PNHP

Policy consequences of low growth in Medicare spending

Policy consequences of low growth in Medicare spending

Growth In Medicare Spending Per Beneficiary Continues To Hit Historic Lows

By Richard Kronick and Rosa Po
U.S. Department of Health and Human Services, January 7, 2013
Medicare spending per beneficiary grew just 0.4% per capita in fiscal year 2012, continuing a pattern of very low growth in 2010 and 2011. Together with historically low projections of per capita growth from both the Congressional Budget Office and the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary, these statistics show that the Affordable Care Act has helped to set Medicare on a more sustainable path to keep its commitment to seniors and persons with disabilities today and well into the future. The success in reducing the rate of spending growth has been achieved without any reduction in benefits for beneficiaries. To the contrary, Medicare beneficiaries have gained access to additional benefits, such as increased coverage of preventive services and lower cost-sharing for prescription drugs.
http://aspe.hhs.gov/health/reports/2013/medicarespendinggrowth/ib.cfm

At a time when politicians are ready to attack Medicare spending, this report on the projected slow growth in Medicare spending per beneficiary might seem to be useful in helping to keep the wolves away. But there are some very serious concerns behind these projections.
There has been some debate about whether the slowing is due to the recession and slow recovery, or if it is due to the implementation of some of the features of the Affordable Care Act, or if it simply due to changes in practice patterns related to evolving efforts of health care professionals to improve the practice of medicine. It is likely that all play some role.
Beyond dispute, however, is the fact that Medicare has been very effective in slowing the growth in spending though various forms of administered pricing, such as DRGs. The S&P Healthcare Economic Indices have shown that Medicare has been far more effective than the private commercial insurers in slowing the rate of growth in health care spending.
As this and other reports have shown, spending controls have not been at the cost of a reduction in benefits to Medicare beneficiaries; in fact benefits have expanded, though only modestly. Spending controls have been limited to slower payment growth for health care professionals and institutions. Although the Affordable Care Act has introduced measures to allegedly improve quality while controlling spending, the current efforts at implementation indicate that the emphasis is on spending restraint, with only token attention to quality measures – measures which are of dubious effectiveness anyway.
Thus there are two major fronts of attack over which we should be acutely concerned:
1) The  government, under the banner of the Affordable Care Act, will continue to selectively ratchet down growth in Medicare spending while largely leaving the private sector plans alone. The expanding differential between lower public payment through the Medicare and Medicaid programs and higher private payments through the private insurance plans will cause more health care providers to abandon the public programs, with a consequent threat of impaired access for the beneficiaries of the public programs. As long as private insurers are there to provide a relief valve, there is a very real risk that the public programs will be underfunded. If private plans were eliminated, as a single payer the government would be obligated to ensure the solvency of the health care delivery system.
2) The current political push for austerity measures has made these public programs vulnerable to the “we-have-a-spending-problem-not-revenue-problem” cranks that populate our nation’s capitol. There is a genuine fear that some of the critical thinkers negotiating with the cranks will plea pragmatism as they trade away important features of our social programs.
We need the opposite approach. We need to reinforce Medicare and then expand it to cover everyone. Complacency with the current politically-expedient implementation of Affordable Care Act will lead us further down the path of no return, that is unless we’re ready for a revolution.

U.S. Health in International Perspective: Shorter Lives, Poorer Health

U.S. Health in International Perspective: Shorter Lives, Poorer Health

Institute of Medicine, January 2013

The United States is among the wealthiest nations in the world, but it is far from the healthiest. Although Americans’ life expectancy and health have improved over the past century, these gains have lagged behind those of other high-income countries. This health disadvantage prevails even though the United states spends far more per person on health care than any other nation.

To gain a better understanding of this problem, the National Institutes of Health (NIH) asked the National Research Council and the Institute of Medicine to convene a panel of experts to investigate potential reasons for the U.S. health disadvantage and to assess larger implications. The panel’s findings are detailed in its report, U.S. Health in International Perspective: Shorter Lives, Poorer Health.

The panel was struck by the gravity of its findings. For many years, Americans have been dying at younger ages than people in almost all other high-income countries. This disadvantage has been getting worse for three decades, especially among women.

When compared with the average of peer countries, Americans as a group fare worse in at least nine health areas:

* infant mortality and low birth weight

* injuries and homicides

* adolescent pregnancy and sexually transmitted infections

* HIV and AIDS

* drug-related deaths

* obesity and diabetes

* heart disease

* chronic lung disease

* disability

Many of these conditions have a particularly profound effect on young people, reducing the odds that  Americans will live to age 50. And for those who reach age 50, these conditions contribute to poorer health and greater illness later in life.

The United States does enjoy a few health advantages when compared with peer countries, including lower cancer death rates and greater control of blood pressure and cholesterol levels. Americans who reach age 75 can expect to live longer than people in the peer countries. With these exceptions, however, other high-income countries outrank the United States on most measures.

Why are Americans so unhealthy?

The panel’s inquiry found multiple likely explanations for the U.S. health disadvantage:

* Health systems.  Unlike its peer countries, the United States has a relatively large uninsured population and more limited access to primary care. Americans are more likely to find their health care inaccessible or unaffordable and to report lapses in the quality and safety of care outside of hospitals.

* Health behaviors.  Although Americans are currently less likely to smoke and may drink alcohol less heavily than people in peer countries, they consume the most calories per person, have higher rates of drug abuse, are less likely to use seat belts, are involved in more traffic accidents that involve alcohol, and are more likely to use firearms in acts of violence.

* Social and economic conditions.  Although the income of Americans is higher on average than in other countries, the United States also has higher levels of poverty (especially child poverty) and income inequality and lower rates of social mobility. Other countries are outpacing the United States in the education of young people, which also affects health. And Americans benefit less from safety net programs that can buffer the negative health effects of poverty and other social disadvantages.

* Physical environments.  U.S. communities and the built environment are more likely than those in peer countries to be designed around automobiles, and this may discourage physical activity and contribute to obesity.

