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Don McCane of PNHP:  Everyone is concerned about the affordability of health care. We want the best care available, but we all realize that we cannot allow health care spending to bankrupt us. As a percent of our Gross Domestic Product (GDP), we spend far more than any other nation on health care, currently 16.5 percent. There is a general consensus that we are ever closer to the threshold that can be tolerated.

See extended for reality based examples of what works and what does not...

Congressional Budget Office
July 2006
Working Paper Series
The Slowdown in Medicare Spending Growth
By Chapin White


The rate of so-called "excess" growth in Medicare spending per beneficiary has varied widely over the last several decades, and growth has slowed substantially in recent years. (Excess growth is defined as growth beyond the combination of the general rate of economic growth and the rate of change in the age composition among beneficiaries.) The annual rate of excess growth fell from 5.5 percent over the period from 1975 to 1983 to 0.9 percent over the period from 1992 to 2003. Changes in provider payment policies might help explain the observed slowdown. Those changes include the implementation of a prospective payment system for short-stay hospitals, and, more recently, the imposition of mechanisms to control aggregate Medicare physician spending. Possible alternative explanations-increases in managed care enrollment, changes in Medicare cost sharing, and a system-wide spending slowdown-do not account for the slowdown in Medicare spending. The slowdown is of an economically important magnitude and deserves further study.


The Boston Globe
August 2, 2006
Medicare eases fee cuts
By Stephen Heuser

The Centers for Medicare and Medicaid Services, known as CMS, released a massive document dictating how much it will reimburse hospitals for hundreds of medical procedures in 2007. Medicare pays $125 billion to hospitals nationwide each year, making it the single most important payer in the American healthcare system. Changes in its policies can trigger shifts in both the American hospital system and the medical-device industry.

The changes detailed yesterday are far less dramatic than the federal agency first proposed in April, when it said it was considering slashing payments for some heart-repair procedures by one-third, and cutting reimbursement for defibrillator implants by one-fifth.

Hospitals and healthcare companies have been watching Medicare unusually closely this year because the agency has launched a major change to the way it pays hospitals. Medicare pays a fixed amount for each type of procedure, and studies had found that those payments had become highly unbalanced. Hospitals were profiting on certain cases, such as cardiac procedures and orthopedic surgery, but losing money on others, such as stroke victims and lung patients.

The revision increases the amount Medicare pays overall by $3.4 billion.

But it shifts the money around in an effort to rebalance its payment system and clamp down on a new breed of hospitals that has emerged to take advantage of discrepancies in the system.

So-called "specialty hospitals," owned by doctors, concentrate on the most profitable procedures, such as coronary angioplasty and orthopedic surgery, leaving the bulk of less profitable medical care to community hospitals.

Comment:  Everyone is concerned about the affordability of health care. We want the best care available, but we all realize that we cannot allow health care spending to bankrupt us. As a percent of our Gross Domestic Product (GDP), we spend far more than any other nation on health care, currently 16.5 percent. There is a general consensus that we are ever closer to the threshold that can be tolerated.

Over the past few decades, innumerable efforts have been made to attempt to control the "excess" growth in spending, excess being defined as a rate of growth in health care spending in excess of the rate of growth of our GDP (corrected for demographics, etc.). This CBO study of the success of Medicare cost containment provides us with some very important lessons.

Some will be surprised to see what has not been effective. Managed care has had an insignificant impact within the Medicare program, and actually resulted in an increase in spending because of the higher rates paid for a lower-risk sector of patients. Cost sharing, the tool being touted by the consumer-directed health care advocates, also has not had any significant impact in reducing excess spending.

Perhaps the most important theory dispelled by this study is that the slowdown in Medicare spending represents a general slowdown of spending in our entire health care system. This analysis confirms that Medicare spending slowed while system-wide spending continued to increase at an excessive rate.

So what has worked? Adoption and continual refinement of provider payment policies such as the prospective payment system for hospitals and the sustainable growth rate formula for physicians have been effective. These are not perfect systems. Refinements have been made, and further changes are essential. The point is that they are designed specifically to provide value to the taxpayer while ensuring that our health care delivery system is adequately and fairly funded.

The Medicare payment document just released by CMS demonstrates how well this can work. Policies are being adopted that will reduce excess spending in some sectors while shifting funds to important services that were losing money, and further modifications were made based on input during the public comment period. Isn't that what we should expect from the stewards of our tax funds?

How does the private sector approach excess spending? It uses the blunt instrument of managed care: ratcheting down provider rates, erecting barriers to access, and now shifting often unaffordable costs to patients with needs. What is really ironic is that these mechanisms have failed to slow the increase in excess costs (except for the one-time impact of private-sector price controls).

What do you want: a government program that has a dynamic system of achieving the best value for our finite health care dollars, or a private, fragmented system that provides poor value and isn't even effective in controlling excess spending?

Originally posted to DrSteveB on Thu Aug 03, 2006 at 06:39 AM PDT.

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Comment Preferences

  •  option 1 of course (1+ / 0-)
    Recommended by:

    I just had surgery last week - was interesting to get the insurance reports of costs. For my 8 hour outpatient stay in the hospital including the surgery, the tab was $37,000. What the insurance statement says it paid was $17,000. I'm assuming that's the negotiated rate with the hospital. If that's true - then Suzy Q. Uninsured would have been stuck with a $37K tab and my insurance company only had a $17K tab - amazing. Or am I completely misunderstanding that?

