Category: Medicare

Explaining Medicare’s Slowing Spending Rate

The slowing rate of growth of Medicare spending per beneficiary is the root cause of the rose-colored glasses through which the Administration views the latest Medicare Trustees’ report, which predicts insolvency four years later than the previous report did. So, what explains this slowing rate of growth?

Analysts at the U.S. Department of Health & Human Services have just released an analysis explaining what has happened. Figure 1 shows that national health expenditures have been growing at 3 percent per capita from 2009 through 2013. Medicare spending per beneficiary has grown slower than this since 2009, effectively flattening in 2013.

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CMS Views Medicare Solvency through Rose-Colored Glasses

The 2014 Trustees Report was released on Monday, July 28th. The Center for Medicare and Medicaid Services (CMS) press release paints a rosy picture, but fails to discuss the bad news that is hidden in plain sight.  According to the cheerleaders at CMS, the health of the Medicare Hospital Insurance Trust Fund has improved since last year. The Trust Fund purportedly will remain solvent until 2030 — four years longer than projected in the 2013 Trustees’ Report. The press release partially credits the 2010 landmark law, the Patient Protection and Affordable Care Act (ACA) with controlling the growth of Medicare spending.

The Trustees Report is supposed to project future Medicare spending based on current law. But, that also means the official projection includes provisions meant to slow spending growth that the Trustees know are unlikely to occur. In years past, the Trustees tended to ignore these uncomfortable facts. Around 2010 the Office of the Actuary at CMS took the unprecedented step of producing an Alternative Scenario report explaining that the assumptions in the Trustees Report were unrealistic, and the projection were most assuredly wrong. That raised eyebrows in the policy world. This year, the alternative scenarios (i.e. conditions that are more likely to occur) crept up from the appendix (at the back) and landed uncomfortable on page 2, with the authors explaining:

Yippee! Medicare Won’t Go Bust Until 2030!

The latest Congressional Budget Office’s latest Long-Term Budget Outlook now asserts that Medicare’s so-called “Trust fund”. Talk about kicking the can down the road!

As the chart below shows, the problem is not that the “trust fund” will go bust in any given year, but that the federal government is borrowing money to finance consumption. “Other non-interest spending” includes major infrastructure and defense, tasks which constitutionally and under a proper economic understanding fall to the federal government. These were the purposes for which the Founders gave Congress the power to borrow money in the people’s name. Borrowing to finance seniors’ healthcare consumption does nothing for future generations’ prosperity.

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Is Crony Capitalism Good Enough for Health Care?

In the Wall Street Journal, Paul H. Rubin and Joseph S. Rubin make an argument in favor of “crony capitalism” as a second-best solution. Their example from health care is Medicare Part D:

Some claim that Medicare Part D, which pays for drugs, was a giveaway to the pharmaceutical industry. But 40 years of research has clearly shown that the Food and Drug Administration’s regulatory process makes drug development and approval unnecessarily and inefficiently expensive. Perhaps, in this environment, supplementing the costs of drugs may move us toward a more efficient drug policy, and bring more life-saving drugs to market.

That’s not quite the way I see it. Medicare is widely accepted in American society, and excluding prescription drugs made no sense because prescription drugs substitute for more expensive treatments, especially hospitalization. Costs are below budget and seniors’ have lots of choices. So, Medicare Part D is a second-best solution, but it is a second-best solution to the socialization of health care for American seniors. It is not a second-best solution to the unnecessary costs imposed on pharmaceutical development by the FDA.

Medicare’s Spending per Beneficiary Increased Twice as Fast as Employer-Based Plans’ in Ten Years

A new study from the American Health Policy Institute analyzes the growth in health spending by different payers over the last decade. In summary, the study found:

  • 1On average, all U.S. employers spent $3,430 per covered life on health care in 2012, up 13.6 percent from 2003 after adjusting for inflation.
  • On average, large U.S. employers (1,000 or more employees) spent $4,990 per covered life on health care in 2013.
  • In 2012, government (federal and state) spent $1.1 trillion on health care, or an average $9,130 per covered life, up from $8,010 in 2003, or 14.0 percent, after adjusting for inflation;

I’m Shocked, Shocked: Allegations of Medicare Fraud in New Jersey

Ambulance at Emergency EntranceDozens of New Jersey ambulance companies — most of them headquartered within 15 miles of Paterson — billed Medicare for unusually large numbers of non-emergency ambulance rides in 2012, a ProPublica analysis of recently released Medicare payment data found.