The tragedy is not that the United States is losing a contest with other countries, but that Americans are dying and suffering from illness and injury at rates that are demonstrably unnecessary. Superior health outcomes in other nations show that Americans can also enjoy better health.

http://sites.nationalacademies.org/xpedio/groups/dbassesite/documents/webpage/dbasse_080620.pdf

“U.S. Health in International Perspective: Shorter Lives, Poorer Health” – Full 405 page report can be downloaded for free at this link:
http://www.iom.edu/Reports/2013/US-Health-in-International-Perspective-Shorter-Lives-Poorer-Health.aspx

Comment:

By Don McCanne, M.D.

The United States is sick, literally and figuratively. We have the most expensive health care system, yet the worst health outcomes of the wealthier nations. The failures are not only with our health system but with much broader sociopolitical institutions.

In response to these glaring deficiencies, this NRC/IOM report places an emphasis on further research to better define the problem and identify interventions that would help. Research is fine, but we do not need to wait any longer when so many of the deficiencies our already in our face.

The brief paragraph above on health systems confirms the pressing need for an effective universal insurance system, along with an expansion of our primary care infrastructure. Enacting the PNHP single payer model would finally set us in the right direction toward a high-performance health care system.

The social and economic conditions, physical environments, and health behaviors demonstrate a crying need for much more effective sociopolitical public policies. Not only do we need a reinforcement of our public health system, we also need greater public action in education, community planning, and especially responsible government policies to correct the gut-wrenching social and economic injustices that permeate our society.

From the opponents of reform we continue to hear that we have the greatest health care system in the world and that we have the very best health outcomes. Download this highly credible report so that you will have it readily available to expose these liars for what they are. Also use it to educate politicians on the broad spectrum of urgent public policies that we so desperately need.

And while we’re at it, we need to fire the politicians who are promulgating these cruel lies.

State should go for expansion of Medicaid

By the H-T editorial board
The Herald-Times (Bloomington, Ind.), Jan. 10, 2013

Gov.-elect Mike Pence should support an expansion of Medicaid in Indiana. And while he’s at it, he should name Dr. Rob Stone of Bloomington his chief adviser on medical and health care issues.Dr. Rob Stone

Stone’s background includes working 28 years as an emergency room physician and nearly that long as an outspoken advocate for making sure access to health care is within reach of as many people as possible. He’s not a big fan of much of the Affordable Care Act because it doesn’t go far enough for him. He is a fan of the Medicaid expansion, though, because it would provide about 363,000 uninsured Hoosiers a way to afford necessary health care.

Medicaid, don’t forget, is the health care safety net for people with disabilities, the poor and the elderly. The most important reason to expand it is that more individuals who really need help will get help.

But that’s not the only reason. This would be good for the state for a lot of reasons.

As Stone said in a presentation this week, “People live sicker and die younger without insurance.” On the flip side, people who are healthier and — well, alive — have a much better chance at being productive and contributing to society.

And, he estimated, one life would be saved for every 1,000 newly insured people. In other words, 363 Hoosiers a year would not die if 363,000 additional Hoosiers can gain access to health care.

Cost is a main reason opponents cite when encouraging state leaders not to expand Medicaid. It would be an expensive program to expand.

But, Stone points out, the return of federal funds to state money would be at least $11 to $1. And the state money, Stone says — estimated at $50 million to $150 million — could come from a $121 million cigarette tax currently earmarked for the Healthy Indiana Plan, as well as $48 million in a high risk insurance pool. Neither program would be needed with the expansion of Medicaid, meaning state funds would simply be transferred from one use to another.

Meanwhile, the Medicaid reimbursement money would go into the state’s economy through doctors, nurses, hospitals and other health care-related jobs.

One more reason popped up last week that should help the state decide to take this deal from the federal government. A federal judge ruled that Indiana has been “deliberately indifferent” to mentally ill inmates in state prisons. It seems likely the state will need to spend more than the $100 million it spent in 2012 on inmate health care in reaction to the ruling. Many of those mentally ill prisoners could be covered by Medicaid if the program is expanded, negating the need to spend more state money in that area.

Stone calls the opportunity to expand Medicaid so more people are treated and federal funds come to Indiana instead of going elsewhere as “a no-brainer” and as grabbing “low-hanging fruit.” We agree with him, and suggest Gov.-elect Pence and the Republican majority in the General Assembly listen to him, too.

PNHP note: See also Dr. Stone’s opinion piece in the Jan. 3 edition of the Indianapolis Star on the issue of Medicaid expansion.

