Medicare sets the tone

No Gravatar

One of the key thoughts behind the idea of healthcare reform was to cut the cost of medical care.  In America, more than 1 of every 6 dollars we spend is for health related expenses.  (It was on track to be one of every 5 by this year- but that was before Obamacare [PPACA] was proposed and enacted.)

Those health cost expenditures could almost be acceptable (yeah, in a very loose sort of way) if this excess expenditure (almost twice what the other technologically adept countries spend) provided great health results.  Instead,  our state of health is, at best, mediocre, when compared to the rest of the world’s.

As you might have determined from the above two paragraphs, the spiral in our health care expenditures has attenuated.  Anyone can spout the reasons why this is true- and some of us spouting the reasons may even turn out to be accurate, but there’s no certainty in those conclusions- yet.

It could have been the recession (although recessions have not attenuated health care rises before).  It could have been the lack of new blockbuster drugs (but drugs are but a small component in our overall health care expenditures).  It could have been Obamacare, with its insurance reform, chance to expand the market by 20% (due to wider insurance coverage for all, and determination of which health care expenditures need to be evaluated)- but the data is not yet in.

One thing is certain.  Medicare is now covering more Americans than ever before.  Because the baby boomers are now joining the program.  This will be the largest increase in the Medicare census ever.  And, Medicare is an humongous role player in price-setting for health care.

Consider this.  Every procedure, every service that can be billed to Medicare (which means it can be billed to the citizenry at large, as well) must be evaluated; someone must decide what is a fair price.  Because that is what Medicare will pay to the provider for said service or procedure.

And, what Medicare pays seems to be the guidelines that private insurers use.  Drs. Jeffrey Clemens (UC San Diego) and Joshua Gottlieb (Vancouver School of Economics) published a paper in the National Bureau of Economic Research that provides this analysis of physician fees and outpatient services.  It turns out that when Medicare changes the price it pays for something by a $ 1, private insurance changes their reimbursements by about $ 1.30.

Obviously, private insurers have determined it is better to have Medicare do the analysis and rely upon its evaluation, than to recreate the system.

(Chapin White (Center for Studying Health System Change, Washington, D.C.) presented a similar analysis of Medicare’s effects on hospital reimbursement.  His analysis appeared in Health Affairs.)

Medicare sets the pace in health care costs

You can say- Wow!  That’s pretty cool.  It means that we can control our costs, somehow.  But, it also means that Medicare MUST get its analysis right.  Because if lobbyists or consumer pressure groups get inveigled in the process, and Medicare approves something at the wrong price- or for the wrong reasons- the effect ripples through the system.

I’ve written about dialysis.  And, that is a special case, since almost all of it is underwritten by Medicare.  (Private insurance only covers patients now for the first 18 months or so; it used to be 12.)  And, when Medicare allowed the indiscriminate use of erythropoietin [EPO] in dialysis, treatment costs were high.  (The costs for EPO were paid separately, and afforded another means for providers to make a profit.  Now, the costs are more closely regulated).  That same sort of error can occur for other therapeutic regimens.

And, now, Medicare is evaluating new processes to value the work of physicians and new services for inclusion- such as hospice and home health care.  And, that process will be the largest fiscal control mechanism we will have for healthcare expenditures (probably even after the IPAB- Independent Payment Advisory Board- is fully funded, since it will help set healthcare expenditures for the non-Medicare world).

This year, Medicare spending will rise between 5 and 7%- both because of the inclusion of more baby-boomers and an increase in per-patient costs.  If this spiral is not controlled, then Medicare costs could reach $ 900 billion by 2023, Medicaid (plus children’s health insurance) will reach $ 575 billion, and the health insurance exchanges will be around $ 135 billion.  Adding in what we pay (and other private insurances reimburse), Medicare still accounts for some 20 cents of every health care dollar spent.  (It should take you less than a second to realize that means that Medicare accounts for 4 cents of every dollar spent in the US economy.)

One last consideration.  Medicare is spending more than 1/2 of every dollar it spends on the last year of someone’s life.  (Now you know why hospice and home health care is being evaluated by the program.)   While some indications show that to be almost 2/3, even ½ means 2 cents of every dollar spent is for our last year of life.  We need to adopt better controls- like the system propounded by Dr. Rockwood et. al.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter
Share

2 thoughts on “Medicare sets the tone”

  1. I know the money numbers are going in the wrong direction, but I’m not sure I want the government deciding which is the last year of my life if I am sick. I am sure that they would like to but I wouldn’t.
    Chef William recently posted..Mexican Dessert Wagon

    1. Actually- you do! Think about, Chef William, do you really want to be picked, probed, operated upon- when there will be no real change? Would you not rather be cogent, free from pain (since that is part of the protocol)- or at least as free as one can be, to share your last days with the ones you love?

      If you read the reference at the end of the article, those folks developed a most comprehensive analysis to determine where we are on the likelihood of life scale. No, nothing is infallible. But, if you score near the top of the scale, data demonstrates that 12 months is a long time from the data of that analysis. If you score near the bottom- assuming no bolt of lightning, airplane crash, auto out of control- there are decades of life.

Comments are closed.