Some 37 operators claimed an average of 50 trips or more per patient, collecting more than $46.5 million from Medicare that year. By comparison, in 33 other states, not a single ambulance company billed Medicare for that many rides per patient, the analysis showed.

Prosecutors had video showing some patients walking to and from ambulances, or even being driven to dialysis in personal vehicles instead of the ambulances for which Medicare was billed, Assistant U.S. Attorney Beth Leahy said.

“It’s direct evidence that these patients are ambulatory,” she said, “that they don’t need to be transported by ambulance, yet the companies are submitting claims to Medicare stating that the transport by ambulance is medically necessary for their wellbeing.”

(Charles Ornstein, ProPublica)

More on Medicare’s Latest Data Dump

Yesterday, we noted the New York Times‘ analysis of hospital charges from the Centers for Medicare & Medicaid Services (CMS) latest data dump. The same data dump showed how the amounts Medicare paid to hospitals and other providers for different services. The Hill‘s Ferdous Al-Faruque has pointed out some extreme differences:

health-care-costsThe agency found wide discrepancies in how much services cost in different regions of the nation and within the same geographic area. In 2012 a major joint replacement surgery cost Medicare $15,901 in Baltimore while the same procedure cost $239,138 in Los Angeles, the report says.

This variation appears too extreme. If it is a quality difference, surely the lower-quality provider is so bad that it should not be accepting patients! The seeming arbitrariness of Medicare payments might be one good explanation for the variance in costs observed by the Dartmouth Health Atlas team.

Like the physician data dump, for which we praised CMS, this is a treasure trove of data. CMS has also presented the data in a reasonably user-friendly way. It took me less than ten minutes to figure out the dashboard, which allows users to make charts and tables of almost any shape and size.

Well done, CMS. Keep ‘em coming.

The Medicare Physician Payment “Data Dump”: Don’t Stop Now

In April, the Centers for Medicare & Medicaid Services (CMS) dumped a treasure trove of raw data into the public domain: The Medicare Provider Utilization and Payment Data: Physician and Other Supplier Public Use File.

Resisted for years by organized medicine, this release publicizes a dataset of Medicare payments to doctors by name. The data released are for 2012; and CMS plans to release more data in the future.

The New York Times was well prepared for the data dump, and has an easily navigable website where subscribers can enter any doctor’s name and find out how much he earned from Medicare in 2012. Doctors whose Medicare revenue was in the millions found TV cameras at their offices the next morning, and had microphones stuck in front of their faces. The data continue to be analyzed, with interesting results: ProPublica has concluded that 1,800 providers billed the most expensive rate for any given procedure at least 90 percent of the time, although those rates are only for the most complex cases.

Unnecessary Care

As many as 42% of Medicare beneficiaries in 2009 underwent unnecessary medical treatments, costing the federal government as much as $8.5 billion, according to a study published yesterday in JAMA Internal Medicine. The analysis is the first large-scale examination into what Medicare spends on procedures that are widely considered to be unnecessary, such as advanced imaging for lower back pain and placing stents in patients with controlled heart disease. (KHN)

The Medicare “Doc Fix” Might Not Be Such a Bad Solution After All

This is Austin Frakt:

yuHowever, from another point of view, the formula — as flawed as it is — has helped keep Medicare spending lower than it might otherwise have been. Instead of cutting physician payments by the large amount the S.G.R. demands, Congress has increased payment rates, but typically by only tiny amounts — at an annual rate of just 0.7 percent.

But, although fees have only increased 8 percent since 2000, Medicare’s spending on physicians has increased 69 percent per patient. This is because the number and intensity of treatments has increased significantly. Could doctors have responded to lower real fees by cranking up volume?