U.S. Health in International Perspective: Shorter Lives, Poorer Health

U.S. Health in International Perspective: Shorter Lives, Poorer Health

Institute of Medicine, January 2013
The United States is among the wealthiest nations in the world, but it is far from the healthiest. Although Americans’ life expectancy and health have improved over the past century, these gains have lagged behind those of other high-income countries. This health disadvantage prevails even though the United states spends far more per person on health care than any other nation.
To gain a better understanding of this problem, the National Institutes of Health (NIH) asked the National Research Council and the Institute of Medicine to convene a panel of experts to investigate potential reasons for the U.S. health disadvantage and to assess larger implications. The panel’s findings are detailed in its report, U.S. Health in International Perspective: Shorter Lives, Poorer Health.
The panel was struck by the gravity of its findings. For many years, Americans have been dying at younger ages than people in almost all other high-income countries. This disadvantage has been getting worse for three decades, especially among women.
When compared with the average of peer countries, Americans as a group fare worse in at least nine health areas:
* infant mortality and low birth weight
* injuries and homicides
* adolescent pregnancy and sexually transmitted infections
* HIV and AIDS
* drug-related deaths
* obesity and diabetes
* heart disease
* chronic lung disease
* disability
Many of these conditions have a particularly profound effect on young people, reducing the odds that  Americans will live to age 50. And for those who reach age 50, these conditions contribute to poorer health and greater illness later in life.
The United States does enjoy a few health advantages when compared with peer countries, including lower cancer death rates and greater control of blood pressure and cholesterol levels. Americans who reach age 75 can expect to live longer than people in the peer countries. With these exceptions, however, other high-income countries outrank the United States on most measures.
Why are Americans so unhealthy?
The panel’s inquiry found multiple likely explanations for the U.S. health disadvantage:
* Health systems.  Unlike its peer countries, the United States has a relatively large uninsured population and more limited access to primary care. Americans are more likely to find their health care inaccessible or unaffordable and to report lapses in the quality and safety of care outside of hospitals.
* Health behaviors.  Although Americans are currently less likely to smoke and may drink alcohol less heavily than people in peer countries, they consume the most calories per person, have higher rates of drug abuse, are less likely to use seat belts, are involved in more traffic accidents that involve alcohol, and are more likely to use firearms in acts of violence.
* Social and economic conditions.  Although the income of Americans is higher on average than in other countries, the United States also has higher levels of poverty (especially child poverty) and income inequality and lower rates of social mobility. Other countries are outpacing the United States in the education of young people, which also affects health. And Americans benefit less from safety net programs that can buffer the negative health effects of poverty and other social disadvantages.
* Physical environments.  U.S. communities and the built environment are more likely than those in peer countries to be designed around automobiles, and this may discourage physical activity and contribute to obesity.
The tragedy is not that the United States is losing a contest with other countries, but that Americans are dying and suffering from illness and injury at rates that are demonstrably unnecessary. Superior health outcomes in other nations show that Americans can also enjoy better health.
http://sites.nationalacademies.org/xpedio/groups/dbassesite/documents/we…
“U.S. Health in International Perspective: Shorter Lives, Poorer Health” – Full 405 page report can be downloaded for free at this link:
http://www.iom.edu/Reports/2013/US-Health-in-International-Perspective-S…

The United States is sick, literally and figuratively. We have the most expensive health care system, yet the worst health outcomes of the wealthier nations. The failures are not only with our health system but with much broader sociopolitical institutions.
In response to these glaring deficiencies, this NRC/IOM report places an emphasis on further research to better define the problem and identify interventions that would help. Research is fine, but we do not need to wait any longer when so many of the deficiencies our already in our face.
The brief paragraph above on health systems confirms the pressing need for an effective universal insurance system, along with an expansion of our primary care infrastructure. Enacting the PNHP single payer model would finally set us in the right direction toward a high-performance health care system.
The social and economic conditions, physical environments, and health behaviors demonstrate a crying need for much more effective sociopolitical public policies. Not only do we need a reinforcement of our public health system, we also need greater public action in education, community planning, and especially responsible government policies to correct the gut-wrenching social and economic injustices that permeate our society.
From the opponents of reform we continue to hear that we have the greatest health care system in the world and that we have the very best health outcomes. Download this highly credible report so that you will have it readily available to expose these liars for what they are. Also use it to educate politicians on the broad spectrum of urgent public policies that we so desperately need.
And while we’re at it, we need to fire the politicians who are promulgating these cruel lies.

Why not good health care for all?

By Philip A. Verhoef, M.D.
Chicago Sun-Times, Letters, Jan. 7, 2013

I am glad that Sen. Mark Kirk has made such a successful recovery from the devastating stroke he suffered a year ago, and even more thrilled that he will be “much more focused on Medicaid and what [his] fellow citizens face.” However, his experience highlights some of the flaws in our current health-care system, many of which are exacerbated by ObamaCare. First, there are multiple tiers of care in our health-care system, which may partly explain the observation that impoverished males have a life expectancy 14 years less than those of the upper socioeconomic strata; clearly, it’s hard to rise out of the lower class when one is constantly having to choose between putting food on the table or paying for health care. The ObamaCare solution is to require insurers to offer various levels of insurance that may only cover 60 percent of health care costs and carry ever-higher deductibles, thus shifting the costs of health care to the people who can least afford it and perpetuating our multitiered system.

Second, as noted by the Sun-Times on Jan. 2, Sen. Kirk “incurred major out-of-pocket expenses” even though he has, arguably, the best health care insurance in the country. This means that his Cadillac insurance still provides insufficient coverage. As he alludes to, Medicaid provides vastly inadequate support for stroke rehabilitation. Further, very few medical providers accept Medicaid patients for outpatient care. Part of the ObamaCare solution is to expand Medicaid eligibility to more people, while allowing states to opt out of administration of the Medicaid expansion. The end result is that more people will have Medicaid, and they will have to shoulder more out-of-pocket expenses, like Kirk.

Why not expand and improve the Medicare system and extend it to everyone? It could be paid for by redirecting the money that we already pay for private health insurance (which costs 10-fold more to administer than Medicare).

I hope that Sen. Kirk will consider this common-sense approach to health-care reform. I know that my patients and I would really appreciate it.

Dr. Philip A. Verhoef is a physician in the adult and pediatric intensive care units at the University of Chicago.

http://www.suntimes.com/opinions/letters/17436896-474/a-whiff-of-hypocrisy-at-the-bga.html

Health Care and Profits, a Poor Mix

By Eduardo Porter
The New York Times, Jan. 8, 2013

Thirty years ago, Bonnie Svarstad and Chester Bond of the School of Pharmacy at the University of Wisconsin-Madison discovered an interesting pattern in the use of sedatives at nursing homes in the south of the state.

Patients entering church-affiliated nonprofit homes were prescribed drugs roughly as often as those entering profit-making “proprietary” institutions. But patients in proprietary homes received, on average, more than four times the dose of patients at nonprofits.

Writing about his colleagues’ research in his 1988 book “The Nonprofit Economy,” the economist Burton Weisbrod provided a straightforward explanation: “differences in the pursuit of profit.” Sedatives are cheap, Mr. Weisbrod noted. “Less expensive than, say, giving special attention to more active patients who need to be kept busy.”

This behavior was hardly surprising. Hospitals run for profit are also less likely than nonprofit and government-run institutions to offer services like home health care and psychiatric emergency care, which are not as profitable as open-heart surgery.

