summer the Supreme Court’s decision sealed the deal. The ACA is constitutional. Health care reform is here to stay.

(Granted, if Mitt Romney wins the White House in November, all bets are off. But the Five Thirty Eight f’orecast, which has an impressive track record, suggests that Obama has a 70 percent chance of winning.  That said, liberals  should not be smug. The economy remains the greatest threat to President Obama’s re-election.)

Medicare Spending

The Obama administration should be broadcasting the news: Medicare spending is no longer growing at an unsustainable rate. Wednesday, Bloomberg columnist Peter Orszag commented on the “sharp deceleration” in Medicare’s outlays. A common way to evaluate the growth in spending for Medicare is to compare the increase per beneficiary to income per capita,” the former director of the Office of Management and Budget (OMB) wrote.  “Over the past 30 years, this excess cost growth for Medicare has averaged about 2 percent a year. The goal of many policy proposals, including provisions in the 2010 Affordable Care Act, is to reduce the future excess cost growth to about 1 percent annually.”

What is astonishing is that Medicare is now exceeding that goal. Over the past year, “excess cost growth has been much less than the target of 1 percent,” Orszag reports. “According to the most recent figures from the Congressional Budget Office, total Medicare spending this year through June rose 4 percent from the previous year. Meanwhile, the number of Medicare beneficiaries rose by almost 4 percent, too, and income per capita rose by about 3 percent. So excess cost growth has been significantly below zero let alone below the target of 1 percent a year.” 

This suggests that the nation’s Medicare bill does not have to pose a threat to the economy, even as the  number of Americans on Medicare’s rolls grows. Widely accepted reserach reveals that at least one-third of Medicare dollars are wasted on over-priced products and unnecessary reatments. Cut that fat, and we can accommodate an aging population.

Sweden faced the problem of a greying population years ago, and has managed to avoid what many who would like to slash “entitlement programs”  insist is an “inevitable” explosion in medical spending as a nation grows older. Healh care spending in Sweden has remained remarkably stable since the 1980s, costing roughly 9% of GDP, and when it comes to quality of care–and patient satisfaction– Sweden’s health care system is rated as one of the best in the developed world. Continue reading

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Complaints about Medicare Advantage Mount…While Congress Contemplates Slashing Fees Traditional Medicare Pays Docs

Recently I argued that eliminating the private insurance industry would not suddenly make health care affordable. But this is no reason to gratuitously overpay private insurers to provide health care to Medicare patients—while simultaneously planning to slash the fees that Medicare pays physicians.

Begin with the insurers. When Congress created Medicare Advantage, the program that allows private insurers to offer Medicare to seniors, it agreed to pay for-profit insurers about 12 percent more per patient than traditional Medicare would spend if it were covering those patients directly.  Add up those extra payments and they amount to a $16-billion-a-year subsidy for the health insurance industry.

Why the sweetener?  Lobbyists argued that the government would have to pay more to persuade for-profit insurers to join the Advantage program.  Moreover, they promised that the insurers would use the $16 billion to offer patients extra benefits like acupuncture and eye exams that they would not receive under traditional Medicare.  And Congress agreed. Now, think about this for a minute: legislators agreed to use our tax dollars to help for-profit insurers draw customers away from a government program that most people liked—and that cost taxpayers less.  This is not about saving money by transferring Medicare to the supposedly more efficient private sector. This is about the conservative agenda: some politicians are determined to try to outsource government to for-profit corporations.

Predictably, private insurers structured their plans to siphon off the healthiest seniors.  In New York City, for example, Oxford included free memberships to some pretty posh gyms as part of the package. They called it the “Silver Sneakers” program. Unfortunately, a year after seniors signed up they discovered that the number of gyms involved in the program had suddenly shrunk. The options that remained weren’t nearly as tony, and most were no longer located in upper-middle-class residential neighborhoods. Is this “bait-and-switch”? You decide.

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Screening for Prostate Cancer: Before Medicare Pays, Patients Need to Know More About Risks

Roughly two-thirds of all men on Medicare are screened for prostate cancer. Most feel they have no choice. After all, this year more than 27,000 American men are likely to die of the disease. When men are asked about their fear of cancer, a survey from the Harvard Risk Management Foundation reveals that prostate ranks at the top of the list. Colon cancer, which kills roughly as many men in the U.S. each year, ranks number seven. There is something about prostate cancer that pushes buttons. No wonder so many men sign up for the “PSA” test which measures levels of prostate-specific antigen in the blood.
But the truth is that current research offers no proof that widespread screening and early diagnosis saves lives. What we do know is that patients who are tested and treated may suffer life-changing side effects that outweigh the uncertain benefits of early detection.

In June the National Cancer Institute made its position clear: “Screening tests are able to detect prostate cancer at an early stage, but it is not clear whether this earlier detection and consequent earlier treatment leads to any change in the natural history and outcome of the disease.” The U.S. Preventive Services Task Force agrees.

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