Greenspan on Medicare

Testifying before Congress, Fed Chair Alan Greenspan (free registration required) noted that while Social Security is indeed at risk, Congress must address “far larger shortfalls in Medicare”.
However, Greenspan also noted that we are not yet ready to take on the task. According to California Healthline;
“However, he emphasized that despite the larger problems in Medicare, lawmakers “probably ought not to address the medical issue quite yet, until we get much further down the road in the advance in information technology in the medical area,” which could help reduce costs. He added, “If we do it now or even next year, I’m fearful we would be restructuring an obsolete model and have to come back and undo it.”
Greenspan’s comments agree with a report just released by the Employee Benefit Research Institute, which stated that Medicare will soon account for a “greater and rapidly growing share of the nation’s gross domestic product, sending Medicare into insolvency 23 years before Social Security,”.
EBRI says that Medicare’s nearly $28 trillion in unfunded liability is more than seven times Social Security’s $3.7 trillion.
The news here is individuals whose pronouncements are widely followed are finally talking about the real issue facing the economy – health care costs.
GM’s health care costs just went up by over a billion dollars. The uninsured population is increasing every year, and is now over 45 million. Medical trend rates in Property and Casualty insurance are the most significant driver of premium inflation. Health care costs for municipalities are now over $7000 per employee, leading to higher property and other taxes.
David Lazarus in the San Francisco Chronicle puts it this way. It is a “big mistake” that “Americans are talking about problems facing the Social Security system” while paying “little attention” to Medicare, San Francisco Chronicle columnist David Lazarus writes in his “Lazarus at Large” column.
Lazarus adds that most experts “believe that Medicare’s issues can’t be adequately addressed without overhauling the nation’s entire health care system.” (thanks to California HealthLine)
Perhaps, just perhaps, we are nearing the tipping point when real health care reform is possible.


Navigating the health care jungle

HealthAdvocate is a relatively new company that is making a business (and by all accounts a fairly successful one) by helping consumers deal with the increasingly complex, frustrating, convoluted world of health care. I don’t have any personal experience with them, but their approach and business model makes sense.
They sell their services to employers, TPAs, insurers, unions, and other organizations as an add-on to employee benefit programs. The service, which is billed on a per employee per month basis of $1-$4, provides several benefits:
1. assists employees in locating health care providers with specific experience and expertise
2. negotiates with health plans for coverage and payment for specific procedures and treatment
3. facilitates claims handling by working with providers and health plans
As Tom Schell of Paradigm Health puts it, ” this type of service offering will be the norm in several years as companies look to get more bang out of their healthcare dollar — since it enables the users to maximize the coverage they currently have and increase the overall patient satisfaction level.”
I agree. “Consumerism”, patient-directed health care, and all the other “make the patient responsible for their own healthcare” efforts have one major obstacle – people are mystified, overwhelmed, and frustrated by healthcare processes and requirements. And it is not likely to get any better. The worse it gets, the more valuable HealthAdvocate and similar firms will become.


Health care costs are 15.5% of GDP

BU’s School of Public Health just released a study indicating US health care costs will be $1.9 trillion in 2005, an increase of $621 billion over 2000. The study also reported that health care is a major driver in GDP growth, with this sector of the economy responsible for a disproportionally high amount (24%) of the growth in GDP.
Two specific items deserve attention, one related to what we get for what we pay, and the other concerning what drives medical inflation.
“The report found that per capita health care spending in the United States on average is double that of Canada, France, Germany, Italy and Britain, which provide universal health coverage to residents.
The report stated, “Current U.S. spending should be adequate to cover all Americans.”
The obvious question remains, what is driving these astronomical increases? While that question has many answers, according to the LA Times one of the more provocative is “doctors receive or determine how to spend 87% of health care spending, with tests and services ordered by doctors comprising 66% of health care spending and doctors’ fees accounting for 21%. ”
When one strips away all the details and nuance of technology, pharma, hospital increases, nursing shortages, and end-of-life care, it always comes down to the treating physician.

The treating doc is the key to delivering care and managing cost.