A shareholder might even applaud the creativity with which profit-seeking institutions go about seeking profit. But the consequences of this pursuit might not be so great for other stakeholders in the system — patients, for instance. One study found that patients’ mortality rates spiked when nonprofit hospitals switched to become profit-making, and their staff levels declined.

These profit-maximizing tactics point to a troubling conflict of interest that goes beyond the private delivery of health care. They raise a broader, more important question: How much should we rely on the private sector to satisfy broad social needs?

From health to pensions to education, the United States relies on private enterprise more than pretty much every other advanced, industrial nation to provide essential social services. The government pays Medicare Advantage plans to deliver health care to aging Americans. It provides a tax break to encourage employers to cover workers under 65.

Businesses devote almost 6 percent of the nation’s economic output to pay for health insurance for their employees. This amounts to nine times similar private spending on health benefits across the Organization for Economic Cooperation and Development, on average. Private plans cover more than a third of pension benefits. The average for 30 countries in the O.E.C.D. is just over one-fifth.

We let the private sector handle tasks other countries would never dream of moving outside the government’s purview. Consider bail bondsmen and their rugged sidekicks, the bounty hunters.

American TV audiences may reminisce fondly about Lee Majors in “The Fall Guy” chasing bad guys in a souped-up GMC truck — a cheap way to get felons to court. People in most other nations see them as an undue commercial intrusion into the criminal justice system that discriminates against the poor.

Our reliance on private enterprise to provide the most essential services stems, in part, from a more narrow understanding of our collective responsibility to provide social goods. Private American health care has stood out for decades among industrial nations, where public universal coverage has long been considered a right of citizenship. But our faith in private solutions also draws on an ingrained belief that big government serves too many disparate objectives and must cater to too many conflicting interests to deliver services fairly and effectively.

Our trust appears undeserved, however. Our track record suggests that handing over responsibility for social goals to private enterprise is providing us with social goods of lower quality, distributed more inequitably and at a higher cost than if government delivered or paid for them directly.

The government’s most expensive housing support program — it will cost about $140 billion this year — is a tax break for individuals to buy homes on the private market.

According to the Tax Policy Center, this break will benefit only 20 percent of mostly well-to-do taxpayers, and most economists agree that it does nothing to further its purported goal of increasing homeownership. Tax breaks for private pensions also mostly benefit the wealthy. And 401(k) plans are riskier and costlier to administer than Social Security.

From the high administrative costs incurred by health insurers to screen out sick patients to the array of expensive treatments prescribed by doctors who earn more money for every treatment they provide, our private health care industry provides perhaps the clearest illustration of how the profit motive can send incentives astray.

By many objective measures, the mostly private American system delivers worse value for money than every other in the developed world. We spend nearly 18 percent of the nation’s economic output on health care and still manage to leave tens of millions of Americans without adequate access to care.

Britain gets universal coverage for 10 percent of gross domestic product. Germany and France for 12 percent. What’s more, our free market for health services produces no better health than the public health care systems in other advanced nations. On some measures — infant mortality, for instance — it does much worse.

In a way, private delivery of health care misleads Americans about the financial burdens they must bear to lead an adequate existence. If they were to consider the additional private spending on health care as a form of tax — an indispensable cost to live a healthy life — the nation’s tax bill would rise to about 31 percent from 25 percent of the nation’s G.D.P. — much closer to the 34 percent average across the O.E.C.D.

A quarter of a century ago, a belief swept across America that we could reduce the ballooning costs of the government’s health care entitlements just by handing over their management to the private sector. Private companies would have a strong incentive to identify and wipe out wasteful treatment. They could encourage healthy lifestyles among beneficiaries, lowering use of costly care. Competition for government contracts would keep the overall price down.

We now know this didn’t work as advertised. Competition wasn’t as robust as hoped. Health maintenance organizations didn’t keep costs in check, and they spent heavily on administration and screening to enroll only the healthiest, most profitable beneficiaries.

One study of Medicare spending found that the program saved no money by relying on H.M.O.’s. Another found that moving Medicaid recipients into H.M.O.’s increased the average cost per beneficiary by 12 percent with no improvement in the quality of care for the poor. Two years ago, President Obama’s health care law cut almost $150 billion from Medicare simply by reducing payments to private plans that provide similar care to plain vanilla Medicare at a higher cost.

Today, again, entitlements are at the center of the national debate. Our elected officials are consumed by slashing a budget deficit that is expected to balloon over coming decades. With both Democrats and Republicans unwilling to raise taxes on the middle class, the discussion is quickly boiling down to how deeply entitlements must be cut.

We may want to broaden the debate. The relevant question is how best we can serve our social needs at the lowest possible cost. One answer is that we have a lot of room to do better. Improving the delivery of social services like health care and pensions may be possible without increasing the burden on American families, simply by removing the profit motive from the equation.

http://www.nytimes.com/2013/01/09/business/health-care-and-pursuit-of-profit-make-a-poor-mix.html?ref=business&_r=0

Where Medicare Stands

A Discussion With Dr. Oliver Fein of Weill Cornell Medical College

By Bob Herman
Becker’s Hospital Review, Jan. 8, 2013

Outside of Social Security, no other domestic program has been scrutinized as much as Medicare as of late.

Medicare represents 21 cents for every dollar spent on healthcare in the United States, according to CMS, and it also represents 49 cents for every dollar received by hospitals.

Some lawmakers called for massive cuts to the program during the fiscal cliff showdown. Others argued cuts to Medicare would lead to an even bigger healthcare financial nightmare. Medicare will continue to be debated fiercely over the next two months as Congress attempts to find a way to avoid sequestration, or automatic spending cuts to domestic programs. If Congress cannot figure out a solution, Medicare providers stand to lose more than $11 billion this year alone under the sequestration plan.

For Oliver Fein, MD, Medicare and other public healthcare policies have been a major part of his life since he left Case Western Reserve University School of Medicine in 1967. Currently, Dr. Fein is a general internist at NewYork-Presbyterian Hospital in New York City, a professor of clinical medicine and public health at Weill Cornell Medical College and chair of the New York Metro Chapter of Physicians for a National Health Program.

