Medicare and Medicaid
"He Said WHAT?"
Published July 17, 2009 @ 10:07AM PT
Yesterday was a dizzying day in health care. Mark-ups took place in each of the three House committees. Obama was on the road yesterday and worked health care into every speech he gave. And, of course, the opposition is in full “pull out all the stops” mode, throwing everything they can out there. We’re told that health care reform will kill jobs, kill people’s financial security, just kill people in general (which is kind of funny because out dysfunctional system is already killing jobs – particularly small business -- killing people’s financial security and, yes, killing those who don’t get the care they need when they need it.)
What I’m trying to say is my inbox is overflowing with questions.
By far, the number one question is about Doug Elmendorf. This is a surprise because, until yesterday, not many people knew who Doug Elmendorf was (he’s director of the Congressional Budget Office). But soon the press wires and the Internet were ringing out with doom and gloom stories containing scary headlines like, “Congress's Chief Fiscal Watchdog Warns of Overhaul's Cost; Ammunition for Critics.” And yes, people flooded my inbox asking if the CBO Director doesn’t think the legislation will control costs, then what are we doing?
I won’t list out Elmendorf’s comments at the Senate Budget Committee hearing because that’s been reported by everyone and their Aunt Suzie. Sen. Conrad meant to put him on the spot, and he did. But absolutely no one is reporting on his follow-up appointment at House Ways and Means, which greatly clarified what he meant to say:
“This legislation, like legislation being considered on the Senate side, adds substantially to federal health spending through the subsidies and expansion of Medicaid that would broaden health insurance coverage. I’ve been very clear about that. That amount of money is very difficult to offset. That was the basis of my statement, that on balance, this legislation that’s being considered looks to us at this point to be raising federal health spending. That’s not contradicted my other statement that there are provisions of this leg that are pushing on the levers in Medicare that experts think would over time reduce Medicare spending.”
For anyone who’s been following the health care debate, the simple truth is that it’s easy to measure how much expanded Medicaid and subsidies for insurance cost. It’s very hard to project how effective savings will be in the health care system from things like primary care, prevention, wellness, chronic disease management, etc. We know these things will save us money by looking at where they’ve been implemented here in the U.S. and how much they save money abroad. But how much money? And, further, how much of that will actually reduce Medicare spending?
As usual, Igor Volsky delivers a killer post on this topic: “For his part, Elmendorf, is isolating the ledger of the federal government from the context of the entire system. In other words, since many of the savings from reform won’t be reflected in the federal budget, Elmendorf does not consider them.” This is a problem we’d face calculating the savings to the federal government for nearly any health care plan you can think of, from single-payer to the Patient Choice Act. The cost outlays are certain. The return on investment is not, particularly in a 10 year window. Unless we're going to pay for reform by setting low rates or cutting reimbursements, something other countries do but which we likely do not have the stomach for, the CBO will have the same problem.
Elmendorf again:
“The coverage proposals in this legislation would expand federal spending on health care to a significant degree. And in our analysis so far, we don’t see other provisions in this legislation reducing federal health spending by a corresponding degree. That’s a different question than whether there are efforts, as you said, in this legislation, to change Medicare payment policy in a way that would over time reduce fed health spending relative to that part, relative to what would otherwise occur. So there are policies in this legislation about Accountable Care Organizations, about readmissions, about bundling, about rewarding primary care physicians, and so on, that cover a range of the areas that experts think should be investigated.”
Of course, it’s hard to write a sensational headline like, “CBO Chief Says Health Care Bill Stinks” based on the above nuanced talk of investigating a range of cost-saving options, which is probably why you haven’t heard of it.
You’re hearing the conventional thinking in the echo chamber calling this a body blow to reform efforts. But let’s also not forget that House Ways and Means passed HR 3200 out of committee last night and House Education and Labor followed suit this morning. 3 out of 5 committees with jurisdiction on health care have passed their bills out of committee. Just one fact you’re not likely to get from the Associated Press or the Wall Street Journal.
(Photo credit: EconomistMom.com, whose post is also excellent.)
Learning from the Innovations of Medicaid (Yes, Medicaid!)
