Jan
13

Possible changes in Medicare

The Medicare Payment Advisory Commission released its recommendations for changes to Medicare, and they aren’t just playing around at the margins.
Key recommendations include –
–instituting a pay-for-performance scheme for hospitals, doctors, and home-care facilities (no details provided…)
–extend the moratorium on building specialty hospitals for an additional 18 months, which would end the prohibition at the end of 2006
–reduce hospital reimbursement below the overall increase of the market-basket 3.3% to just 2.9%.
Hospitals will certainly breathe a bit easier with the extension of the moratorium on construction, at least those hospitals facing competition from privately-funded ambulatory surgical, cancer, and orthopedic centers.
As suggested here before, prepare for a significant change in government-funded health care programs. And, prepare for the downstream effect of these changes as providers seek to recoup lost revenue from private payers.


Jan
12

Hospital Cost Drivers

Consolidation in geographic areas appears to increase hospital costs, without any apparent impact on quality. The latest issue of Health Affairs includes a report on an analysis that proves what many have thought for some time – the growth of health systems (as they acquire or eliminate independent hospitals) is associated with higher costs.
Note the wording – “is associated with”, not “results in”. Not that I’m trying to be circumspect, far from it – but the study stops short of proving a definitive linkage between consolidation and increased cost.
However, the study does conclude with the statement, “This analysis suggests that consumers were worse off as a result of hospital consolidations.”
The pace of consolidation has slowed, from over 300 hospitals merged or acuired in in 1997, to just over 100 in 2002. Thus, the consolidation wave may have peaked. That does not mean the impact has; oligopolies tend to test their pricing power carefully; the increased cost noted in the article may not be the final word.
One point that goes unmentioned – in all the rhetoric surrounding the typical hospital merger/acquisition, you always hear about how joint purchasing, contracting, and integration of IT and administration is going to save money.
When? and for whom?


Jan
12

What’s up for Medicare?

The newly elected government has big plans for Medicare, Medicaid, and other entitlement programs. Well, perhaps we should say not-as-big plans.
In California HealthLine (an excellent daily news source) yesterday, the following appears:
“White House officials and congressional budget leaders last week indicated that President Bush in his budget request to Congress “will try to impose firm, enforceable limits on the growth of federal benefit programs” while continuing to “give priority to military operations and domestic security over social welfare programs,” the New York Times reports.”
To those readers who have been with us since the beginning (I know, only two plus months ago…), this will come as no surprise. Quite simply, we cannot afford tax cuts, guns, and health care; and the two that appear to be winning are tax cuts and guns.
Where does that leave Medicare?
“Bush has said that his new Medicare law will hold down costs, but a 2004 actuaries report — signed by three Cabinet secretaries, including Thompson — concluded that the program’s long-term liabilities had increased by more than one-third, or $17 trillion, in a single year.” The article went on to note that Bush claimed the $500 billion Medicare Drug bill will save money by “paying for medicine that would prevent the need for expensive heart surgery”.
Sounds like pharma’s DTP (direct to presidents) campaign is working…
But seriously, it is puzzling that the federal executive and legislative branches are focused on Social Security reform when Medicare is significantly more impaired.


Jan
11

Health care now 15.3% of US GDP

Business Insurance magazine notes that health care costs are now over 15% of GDP – following is an excerpt from their article on same:
” In 2003, health expenditures in the United States climbed 7.7%, to $1.7 trillion, down substantially from a 9.3% growth rate in 2002, according to the U.S. Centers for Medicare and Medicaid Services.
Still, because health costs rose much more than the overall growth in the economy, health spending accounted for a record 15.3% of the GDP in 2003, up from 14.9% in 2002.
Of the nation’s $1.7 trillion health care tab, private payers, such as health insurers and self-funded employers, paid out $913.2 billion in 2003, an increase of 8.6%.
Hospital spending, which accounts for about one-third of national health care expenditures, climbed 6.5% in 2003, down from 8.5% in 2002. Spending growth for prescription drugs slowed significantly, with costs rising 10.7% in 2003, down from 14.9% in 2002. CMS attributed the slowdown in prescription drug costs increases to several drugs losing their patent protection and lower-cost generics becoming available and the expanded use of tiered co-payment plans, which give employees a financial incentive to use lower-cost generics. ”