Dr. Fein says he has always been interested in the delivery of healthcare to vulnerable populations, especially the poor and elderly. He spent his residency in public hospitals, and his clinical practice was based in academic medical centers where he could continue to see Medicaid and Medicare patients. When it comes to Medicare, Dr. Fein explains it is “not a perfect program,” but it will continue to be tremendously important for hospitals and physicians alike.

Here, he shares his thoughts on where Medicare stands today, if the program is really as insolvent, as some say it is, and what he would do if he helmed CMS.

Question: Medicare is, for all intents and purposes, one of the most important payers in the country. What are some of the fundamental problems with it, and what does it do well? Is it really as insolvent as some public policy leaders say it is?

Dr. Oliver Fein: Let’s start with what Medicare does well. [Medicare] is a situation where when you turn 65 and have worked 40 quarters, or 10 years, in this country, you’re eligible. The simple eligibility of Medicare is just wonderful, and I think people really appreciate that.

From a physician’s point of view, the sense I have is, there are some that believe Medicare doesn’t pay them enough. So, therefore, they don’t take Medicare patients. I think that’s been highly exaggerated. There was a study from the Archives of Internal Medicine in 2011 that argues, in fact, the number of physicians that accept Medicare is much larger than acknowledged in the anecdotal literature. That may change if this whole [sustainable growth rate] issue isn’t solved.

The other thing to say is many [physicians] who are in private practice have told me they like Medicare because they can count on getting the check each month. There’s no hassle of claims being denied that occurs with private health insurance. What has happened is most insurers are for-profit entities. Any way they can delay payment means they can make money on premiums they’ve collected. Well, since there is no for-profit motive in Medicare, claims denials are rare. I think overall, beneficiaries like Medicare, and it’s a program that physicians overwhelmingly think is an important program for them.

For hospitals, Medicare is kind of their intermediate payer. It may not be as good as contracts they’ve been able to negotiate with private insurers, but it’s better than contracts with Medicaid insurers. The result is even specialized places like Memorial Sloan-Kettering Cancer Center take Medicare whereas they may deny certain for-profit private insurers because they feel they don’t get adequate reimbursement from them.

In terms of Medicare’s solvency, Medicare’s trustees and most economists will say the money that has been collected from people’s payroll checks makes the program solvent through 2024. So what does that mean? The money is there to pay projected payouts that will be needed in those years for Part A. Some people are talking about Medicare going broke after that. It is perhaps that the monies collected won’t equal what’s paid out — but that assumes there’s no change in the payroll tax. Currently, [payroll tax contributions to Medicare] are 1.45 percent from you and 1.45 percent from your employer. Let’s increase that by a little bit to 1.5 or 1.55 percent of salary, and we could extend the life of this program on the Part A side to perhaps 2040 or 2050. I think that’s one dimension.

The other thing to realize is that on the Part B side, Medicare is a 25-75 program. The beneficiary, on average, contributes 25 percent of cost of the program, and the government takes the rest out of current tax revenues. Does that mean program is broke? Well, if we continue to have wars in Afghanistan and Iraq and have military costs that are so substantial, we’re not going to collect enough tax revenue to cover it. [However], if you just shrink [the military budget] a little bit, we’ll have plenty of money to cover Part B contributions.

Part C, or Medicare Advantage, is also designed in such a way where beneficiaries are able to elect a private health insurance company to mange their benefits. And when that happens, the doctor and the hospital are dealing with a private insurance company, not Medicare. What has been shown is private [Medicare Advantage] companies are getting 11 to 14 percent more money than if the beneficiary stayed in the public program. The program is designed to reimburse the private insurance companies more generously. They also risk select, and one of the classic ways they do that is by offering a free gym club membership, for example. So if we really paid private insurers less [Medicare] money, there would be more money in program, and again one wouldn’t be talking about us going broke.

Q: There’s been a consistent refrain in the hospital sector that raising the eligibility age of Medicare from 65 to 67 or higher would help control costs as well. What do you think would result from that plan?

OF: It will deal with the government costs. If you don’t cover a whole sector of the population, sure, Part A costs will be less, Part B costs will be less, Part C and D costs will be less. But it is enormously unfair, and the hospital sector will ultimately get very hurt by this. This works for people of upper incomes because many of them actually do work past age 67. It’s the laboring class — the coal miners, steelworkers, garbage collectors, people who have to do real, physical labor who frankly ought to retire at age 65 who are the ones really adversely affected by this.

If those older, low-income folks are laid off by their employers, they lose their insurance — and that will come back to slap hospitals in the face. When contrasted with 30-year-olds with no insurance, hospitals will find themselves swimming in a new form of debt.

Q: What about the inverse? What if Medicare’s age was lowered to add in younger, healthier people?

OF: That’s where we should be going, it seems to me. Incorporate younger people in Medicare, who will cost the program much less on a per capita basis. One could decide to cover children. Children are a great example. They require relatively cheap care even though they do have immunizations in the first year of life. But on a per capita basis, they are much cheaper. Let’s incorporate them in the Medicare program, and as they get older, keep them in the program.

Q: What about reduc
ing the number of health insurers? Would that make financial planning at hospitals, for example, easier?

OF: The studies we’ve looked at show that since administrative costs of multiple health insurers are on average 20 percent to the insurance company and up to 40 percent to the physician because they have to hire extra staff to deal with multiple insurers and challenge unjustly denied claims. [Physicians for a National Health Program] decided to compare Toronto General in single-payer Canada with Massachusetts General Hospital in Boston, since they are similarly sized. At Toronto General, there were three billers in the billing office; Massachusetts General had over 300.

Frankly, every single-payer bill that exists in Congress includes jobs retraining, so if we went to single-payer, there wouldn’t be this concern. We haven’t actually seen a good economic study of how many fewer employees you would need in the insurance sector. Some people have looked at the issue in terms of the amount of time a primary care physician has to spend dealing with prior approval, denial of claims, so on and so forth. Larry Casalino, MD, PhD [chief of the division of outcomes and effectiveness research at Weill Cornell Medical College], shows that in terms of income, practicing primary care physicians are probably spending an enormous amount of money having to deal with multiple insurers.