Published July 09, 2009 @ 07:18PM PT
Medicare has a golden reputation for security and stability, particularly as you inch closer to 65. It’s not by accident that the candidates for president described their public health insurance option as being “similar to Medicare.” By contrast, Medicaid has no such glister in the popular imagination. People generally hear of Medicaid in terms of “Medicaid cuts,” particularly in this economic climate, or think of the stigma reinforced by the various hoops required to prove your eligibility for Medicaid. But cutting Medicaid and making it harder for people to get in it aren’t the only way to save costs. You can also make the system better.
The New America Foundation blog has a follow-up on the North Carolina Medicaid Medical Home model. We’ve talked before about the medical home model – a way of arranging the delivery of health care in a coordinated fashion, with one point-person, be it a primary care provider or social worker, who is tasked with making sure all of a patient’s doctors and caregivers are on the same page. That same point-person is also in charge of instructing the patients on caring for themselves, as well as giving helpful reminders and follow-ups. Medicare has experimented with the medical home, and is set to run a number of additional pilot programs since it's learned that the model saves money. Healthy San Francisco uses this model for its citywide universal coverage program, and has the lowest cost per person of any health delivery system in California – yes, even Kaiser. The Sustinet universal coverage plan in Connecticut, if it’s ever implemented, would do the same. Even private insurance has dabbled in the medical home – if a major customer holds a gun to their head.
You can add North Carolina Medicaid Medical Home to the list of success stories. In one year, it saved an estimated $244 million in Medicaid costs. The model is based on the same sense of community and teamwork we’ve seen in other medical homes, with a $3 per patient per month capitated payment on top of normal compensation rates that’s purely to pay for coordination tasks. The staff involved are a primary care physician who has primary responsibility for the patient and is always available, plus a social worker to particularly focus on patients with chronic diseases. The final component is data collection and strict adherence to best practices – you know, the stuff conservatives say will inevitably lead to a Soviet-style rationing. In practice, it’s led to much better health outcomes for patients with asthma, diabetes, or congestive heart disease, to say nothing of decreased hospitalization and ER benefits.
Let’s push pause a second – this means if you’re on Medicaid in North Carolina, you’re getting some of the best, coordinated care in the country. And it actually costs less than the private managed care plans that over 60% of Medicaid patients receive coverage through.
Drew Altman from the Kaiser Foundation hammers home the point that “Medicaid, often characterized in public debate like other public programs as lagging behind the private sector in its ability to innovate, can be a leader in demonstrating how to improve care and lower costs through delivery system changes.” If we’re serious about reforming not just how health care is paid but how it’s received in order to truly improve quality, we’ve got a lot to learn from Medicaid.
It’s a shame no one seems to ever hear about it.
(Photo credit: J. Stephen Conn on Flickr.)
How Impressed Should We Be with the Hospital Deal?
Published July 08, 2009 @ 07:06AM PT
In what has been the world’s worst secret for the past two days, Vice President Biden will be announcing a deal with the American Hospital Association, Catholic Health Association and the Federation of American Hospitals. The tradeoff: $155 billion in cuts to hospitals in Medicare and Medicaid for a more favorable timeline for when those cuts take place than what was originally pitched by the president. This comes on the heels of the deal with Big Pharma to close the doughnut hole, and the NY Times teases this morning that a deal with various doctors groups may be next on the horizon. The symbolic effect of these deals is perfectly obvious. As Rahm Emmanuel said, “The very groups we have been talking to have been the most vocal opponents of health care reform; they are now becoming the vocal proponents for health care reform.”
But symbolism aside, how impressed should we be?
The proof will be in the pudding when Biden announces the terms today, but on first glance, pretty impressed. Big Pharma’s deal was to spend $80 billion per year to partially close the doughnut hole in Medicare Part D, but it’s unclear how this helps fund the non-Medicare push for universal health care since it’s mainly defraying costs that were paid by individuals, not the government. In contrast, this deal with hospitals, if it’s as good as advertised, directly supports the financing of health care.
President Obama had specifically targeted some cuts to Medicare reimbursements to hospitals as part of his 2/3 savings, 1/3 new revenue mix for funding the health care reform legislation being proposed in Congress. Like his proposal to limit charitable deductions for those making more than $250,000 a year, it’s a good idea. But also like that proposal, Congress wasn’t falling over themselves to adopt it. The why, was obvious – hospitals were going to hate it. Only now they don’t.