Jan
10

Government’s role, cost, quality, and comparisons

Matthew Holt is a health care consultant, interested observer, and man of strongly held opinions, especially concerning health care and the payment for same. His latest missive is worth a read, regardless of your political leanings or views on socialized v. market-based health care.
Mr. Holt brings up several intriguing points around
— cost v. outcomes;
— the role of government v private payers; and
— who pays for innovation.
If you are pressed for time, print it for plane or train reading – it will get you thinking…


Jan
9

Intelligent reform of Medicare Rx…is it possible?!

There are rumblings that a large number of Republican representatives are pushing to reform the Medicare Prescription Drug Program. Hallelujah.
There are several problems with this ill-conceived and poorly-executed program. They are all related to a core issue – the plan is voluntary and appears to be structured to promote adverse selection; that is, only the people that need drugs will sign up for it. Here’s why.
1. The deductible is very low – $250 annually – and cannot be changed by any health plan.
2. Monthly premiums are estimated to be $35 per senior.
3. There is a late enrollment penalty (that only starts in May of 2006) that is 1% per month. To quote Bob Laszewski of Health Policy and Strategy Associates, you can “wait 30 months until you can make money off the drug plan and it will only cost you $10.50 more per month than if you had enrolled at the beginning.”
What does all this add up to?
Well, seniors will run the numbers. They will calculate what they are paying for drugs today, then add up program’s the monthly premium cost, deductible, their co-pay (25% of the cost of their drugs), and compare the two. Seniors that will “make” money will enroll, seniors that won’t benefit, will stay away.
This is not insurance per se; it is just a terrible business proposition.
Bob’s prediction is not many health plans are going to jump at the opportunity to sell these programs; he’s undoubtedly right.
So, the news that some Congressman have decided they don’t like the program is welcome news. It is somewhat distressing, but wholly unsurprising, that they waited until after the election to have this “ah-hah” moment.


Jan
3

Uninsurance

Peter Rousmaniere is both a good friend and a very astute observer of things health care, insurance, political, and just plain interesting in nature. He publishes a daily missive entitled “Three Witnesses”; below is an extract from his 12/30/2004 edition.
I am encouraging Peter to enter the world of the blog – if you agree, please email him at pfr@rousmaniere.com.
the passage begins – Washington Post economic strains on American workers worsening
Highly edited down – PFR
“Over the past two decades, companies have moved en masse away from traditional pensions in which employers pay the cost and employees get a set amount after retiring. Employer-based health care coverage has fallen as well, not just for workers in low-wage jobs, but increasingly for those in middle-class jobs. One analysis estimates that there were 5 million fewer jobs providing health insurance in 2004 than there were just three years earlier. Overall, nearly 1 in 5 full-time workers today goes without health insurance; among part-time workers, it’s 1 in 4.
Those who manage to keep their benefits often must pick up their share of the higher cost. Employee contributions for family coverage were 49 percent higher in 2004 than they were in 2001, and contributions for individual coverage were 57 percent higher, according to the Kaiser Family Foundation. ”