Q: If you were in charge of CMS, what would be some of your main initiatives?

OF: Initially, I would try to figure out a good strategy to reduce payments to the private health insurers who take Part C and see if we couldn’t get that down to a more reasonable amount of money. CMS doesn’t control the percentage of payroll tax, and CMS doesn’t control how to get more money into the system. All that it could control is how to spend less and do it efficiently.

Medicare’s deductible for Part A has become quite substantial. It’s now over $1,100. Part B’s deductible is $140. Part D’s is $335. These are major barriers to low-income patients’ access to care. I would like to see them reduced or eliminated. I also would like get rid of the doughnut hole, and the proposal in the ACA will eliminate it later in 2020.

I would propose a lot of things Don Berwick, MD, [former CMS administrator] was doing to boost quality and reduce cost, but they would not be adequate. For instance, penalties for readmissions — yeah sure. But hospitals are paid on a DRG basis, and physicians are paid on a fee-for-service basis. The physician has an incentive to keep patient in hospital longer, and the hospital has an incentive to get the patient out.

To the degree the physician has patients’ interest in mind, it may be good for physicians to resist the hospitals’ pressures to discharge early. I’m not sure I want to give physicians a financial incentive to do that, but it may make sense that the physician who is close to the patient feels this patient really can’t go home, is not medically stable, the home situation isn’t ideal to go to yet — I respect that. That’s important.

http://www.beckershospitalreview.com/racs-/-icd-9-/-icd-10/where-medicare-stands-a-discussion-with-dr-oliver-fein-of-weill-cornell-medical-college.html

Joshua Freeman on the shortage of rural family physicians

Retention of Rural Family Physicians After 20–25 Years: Outcomes of a Comprehensive Medical School Rural Program

By Howard K. Rabinowitz, MD, James J. Diamond, PhD, Fred W. Markham, MD and Abbie J. Santana, MSPH
Journal of the American Board of Family Medicine, January-February 2013 vol. 26 no. 124-27

“The shortage of primary care physicians in rural areas, especially family physicians, has been a serious problem for decades, with major implications in access to health care for a substantial proportion of the US population….Retention is a key component of the rural physician supply, in part because it has a multifold impact on the rural workforce; for example, one physician practicing in the same rural area during a 35-year career has a similar impact as 5 physicians who practice for an average duration of 7 years…”.

The authors describe the impact of the Physician Shortage Area Program (PSAP), a special program at the Jefferson Medical College of Pennsylvania that “…recruits and selects medical school applicants that have grown up or lived in a rural area or small town for a substantial portion of their life after college and who were committed to practicing family medicine in a similar area” and provides them with other experiences during medical school. “Of the 37 PSAP graduates [from 1978-86] who originally entered rural family medicine, 26 (70.3%) were still practicing family medicine in the same rural area in 2011 (including 5 in adjacent counties). Comparable data for non-PSAP graduates showed that 24 of 52 (46.2%; P = .02) were in the same rural area (including 5 in adjacent counties).”

These are really good results, demonstrating that the PSAP at Jefferson is effective in training students who not only enter rural practice but remain in it over time. And, they indicate, “PSAP outcomes are similar to those of the 5 other RPs with published outcomes.”

http://www.jabfm.org/content/26/1/24.full

And…

The Redistribution Of Graduate Medical Education Positions In 2005 Failed To Boost Primary Care Or Rural Training

By Candice Chen, Imam Xierali, Katie Piwnica-Worms, and Robert Phillips
Health Affairs, January 2013, 32(1):102-110

ABSTRACT Graduate medical education (GME), the system to train graduates of medical schools in their chosen specialties, costs the government nearly $13 billion annually, yet there is little accountability in the system for addressing critical physician shortages in specific specialties and geographic areas. Medicare provides the bulk of GME funds, and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 redistributed nearly 3,000 residency positions among the nation’s hospitals, largely in an effort to train more residents in primary care and in rural areas. However, when we analyzed the outcomes of this recent effort, we found that out of 304 hospitals receiving additional positions, only 12 were rural, and they received fewer than 3 percent of all positions redistributed. Although primary care training had net positive growth after redistribution, the relative growth of nonprimary care training was twice as large and diverted would-be primary care physicians to subspecialty training. Thus, the two legislative and regulatory priorities for the redistribution were not met. Future legislation should reevaluate the formulas that determine GME payments and potentially delink them from the hospital prospective payment system. Furthermore, better health care workforce data and analysis are needed to link GME payments to health care workforce needs…

http://content.healthaffairs.org/content/32/1/102.abstract

Note:  Today’s message on the shortage of rural family physicians was prepared by Joshua Freeman, MD, Professor and Chair of the Department of Family Medicine at the University of Kansas Medical Center. He also writes a highly commendable weekly blog on Medicine and Social Justice, accessible at: http://www.medicinesocialjustice.blogspot.com/

Comment:

By Joshua Freeman, MD

What is wrong with this picture? Taken together, these studies show us that despite the fact that we know what strategies work to increase the number of rural family physicians, they are not being truly embraced by policymakers at either the medical student or resident level. The PSAP and similar programs are effective, but are far too small. Twenty percent of Americans live in rural areas, but over the 9 year period studied in which 37 PSAP graduates entered rural practice, Jefferson Medical College, which has an enrollment of over 250 students a year, thus graduated over 2200 students. This is at a school with one of the nation’s most successful programs; at many schools it is much worse. At the graduate training (residency) level, only 3% of redistributed positions went to rural training, despite that being a primary intent of the policy.

The problem is that there are powerful forces whose interests conflict with these goals. Medical schools and their faculties are often more interested in replicating themselves by recruiting students with high grades who will enter medical subspecialties or research than they are in recruiting students who will meet the most urgent healthcare needs of our nation. The same motivation affects graduate medical education, where most training positions are not in primary care, and the vast majority are in urban centers. In addition, hospitals, which are the main sponsors of residency training, tend to be more focused on their own interests than the community’s. They therefore prefer residents and fellows in specialties that can make them more money or lower their costs rather than those training to be rural primary care providers.