Instead of $200 billion over 10 years, these hospitals are agreeing to $155 billion or so. It’s also on a timeframe favorable to them. One of the particular cuts was what’s called the “Disproportionate Share” payments – money hospitals get when they provide a disproportionate amount of uncompensated care to the uninsured. In theory, if we get to 95%, 97% or 100% insured in this country, we should pay less for that than in our current state of 84% (or less) insured. Of course, there were problems – although Obama’s original proposal would have phased in these cuts over a number of years, that timeline always felt artificial. It also presumes that those now with insurance will be less expensive to treat because they’ll start receiving regular primary care, paid for at good compensation rates, rather than receiving expensive emergency care that’s uncompensated. But it will take years for those savings to kick in. Probably the biggest concession the hospitals got from playing ball is the recognition that these cuts will be added slowly, and only “after a significant number of people have enrolled in the new insurance programs.” They also got a pledge that the public health insurance option won’t pay straight-up Medicare reimbursement rates – a pledge that effectively cost the Administration nothing, as none of the plans on the table for the public plan would have done that.
Think of this more as a non-aggression pact. At the end of the day, the Obama Administration gets most of the cuts they wanted and pledge not to more aggressively pursue them. The hospitals (who don’t represent all hospitals, but are a sizeable chunk of the industry, taken together) pledge not to fight them. Those savings go right into paying for the expansion of health care programs without a gun-shy Congress reluctant to take on an entrenched special interest.
It’s only a fraction of the money we need, but it’s still pretty impressive.
Medicare Payments: A Second Front on Health Reform
Published July 05, 2009 @ 02:01PM PT
The health care reform bills in Congress aren’t the only game in town. The Wall Street Journal reported on Thursday that payment reform in Medicare is also underway, through the Centers for Medicare and Medicaid Services, the agency that sets rates for Medicare Physician Fee Schedule. Primary care reimbursements will go up – a step long overdue. Given the fact that Medicare is the Big Dog of payors, and any reforms they adapt tend to get quickly implemented by private insurance, there’s hope that primary care will soon be better compensated across the board. But it will do so by reducing the total reimbursements for some specialties. This could be a positive step for medicine, or it could unleash a flurry of lobbying, hand wringing and destructive rhetoric. CMS may be opening a second front on the fight for health reform.
The details are not for the technically squeamish. CMS sets the payment rates for over 7,000 services and procedures, so tracking who is likely to get paid what is beyond confusing. It’s not like the release comes out and says, “We expect radiologists to get a 10% pay cut.” I’m relying heavily on the analysis of blogger and ER attending Shadowfax to help me make sense of it all. The short version is that some of the most lucrative scans, tests and consultations are being reduced in rate to something closer to what a primary care doctor would get charged for a similar consultation. As you can imagine, this hits those specialists who utilize scanning technology the most. Shadowfax explains:
Hardest hit among specialists are Radiation Oncology, Nuclear Medicine, Interventional Radiology, Cardiology, and Radiology, all of which see >10% decreases in direct compensation. This may in fact be understating the impact, in that the compensation will also be cut for certain diagnostic procedures such as echocardiography (-42%), coronary angiography (-24%), as well as the payments for CT, MRI and PET scans, and radiologists often (though certainly not always) own the equipment being used to perform the scans.
The cuts aren’t coming willy-nilly. Rather one of the arguments for limiting these payments is based on the cost of keeping up the equipment and how often it’s in use. The old payment scale presumed many of these scanners are only in use 50% of the time, so they should be compensated higher in order to break even. The reality is many of them are in use 90% of the time, and have become cash cows for providers and hospitals, leading to a perverse incentive to order still more tests and procedures, often “just in case.” Whether the decision is conscious or unconscious, the fact that such procedures are so lucrative unquestionably leads to overtreatment, and increased health care costs that don’t lead to better health.