Jan
2

A response to a physician’s rant about health care costs…

I was reading a blog from a practicing generalist, who was making the point that health care costs are increasing due to technology, and that this was benefiting patients. There were no statistics to confirm this (longer life expectancies, better survival rates, improved functionality), but I take his point. There is no question technology is improving many people’s lives.
However, technolgy can be a two-edged sword, especialy for those who get a false negative or positive on a prostate cancer screen, and take/don’t take action based on what is acknowledged to be a very poor test.
As one from the “payer” side, I’d recommend we take the argument on health care costs a step further. Like it or not, employers pay a significant portion of health care costs, both directly (premiums) and indirectly (cost-shifting for uninsured, FICA taxes, income taxes, etc.)
The real issue employers have with health care costs is they have NO sense for their return on the investment. And that is the fault of the medical and managed care communities. Employers carefully assess each investment into plant and equipment, personnel and training, investment options and new products. They calculate RoIs carefully, assess performance constantly, and get as comfortable as possible with an expenditure BEFORE they make the investment.
Think about health care – what do employers get? Happy employees? Rarely – health insurance is a terrible “good” – people only use it when they are ill or injured, it is convoluted and difficult to understand, and they have to pay for part of it too!
Actually, what employers SHOULD be thinking about is the demonstrated ability of a health care provider to “deliver” healthy, fully functional employees and families, thereby enhancing productivity and, therefore RoI. Health insurance is an investment in productivity.
If we can evolve to this way of thinking, much of the present bickering about health care costs will end. Sure, there will be arguments about impact rates, who delivers what benefit, and what evaluation methodology makes the most sense, but that will signal we are talking about the right things.
So, the next time someone complains about charges, costs, or premiums, ask them how that “good” will help them function. They won’t know the answer, but perhaps they’ll start thinking about it.


Dec
31

The future of Medicaid

With the nomination of of Mike Leavitt to the post of Secretary of Health and Human Services, President Bush has sent a clear signal of his intentions to drastically reform the Medicaid system. Leavitt, a former governor of Utah, was instrumental in helping Utah secure a waiver from HHS that enabled the state to make significant changes in its Medicaid program.
These changes represented significant trade-offs, namely funding expanded coverage (adding populations not previously covered by Medicaid) by implementing cost sharing for beneficiaries and cutting some benefits.
Mr. Bush has made it quite clear that he intends to move the nation towards the “ownership society”. In the case of Medicaid, the implication is the states will receive block grants of funds from the federal government, funds that they will have significant discretion in regards to how they spend them. According to the LA Times, “In the past, the administration has proposed capping the federal share of Medicaid, currently about $180 billion a year…Medicare faces pressure to cut payments to hospitals and other providers.”
The net result – states will “own” Medicaid, be free to develop and implement their own programs, and do so with minimal interference from the feds.
While this sounds great at first blush, even Republican governors have serious concerns. In essence, their concern is that the President is making Medicaid a “defined contribution” program, thereby limiting the federal government’s future expenditures. This is a marked change from the present “defined benefit” form of Medicaid, where the governments (state and federal) are allocate enough funds to cover the benefits provided to qualified individuals’ costs. Remember, the feds took over the provision of health care to the poor in large part because some states were not doing what federal legislators deemed an adequate job.
In addition to his experience as Utah governor, Mr. Leavitt was head of the EPA and got his start as an insurance broker in Utah. Leavitt is known for his political prowess and willingness to stick to the task. While he will be tasked with Medicare reform and other issues, Leavitt will likely start with Medicaid.
This nomination is the clearest possible signal that Medicaid is in for the biggest change in its forty-some years of existence.


Dec
31

Health care blog worth watching

The Piper Report is a health-care oriented blog focused on Medicare, Medicaid, and some employer-based health programs. The author is well-read and well-informed about governmental programs, and seems to be on top of the latest research, with a heavy emphasis on governmental programs pertaining to drug coverage.
For example, Piper’s latest contribution summarizes some of the latest thinking regarding Medicare prescription drug programs.
Other links on Piper’s blog include the National Pharmaceutical Council’s health care cost:quality equation and a prognostication about possible Congressional action on Medicare.
As you travel through the blogosphere, you’ll encounter sites such as Mr. Piper’s that provide a depth of insight into a specific topic unobtainable anywhere else. Kudos to Mr. Piper et al for their willingness to share their perspectives.