At the medical student level, programs like PSAP need to be dramatically increased, even if taking more students committed to rural practice decreases the number admitted who have more “traditional” strengths. At the residency level, loopholes must be closed so that new residency positions intended to create more rural primary care doctors are not instead used for other, more popular or more financially desirable, specialties. To the extent that medical schools and hospitals can “game” the system, they will, so policymakers must recognize these tendencies and explicitly block them.

Joshua Freeman on the shortage of rural family physicians

Retention of Rural Family Physicians After 20–25 Years: Outcomes of a Comprehensive Medical School Rural Program

By Howard K. Rabinowitz, MD, James J. Diamond, PhD, Fred W. Markham, MD and Abbie J. Santana, MSPH
Journal of the American Board of Family Medicine, January-February 2013 vol. 26 no. 124-27
“The shortage of primary care physicians in rural areas, especially family physicians, has been a serious problem for decades, with major implications in access to health care for a substantial proportion of the US population….Retention is a key component of the rural physician supply, in part because it has a multifold impact on the rural workforce; for example, one physician practicing in the same rural area during a 35-year career has a similar impact as 5 physicians who practice for an average duration of 7 years…”.
The authors describe the impact of the Physician Shortage Area Program (PSAP), a special program at the Jefferson Medical College of Pennsylvania that “…recruits and selects medical school applicants that have grown up or lived in a rural area or small town for a substantial portion of their life after college and who were committed to practicing family medicine in a similar area” and provides them with other experiences during medical school. “Of the 37 PSAP graduates [from 1978-86] who originally entered rural family medicine, 26 (70.3%) were still practicing family medicine in the same rural area in 2011 (including 5 in adjacent counties). Comparable data for non-PSAP graduates showed that 24 of 52 (46.2%; P = .02) were in the same rural area (including 5 in adjacent counties).”
These are really good results, demonstrating that the PSAP at Jefferson is effective in training students who not only enter rural practice but remain in it over time. And, they indicate, “PSAP outcomes are similar to those of the 5 other RPs with published outcomes.”
http://www.jabfm.org/content/26/1/24.full
And…

The Redistribution Of Graduate Medical Education Positions In 2005 Failed To Boost Primary Care Or Rural Training

By Candice Chen, Imam Xierali, Katie Piwnica-Worms, and Robert Phillips
Health Affairs, January 2013, 32(1):102-110
ABSTRACT Graduate medical education (GME), the system to train graduates of medical schools in their chosen specialties, costs the government nearly $13 billion annually, yet there is little accountability in the system for addressing critical physician shortages in specific specialties and geographic areas. Medicare provides the bulk of GME funds, and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 redistributed nearly 3,000 residency positions among the nation’s hospitals, largely in an effort to train more residents in primary care and in rural areas. However, when we analyzed the outcomes of this recent effort, we found that out of 304 hospitals receiving additional positions, only 12 were rural, and they received fewer than 3 percent of all positions redistributed. Although primary care training had net positive growth after redistribution, the relative growth of nonprimary care training was twice as large and diverted would-be primary care physicians to subspecialty training. Thus, the two legislative and regulatory priorities for the redistribution were not met. Future legislation should reevaluate the formulas that determine GME payments and potentially delink them from the hospital prospective payment system. Furthermore, better health care workforce data and analysis are needed to link GME payments to health care workforce needs…
http://content.healthaffairs.org/content/32/1/102.abstract

Note:  Today’s message on the shortage of rural family physicians was prepared by Joshua Freeman, MD, Professor and Chair of the Department of Family Medicine at the University of Kansas Medical Center. He also writes a highly commendable weekly blog on Medicine and Social Justice, accessible at: http://www.medicinesocialjustice.blogspot.com/
What is wrong with this picture? Taken together, these studies show us that despite the fact that we know what strategies work to increase the number of rural family physicians, they are not being truly embraced by policymakers at either the medical student or resident level. The PSAP and similar programs are effective, but are far too small. Twenty percent of Americans live in rural areas, but over the 9 year period studied in which 37 PSAP graduates entered rural practice, Jefferson Medical College, which has an enrollment of over 250 students a year, thus graduated over 2200 students. This is at a school with one of the nation’s most successful programs; at many schools it is much worse. At the graduate training (residency) level, only 3% of redistributed positions went to rural training, despite that being a primary intent of the policy.
The problem is that there are powerful forces whose interests conflict with these goals. Medical schools and their faculties are often more interested in replicating themselves by recruiting students with high grades who will enter medical subspecialties or research than they are in recruiting students who will meet the most urgent healthcare needs of our nation. The same motivation affects graduate medical education, where most training positions are not in primary care, and the vast majority are in urban centers. In addition, hospitals, which are the main sponsors of residency training, tend to be more focused on their own interests than the community’s. They therefore prefer residents and fellows in specialties that can make them more money or lower their costs rather than those training to be rural primary care providers.
At the medical student level, programs like PSAP need to be dramatically increased, even if taking more students committed to rural practice decreases the number admitted who have more “traditional” strengths. At the residency level, loopholes must be closed so that new residency positions intended to create more rural primary care doctors are not instead used for other, more popular or more financially desirable, specialties. To the extent that medical schools and hospitals can “game” the system, they will, so policymakers must recognize these tendencies and explicitly block them.

Idaho Gov. Otter's health care solution for the poor

Idaho governor: Eliminate personal property tax

By The Associated Press
The Examiner, January 7, 2013

(Idaho Gov. C.L. “Butch”) Otter is… not immediately endorsing the expansion of Idaho’s Medicaid coverage to include more than 100,000 additional low-income residents whose bills would largely be paid for with funding from Washington.