    Thank god I have a very good insurance policy - covered everything with zero outlay from me other than my monthly wage premiums.

    •  In short... (0+ / 0-)

      you understand this correctly.  The non-insured person would indeed be responsible for this cost.

      Now, having said that, the hospital usually has some discount, or some such thing available, or some payment plan in mind.  But it's not usually realistic.

      •  That's right. (0+ / 0-)

        Number one cause of bankruptcy in the US.  

        They jack up the rates on the uninsured.

        •  Compare (2+ / 0-)
          Recommended by:
          jibsail, hoolia

          On the one hand we have health care executives getting $10 million annual compensation and billion-dollar retirement packages.

          On the other hand we have working families driven into bankruptcy by medical bills.

          In other words, people are being bankrupted not to pay for mecial services, but so their meager life savings can be added onto the towering money piles of insurance, pharmaceutical, and HMO execs.

          Compassionate conservatism in action!

  •  Question for Dr. Steve (0+ / 0-)

    I'm a bit confused.  So how does this square with John Kerry's plan for universal healthcare?  Or Russ Feingolds'?

    Is PNHP supporting either Kerry or Feingold's position on these issues?

    I see that you are a dot org.  Does that mean that you are a 501C3?

  •  Thanks for the info. (2+ / 0-)
    Recommended by:
    jibsail, kck

    I didn't get your link to work. I would like to see more diaries like yours about overall problems, and incremental ways to improve health care quality and cost. I would also like to see DailyKos attract a healthcare professional, preferable a physician/administrator, who would diary regularly on health care issues.

    I see first hand how hospitals hire/pay according to Medicare reimbursement. Nonprofits need to work the system to cover underinsured areas, and for-profit, to maximize salaries.

    Sen. Mark Dayton has said that Medicare patients in Florida use 3X the health resources as those in Florida. Do you know anything about that?

    •  Oops (1+ / 0-)
      Recommended by:

      Medicare patients in Florida use 3X the health resources as those in Florida.

      I assume you meant something like "... 3X the health resources as those in Wyoming."

      Not an expert, but I believe Medicare allotments per state (which translate into a per-capita amount for each resident of the state) are based on observed spending in a base-line time period. Florida, with a large population of elderly retirees, would thus have more allocated per individual than would Wyoming.

      •  Thanks, I meant to say that Minnesota retirees (0+ / 0-)

        use only 1/3rd per capita resources of Medicare as a Florida retiree, without any seeming benefit healthwise to the Florida retiree. That was why Sen. Dayton was concerned. This was also cited recently in a NYTimes editorial on why more doctors are not needed. People just go more. Personally, I don't believe this is the reason for the discrepancy.

  •  You ask what I want. (0+ / 0-)

    To put it simply I want equal health care for all provided by the government. I want to pay for it with a designated tax and I want to see the insurance industry reduced to handling property issues.

    At this point, my husband and I are paying $228 per month out of a meager paycheck, plus $2000 per person per year, plus a $250 per person deductable, office visit co-pays, prescription co-pays and more for specialists. We make about 32K a year. I know that we are doing better with it than many, but I believe that there is a better way.

  •  Can someone tell me why (0+ / 0-)

    our elected officials are not working on this day and night. Health care effects all of us. Those of us who have insurance pay way too much, and many of us simply can not afford it. Every day we see advertisments for this drug or that drug which can make your life more tolerable, if you can't sleep take this drug, if you can't pee take that one, if you pee too much take yet another, heart problems we got one for you, High Blood pressure take this pill. Every commerical ends with "consult your doctor". Just how many Americans can afford to consult their doctor? Those of us who can barely afford to go to the doctor for a check-up, scrap up the money and go, and then are told you need a mammogram, a colonoscopy, a bone scan, or even more very costly test. Who can afford these test? Not me, and then the doctor refuses to treat you any longer because you didn't follow his/her orders and get the tests they recommended. Most Americans simply can not afford to stay healthy, and yet Congress spends their time, voting on flag burning, gay marriage, and a shit load of other stuff that really doesn't effect our lives at all. There is definatly something very wrong

    •  Sadly... (0+ / 0-)

      Health care effects all of us.

      Our elected officials (at least in Congress) can take their own healthcare completely for granted, but the financial condition of insurers & for-profit providers greatly affects their campaign funding.  That's what really counts.

      Democrats always act as though they're afraid they'll lose, so people look at them and see losers. -Paul Waldman

      by latts on Thu Aug 03, 2006 at 09:18:48 AM PDT

      [ Parent ]

  •  A Huge Cost Not Mentioned? (1+ / 0-)
    Recommended by:

    We talk about bankruptcy of the individual.

    I don't think we mention often enough the theft of inheritance from the next generation.

    My aging mom has an estate that would buy modest homes for each of us siblings.

    But we know for a fact that it will all be donated to big pharma instead.

    Every penny.

    Love ya, mom.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy....--ML King, "Beyond Vietnam"

    by Gooserock on Thu Aug 03, 2006 at 08:07:25 AM PDT

  •  What will work? (0+ / 0-)

    I'll tell you what will work,

    Not more of the same! What you listed WAS more of the same...none of which WORKS for REAL PEOPLE who need to go to the doctor.  

    I say let the whole f'king system EAT ITSELF.

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