CBO-KAY! Senate HELP Bill Rebounds
Published July 01, 2009 @ 10:35PM PT
Republicans have made hay for the past few weeks on how Ted Kennedy’s bill cost too much ($1 trillion dollars) and covered too few (only an additional 16 million). Of course, that score was on a partial bill, one that the Congressional Budget Office itself claimed “[does] not represent a formal or complete cost estimate for the draft legislation” (italics theirs.) It also lacked the details on the individual mandate, the employer “pay or play” mandate, and the public health insurance option. But Kennedy and Chris Dodd have kept at it, undeterred from the catcalls, and have finally delivered the goods. According to Jon Cohn on The Treatment, the new, full bill is in.
The results? A price tag of $600 billion over ten years (chew on that, Senate Finance Committee!) and coverage for an estimated 97% of the uninsured.
Imagine that – you actually include shared responsibility in an individual mandate and an employer mandate, new revenue, a robust public option competing on cost and generous expansions of public coverage through Medicaid, and the damn thing works.
First of all, this kills the sticker shock stories, at least for a few days. Second, it restores the notion that you can have health care reform without some version of pay or play or the public plan, but it’s cheaper to include them, no matter how politically problematic. Third, it shows the Senate Finance Committee’s reaction to the initial incomplete estimate was, to be blunt, wrong. They immediately began to cut subsidies and then cut them some more. But if I’m reading this correctly, the HELP bill hasn’t cut any subsidies – they’re still funded on a sliding scale at up to 400% of the Federal Poverty Line. The cost of the bill is down anyway. This is also good news for the House draft bill’s ultimate score, since the two bills have much in common.
The most intriguing news of all: according to Jon’s analysis, this CBO score doesn’t take into account any of the Obama Administration’s proposals for cost-savings in Medicare or new revenue – meaning we already have concrete proposals on the table from the White House to pay for nearly the whole thing, presuming that Medicaid expansion (which for jurisdiction reasons cannot be in this bill) costs an additional $400-$600 billion.
I’ll post a link to the full bill as soon as someone uploads it (updated -- see below). From my perusal and first reaction, these revisions make the bill somewhat less generous than the first released “principles” document (which is looking more and more like it was a trial balloon). The subsidies up to 500% of poverty are out, as is the public plan that would force providers to participate if they accepted Medicare and charge them 110% Medicare rates. But for all that, this is a strong bill which covers most of the bases of the common blueprint that most of the 2008 presidential candidates laid out.
Filling in the Doughnut Hole in Medicare
Published June 22, 2009 @ 04:06PM PT
Today an article in the Washington Post proclaimed that a new voluntary agreement with Big Pharma for $80 billion a year in discounts would provide "a bit of cash for President Obama's expensive and ambitious attempt to give health coverage to every American." That's a bit off the mark - this money mainly goes to bail out the "doughnut hole" in Medicare Part D. This may not help get comprehensive health care reform passed, but it's a huge help for Medicare patients across the country.
Of all the quirks of Medicare Part D, the "doughnut hole" seems the most arbitrary and the most cruel. Beneficiaries are fully covered for the first $2,700 of their prescription drugs per year, but then the coverage abruptly cuts out. Once they get to just north of $6,154, they're considered to be in need of catastrophic coverage, and Medicare kicks back in to cover everything else above that dollar value. The original theory would be that some cost-sharing would discourage the use of unnecessary drugs, keeping costs down. Interesting idea. But what it's mainly done is throw about 25% of Medicare beneficiaries into an awkward coverage gap where they can pay as much as $3,400 out of pocket on necessary prescription drugs per year. Some can afford that, some can only respond to having to pay for expensive drugs out of pocket by, well, not taking the drugs for the rest of the year, or rationing their pills by cutting their doctor-prescribed dosage into halves, thirds, or quarters.
That's right - the dreaded "r" word is alive and well and provided by the private health insurance plans that make up Medicare Part D.
Although it's been a problem since inception, and far more wide-spread than anticipated, solving it has been a pickle. The doughnut hole was always a bow to the political realities of getting an expensive entitlement passed with a conservative Congress and putatively conservative President. They could have forced participating plans to negotiate for the best rates, but the government waived that right. They could have focused on generics, or the reimportation of drugs from Canada, but Medicare Part D was forbidden from doing that as well. And spending still more on the program was out of the question. So the people forces to take the hit were senior citizens. Even with the change in party in both Congress and the White House, the pharma lobbyists had too much at stake to allow negotiation or reimportation, and there were and are too many political problems with the government spending more money to fill the hole.