Instead, Otter now plans to spend the next year studying how Idaho’s federal-state funded health care system for the poor can be revamped to make it less focused on paying fees for services and more on requiring Medicaid beneficiaries to take more responsibility for their health.

http://washingtonexaminer.com/idaho-governor-eliminate-personal-property-tax/article/feed/2061378#.UOxQ6RwZf58

Comment:

By Don McCanne, MD

Wow! What a great idea! Instead of paying for essential health care services for Medicaid patients, let’s make those people “take more responsibility for their health.” We could expand the same concept to everyone, including Gov. Otter, and then our health care spending problem would be solved.

Please excuse the abject frivolity of this comment, but what I really want to know is, what has happened to compassion in America?

Idaho Gov. Otter's health care solution for the poor

Idaho governor: Eliminate personal property tax

By The Associated Press
The Examiner, January 7, 2013
(Idaho Gov. C.L. “Butch”) Otter is… not immediately endorsing the expansion of Idaho’s Medicaid coverage to include more than 100,000 additional low-income residents whose bills would largely be paid for with funding from Washington.
Instead, Otter now plans to spend the next year studying how Idaho’s federal-state funded health care system for the poor can be revamped to make it less focused on paying fees for services and more on requiring Medicaid beneficiaries to take more responsibility for their health.
http://washingtonexaminer.com/idaho-governor-eliminate-personal-property…

Wow! What a great idea! Instead of paying for essential health care services for Medicaid patients, let’s make those people “take more responsibility for their health.” We could expand the same concept to everyone, including Gov. Otter, and then our health care spending problem would be solved.
Please excuse the abject frivolity of this comment, but what I really want to know is, what has happened to compassion in America?

Growth of national health expenditures, 2011

National Health Spending In 2011: Overall Growth Remains Low, But Some Payers And Services Show Signs Of Acceleration

By Micah Hartman, Anne B. Martin, Joseph Benson, Aaron Catlin, the National Health Expenditure Accounts Team
Health Affairs, January 2013

Abstract

In 2011 US health care spending grew 3.9 percent to reach $2.7 trillion, marking the third consecutive year of relatively slow growth. Growth in national health spending closely tracked growth in nominal gross domestic product (GDP) in 2010 and 2011, and health spending as a share of GDP remained stable from 2009 through 2011, at 17.9 percent. Even as growth in spending at the national level has remained stable, personal health care spending growth accelerated in 2011 (from 3.7 percent to 4.1 percent), in part because of faster growth in spending for prescription drugs and physician and clinical services. There were also divergent trends in spending growth in 2011 depending on the payment source: Medicaid spending growth slowed, while growth in Medicare, private health insurance, and out-of-pocket spending accelerated. Overall, there was relatively slow growth in incomes, jobs, and GDP in 2011, which raises questions about whether US health care spending will rebound over the next few years as it typically has after past economic downturns.

Out-Of-Pocket Spending

Faster growth in 2011 reflects higher cost sharing for group health insurance plans and increased enrollment in consumer-directed health plans that have higher deductibles, copayments, or both. Additionally, increases in the number of uninsured people over the past few years had resulted in more direct out-of-pocket spending than might otherwise have been the case.

Medicaid

Slower growth in Medicaid spending reflected states’ efforts to control expenditure growth as the enhanced federal matching rates expired and state revenues continued to increase at a slow rate. With fewer federal matching dollars and continued pressure on their budgets, some states implemented cost-control measures that included provider reimbursement reductions, eligibility restrictions, benefit reductions, and increased cost sharing.

Medicare

Medicare spending for physicians’ services also accelerated in 2011, increasing 7.6 percent compared to 3.2 percent growth in 2010, even as the increase in physicians’ fees was lower in 2011. Faster fee-for-service spending growth for physician services, therefore, is attributable to a rebound in the volume and intensity of services after unusually slow growth in 2009 and 2010.

Conclusion

In 2011 national health spending increased 3.9 percent—the same rate of growth experienced in 2009 and 2010. The recent recession had an immediate and noticeable effect on the health sector because of high unemployment, loss of private health insurance coverage, and a reduction in the resources available to pay for health care. All of these factors contributed to historically low growth in aggregate health spending during 2009–11.

In 2011, however, there were some signs of change, evident in faster growth in nonprice factors such as the use and intensity of health care goods and services. Additionally, insurance coverage expanded in 2011 for dependents under age twenty-six, and overall private health insurance coverage did not decline as had been experienced in the prior three years.

Nonetheless, economic, income, and job growth in 2011 was modest and less than might normally be expected during an economic recovery. This fact raises questions about whether the near future will hold the type of rebound in health care spending typically seen a few years after a downturn. Data for the years 2012 and 2013 will provide important indications of the state of the US health system as the major insurance expansions associated with the Affordable Care Act grow nearer on the horizon.

http://content.healthaffairs.org/content/32/1/87.abstract

Comment:

By Don McCanne, MD 

National Health Expenditures (NHE), 2011

$2,700.7 – NHE, billions

17.9 – NHE as percent of GDP

$8,680 – NHE per capita

In 2011, health care costs grew at the same rate as the growth in the gross domestic product (GDP). Thus the recent severe recession and slow recovery, plus the initial phase of implementation of the Affordable Care Act, have not had a major impact on the growth of health care spending.

At a time when Medicare spending is under close scrutiny, especially for potential opportunities to reduce the federal deficit, the fact that the volume and intensity of services have increased disproportionately warrants scrutiny. Physician behavior may drive reforms that could have other consequences, favorable, or more likely unfavorable.

Shifts in Medicaid spending should raise red flags. More of the costs are being shifted to states at a time that they are facing budget crises. States are responding with measures such as provider reimbursement reductions, eligibility restrictions, benefit reductions, and increased cost sharing. These changes can result in greater impairment of access just at a time when massive enrollment increases are anticipated. This can have very serious consequences for a welfare program that is already critically underfunded.

Out-of-pocket spending is increasing, especially due to an increase in enrollment in consumer-directed health plans with high deductibles – a market strategy to reduce health care spending by erecting financial barriers to care.

Although reducing the increase in health expenditures down to the rate of increase in the GDP sounds like good news, the trends behind the numbers should have us all deeply concerned.

Need I say, a single payer…