A miracle on Capitol Hill

Just when we thought the holiday season was over, the CMS Actuaries gave their biggest gift of the year to the White House, Senate, and House – an accounting change that reduced Medicaid expenses by $73 billion over the next ten years.
To be fair, and who doesn’t want to be fair when dealing with the Feds, the change was triggered when CMS determined that inflation in Medicaid for 2004 was 9%, not the 11% originally forecast. But let’s focus on the implications.
Recall that new HHS Sec. Leavitt was seeking to reduce Medicaid by some $60 billion by eliminating “accounting gimmicks” that states were using to get as much Federal money as possible to fund Medicaid (which is, by the way, a funding requirement placed on the states by the Feds…). The new numbers may make it a little tougher for the Administration to push through drastic changes to Medicaid.
CMS is downplaying the change, noting that “the revision would not affect administration plans to reform Medicaid in the fiscal year 2006 budget proposal that President Bush is set to release on Monday.”
So, any euphoria over the new found savings may well be short-lived. If nothing else, it will make for entertaining Hill-watching, as Governors, battling low state revenues and rapidly rising Medicaid costs, seek to maintain Federal funding. According to California HealthLine reporting on Congressional Quarterly’s story,
“Virginia Gov. Mark Warner (D), chair of NGA, said, “The cuts cause grave concern because the states are still reeling from the budget woes of the last five to six years. To have a major cost shift that simply passes costs from the federal government to the states will really slow the recovery that most states have started to experience” (Adams, CQ Weekly, 2/7).
And it’s not just Democrats…
“Sen. George Voinovich (R-Ohio), a former mayor of Cleveland, is leading a coalition of Republican former governors and local officials in Congress who are prepared to contest Bush’s Medicaid proposals. “We’re going to look at what he proposes. But we are not going to just slash funding for states. We’re not going to rip up the safety net,” Voinovich said. ”


Health care bill processing errors

Peter Rousmaniere passed on a very interesting graphic from the “Wall Street Journal” on group health insurnace claims processing errors.
The article referenced Towers Perrin audits conducted in 2002 and 2003, which indicated 3.3% of claims dollars were paid in error. More disturbingly, 6.6% of claims had financial errors. The Journal requires a subscription for access, thus no url links, but I’ll look for other info and pass it along.


Why is Medicaid growing?

A significant portion of the $75 billion increase in Medicaid expenditures from 2000-2003 is due to increased enrollment. This may be partially due to the drop in employer-sponsored health insurance and/or a decrease in the number of employees signing up for health insurance with their employers.
Regardless, it appears that the price controls put in place for Medicaid in the form of fee schedules, and the utilization controls in effect in many jurisdictions are helping to hold per-enrollee cost increases under that experienced by privately insured individuals.
The implication is a growing population “insured” by the government, fewer people covered by private insurance, and a de facto transfer of risk from employers to the government.
Of course, this leaves out the 45 million under-65 Americans who had no health insurance coverage at some point in 2004; as this population increases it will lead to rising cost shifting to both governmental and private insurers.


The Medicaid/Medicare crisis

A recent Congressional Budget Office report indicates the Medicare trust fund will be insolvent by 2019, a full 23 years before the earliest projections for the Social Security fund. And, problems will abound well in advance of that potentially fateful date.
As reported by California HealthLine;
“According to (CBO Director) Holtz-Eakin, Medicare and Medicaid currently consume 4% of the U.S. gross domestic product, but that proportion could rise to 20% in the next 50 years if changes are not made (Reuters/Arizona Daily Star, 2/1). He also estimated that prescription drugs will make up 20% of all Medicare spending within 10 years (CQ HealthBeat, 1/31).
Among the potential solutions to the Medicare/Medicaid crisis (all of which are politically treacherous) are cuts in benefits; increase in retirement/eligibility age, reducing payments, increased provider competition, and the old favorite, eliminating waste.
Watch what happens with Medicaid this year to get a sense for where the Administration is heading on Medicare in the future.


Medicaid news round-up

California HealthLine has an excellent summary of two stories. One is related to Sec. Leavitt’s (HHS) recent pronouncements and possible future plans; as Medicaid comes under budgetary scrutiny, Leavitt may find himself squaring off against Republican governors over Federal budget cuts in the program. (Leavitt was the Republican governor of Utah)
The other article examines several states’ possible actions on Medicaid, specifically related to dental coverage. It appears several states, including Ohio, are considering reducing or altering dental coverage for Medicaid enrollees. One wonders if the recent press re dentists’ incomes exceeding those of some MDs is contributing to this.


Hidden cost of obesity

Novation Inc. has just released a report (based on a survey of VHA hospitals) indicating that caring for obese patients increases the number of hospital worker injuries and requires the purchase of new equipment. I’m a little skeptical of the report’s claim that the cost of caring for the obese patient increased by 24% over the prior year; how do they find those numbers, what are they based on, etc.
That being said, the report’s other findings are more solid:
–90% of obese patients are seen in the ED
–53% of pediatric patients are obese
–28% of respondents indicated workers’ comp injuries increased due to dealing w obese patients
With the tight labor market for nurses and para-professionals, the rampant obesity in America certainly is not helping the labor shortage.


Health care spending stats

The journal “Health Affairs” reports that medical inflation in 2003 was 7.7%, significantly less than the prior year’s 9.3% rate.
However, the bad news is that the 7.7% was significantly higher than the rate of overall inflation, and the medical trend rate for workers comp (and probably other property and casualty lines) was 12%.
This likely is a result of cost shifting. To quote the report, “Financial constraints on the Medicaid program and the expiration of supplemental funding provisions for Medicare services drove the deceleration.” So, if governmental programs are paying less, some payers have to be paying more.
With the growing likelihood that Medicaid and Medicare reimbursements will continue to increase at a rate well under overall medical trend, we can expect cost shifting to continue, if not accelerate.