It’s All About Medicare

Medicare has been a hot topic in the world of healthcare and healthcare management for some time now. Some things in the Medicare debate are clear- like the fact that being on the wrong side of it could cost a political party its shot at the 2012 Presidential election. Approximately 78% of Americans do not want to make any cutbacks to the Medicare program.¹

There are 40 million people over the age of 65 in the United States- approximately 13% of the total population- and healthcare costs consist of about one third of that senior population's disposable income.  It is a topic of growing interest, as those aged 45-65 increased by 31.5% between 2000 and 2010, putting the number of seniors and soon to be seniors who may be needing Medicare benefits at a whooping 121.5 million people.²

With such a large portion of the population thinking about Medicare, many changes are being proposed, discussed, and made as politicians vie for favor.  A recent report by the Institute of Medicine (IOM) suggests that the division of Medicare benefits is flawed based on the fact that 40% of hospitals receive exemptions for how their adjustments are calculated. The institute feels that if so many exemptions are required, something must be wrong with the system. 

In their report the committee suggests that, because salaries and benefits make up one of the largest costs of providing care, the Bureau of Labor Statistics data on health sector salaries should be used to calculate wage adjustments for hospitals and private practice health professionals.

Another recommendation from the IOM is to use the Office of Management and Budget’s metropolitan statistical areas to set payment areas, labor markets, and develop a new source for office rent data.

As is often the case, not everyone agrees that these payment formulas are the best way to assess compensation needs. Reuters writes in a recent article³ that the American Hospital Association questions using BLS data because it ignores hospitals’ pension, benefit and overtime costs. Because the sector of the population that is nearing retirement has recently grown by 81 million, pensions, benefits, and overtime costs may be critical in the assessment of Medicare payment formulas.

The folks at ThinkProgress.org have yet another proposal for the future of Medicare⁴. I have included a shortened version of their threefold plan:

1. Empower Medicare To Negotiate For Lower Drug Prices: This would allow Medicare to use its bulk purchasing power to negotiate with drugmakers for lower prices. Rep. Peter Welch (D-VT) estimates that doing this could save as much as $ 156 billion over 10 years.

2. Allow Drug Reimportation From Canada: One of the major costs in the U.S. health care system that drives up the costs not only in the private sector but also among Medicare are the costs of prescription drugs. The free importation of prescription drugs from our neighbors like Canada would help offset these costs. Sens. Byron Dorgan (D-ND) and John McCain (R-AZ) estimated in 2009 that doing so would save consumers $ 80 billion.

3. Globalize Medicare:  Seniors currently aren’t allowed to use their Medicare insurance system outside of the United States. An alternative to this would be to drop these trade barriers and allow seniors on Medicare to seek care abroad, where services are much cheaper. Economist Dean Baker estimates that if fifty percent of Medicare beneficiaries opted for this globalized option, then taxpayers would save more than $ 40 billion by 2020.

1 http://www.fiercehealthcare.com/story/medicare-uses-flawed-data-pay-hospitals-docs/2011-06-02

2 http://www.census.gov/prod/cen2010/briefs/c2010br-03.pdf

3 http://www.reuters.com/article/2011/06/02/us-usa-campaign-medicare-idUSTRE7516MI20110602

4 http://thinkprogress.org/politics/2011/04/30/162565/three-ways-save-medicare/

Healthcare Reform Opinion Piece

The healthcare reforms brought on by the passing of the Affordable Care Act (ACA) are numerous and complex. Debatable projections and refutable theories have vigorously stoked the flames of discontent. Currently, more Americans than not wish for a repeal of the act. Therefore, in an attempt to explain the substance behind this popular outcry, this essay will be organized into three areas of major conflict: fallible deficit reduction projections, feasibility of enforcing individual mandate, and the likelihood of cost savings coming from a mandatory government entitlement program.

            The Congressional Budget Office’s (CBO) projections concerning possible deficit reductions found in the ACA are continually under fire from opponents of the act. The projections are said to be grossly inaccurate, excluding pertinent expenses and assuming actions that have a pattern of deferment. For example, while the CBO states that there will be a net deficit reduction of $124 billion in the first 10 years after the passing of the reform--due to the ACA--the revised numbers presented in the Holtz-Eakin & Ramlet (HE&R) article assert that there will actually be an increase in the deficit by an additional $554 billion over the same period of time. A large percentage of this disparity is represented in what HE&R considered to be invalid assumptions.  Most of these assumptions were invalidated because of their dependence on congressional action.

The politics of Congress, wrote HE&R, will stifle the implementation of cost saving measures. Prior legislative action is replete with evidence to support this stance, but two key examples come to mind most readily. First, Congress has overridden the “sustainable growth rate” formula, which would lower Medicare payment to physicians, every year since 2002. Second, Congress already gave in to labor lobbies by pushing back an ACA excise tax on high-premium health plans.

            The political hurdles to overcome don’t end when Congress has relented to lobbies and public interest groups. The very constitutionality of a portion of the ACA, the individual mandate, is being scrutinized. Under such scrutiny there is virtually no chance that Congress, the IRS, or any other authority will seek to enforce the penalties tied to this mandate. By not levying these “penalties” the CBO net deficit reduction amount is diminished even further. If the mandate is removed from the act, then spending will outpace the projections of even the harshest of the ACA’s critics. Many of those in the low-risk pool will, as they have been, continue to choose to be uninsured, and Medicaid will be extended to a larger group of people that may be in the high-risk pools.

            Finally, an appeal to common sense must be made. Does it really seem plausible that the roll-out of a federal program of the magnitude of the ACA will decrease government spending? Has a large, mandatory entitlement program ever meant decreased spending? In all likelihood the answer must be, no. Myriad projections can be published, but, if left in its current state, this ACA will inevitably contribute more expense to the staggering deficit. Too many of our countries initiatives are focused on the long-term, or from a politician’s perspective, during some else’s term. Too often our leaders point to the future to distract from the present. If this legislation is going to work, then someone needs to make bold, unpopular decisions that will reduce the hemorrhaging of tax payer dollars. Otherwise it may very well be that healthcare, ironically, bleeds the US out.