The ongoing and far-from-resolved debate about whether or not health reform will erduce costs has generated lots of fear-mongering, wildly inflated claims, and far too little intelligent discussion. Jonathan Cohn’s attempt to add a bit more intelligence to that discussion is well worth a read.
Care and Cost, a sort of ongoing compendium of thoughtful articles on the subject, republished Cohn’s Kaiser Health News piece dissecting the Medicare Actuary’s recent comments on the impact of reform on cost.
Richard Foster is the chief actuary for Medicare – the person tasked with calculating how much it will cost, and estimating whether cost will go up or down and by how much due to this or that change. He recently testified before the House Budget Committee on the impact of reform on Federal health expenditures, basing his testimony largely on the basis of his work in April of 2010.
Foster made a couple of key points.
Cohn’s piece focuses on a couple key points. First:
“By 2019, the net reduction in Medicare expenditures is estimated to be 0.5 percent of GDP, which represents an 11-percent decrease from the level projected prior to the Affordable Care Act. [emphasis added] This percentage reduction would grow larger over time as a result of the compounding effect of the slower annual updates in Medicare payment rates for most categories of health care providers.”
Good news, right?
Well, he then went on to call into question the basis for that estimate:
It is important to note that the estimated savings for one category of Medicare provisions may be unrealistic. The Affordable Care Act requires permanent annual productivity adjustments to price updates for most providers (such as hospitals, skilled nursing facilities, and home health agencies), using a 10-year moving average of economy-wide private, non-farm productivity gains. While such payment update reductions will create a strong incentive for providers to maximize efficiency, it is doubtful that many will be able to improve their own productivity to the degree achieved by the economy at large. [emphasis added]
So, what happens? According to Foster, about 15% of Part A providers (non-hospital/facility, non-pharma) would become unprofitable, and CMS might make changes to increase their reimbursement.
There’s another distinct possibility; Congress will tell CMS that it can’t increase payments to less-efficient providers, and those providers either a) get more efficient or b) drop out of the program. And there’s ample precedence for this scenario; one need look no further than the recent changes to durable medical equipment reimbursement.
I’d add the recent – and long overdue – focus on the national debt and deficit may significantly increase the intestinal fortitude of members of Congress, perhaps enough even to make them stick to their guns and force providers to get better or get out.
What does this mean for you?
Intellectual honesty is all too rare in the debate over reform. Foster’s views are well worth discussion, but don’t take them at face value.
Feb
7