Enter today's arrangement - whereby Big Pharma has agreed to offer discounts up to $80 billion total so that those caught in the doughnut hole will only pay half of their prescription drug costs while in it. This is a big deal to seniors who are stuck in the hole. It's a big deal for President Obama, who at the announcement pointed out that he and Sen. Chris Dodd - standing behind the rostrum - had similar experiences on the presidential campaign trail of urgent requests from seniors in real need. It's also a big deal for PhRMA, who gets to burnish its pro-reform credentials at fairly minimal cost - Dean Baker calculates this commitment is about 2% of what the pharmaceutical company makes off of Medicare Part D.
Don't expect this to translate into savings for the larger health care reform effort, or to necessarily mean Big Pharma will go any easier if health care reform bites into their bottom line through negotiated drug prices for a public plan, or more investment in comparative effectiveness research that asks "Why am I paying for drug A at $15 a pill, when drug B is roughly as effective at $0.15 a pill?" But do expect this to make a very real difference for those who are currently crunched under the arbitrary and unfair whims of our health care system.
(Photo credit: MaranzaMax on Flickr.)
MedPAC Provides Solutions, Congress Looks the Other Way
Published June 21, 2009 @ 10:07PM PT
In President Obama’s letter to the Senate, he expressed support for expressed support for making the recommendations of the Medicare Payment Advisory Committee (MedPAC) more than easy-to-ignore suggestions. As such, it’s worth looking at their latest report (issued last week) and imagining what could be if Congress were required to vote on the whole package. What would happen this year if MedPAC ruled the world?
Right off the bat, they once again recommend that Medicare Advantage plans be capped at 100% the payment for a normal Medicare recipient – an area of fat (Medicare Advantage averages 114% per enrollee without producing better health outcomes) that has also been targeted by the White House and, in theory, Congress for years, although no one’s made that cut happen yet.
They encourage a rethinking of residency programs. Currently, the overwhelming majority of residencies for newly-graduated physicians are done in a hospital inpatient and outpatient environment. They’re great for teaching those skills, but a lot has been left out of the equation – skills like complex coordinated care where doctors work as part of a multi-specialty team, or learning the cost-effectiveness of procedures as well as the raw skills to execute them, or seeing what patient care is like in non-hospital, community settings. Unremarkably, the areas that prove the hardest to change in Medicare and where some physicians offer resistance are precisely in these areas. Learning the skills in residency, the theory goes, will make physicians more willing to try pilot programs that improve efficiency and lower costs.
They also heavily target is physician self-referral for imaging services. The report recognizes that there would be good reasons why a physician or a practice would have an MRI or CT scan on the premises, as it allows for a quicker and more efficient diagnosis – a very good thing when time is of the essence. But we also know there’s a problem here, and an inherent conflict of interest. As the report notes, “Between 2002 and 2007, the volume per beneficiary of imaging services paid under the physician fee schedule grew nearly twice as fast as all physician services.” Even more interesting, more frequent self-referral for imagine services has a correlation to more use of resources in treatment just in general. MedPAC doesn’t have a recommendation on how to fix this, but wants to look at restructuring image service payments to take into account how much technology has advanced (i.e., it’s not as expensive to do these tests as it used to be) as well as what’s a clear temptation to do more MRIs if you happen to have an MRI machine.
I’m barely scratching the surface. From cover to cover, MedPAC is filled with interesting solutions to simultaneously save costs and reward quality. Some of these paradoxically require spending more money on the things we don’t do enough of. Some of them involve cuts on programs that haven’t shown their worth. None of them have, to date, survived resistance from the lobbyists of the various industries: Medicare Advantage is the poster-child for spending money for no reason, but the insurance lobbyist has fought off cuts; hospitals like to keep residents working full time in the hospital, thank you very much, and are resistant to change; and anything that changes the perverse incentives for physicians to be tempted to run up the score with more imaging scans will draw the ire of medical device makers and physicians. We have an overabundance of ideas for cutting costs and improving care, thanks to MedPAC. But until these recommendations have any teeth, Congress is likely to conveniently look the other way.
(Photo credit: Corporal Cacophony (ClintJCL) on Flickr.)
