Kick the Medicare Doc Fix Down The Road

 

Confident Doctors

A similar version of this Health Alert appeared at Forbes.

Congressional leaders from both parties have agreed on a long-term, so-called “doc fix” that claims to solve the problem of how the federal government pays doctors who treat Medicare patients.

Currently, Congress has a certain amount of money every year to pay doctors. This amount of money increases according to a formula called the Sustainable Growth Rate (SGR), which was established in 1997. The SGR is comprised of four factors that (by the standards of federal health policy) are fairly easy to understand. Most importantly, the SGR depends on the change in real Gross Domestic Product (GDP) per capita.

The Medicare Part B program, which pays for physicians, is an explicit “pay as you go” system. Seniors pay one quarter of the costs through premiums, and taxpayers (and their children and grandchildren) pay the rest through the U.S. Treasury. Therefore, it is appropriate taxpayers’ ability to pay (as measured by real GDP per capita) be an input into the amount.

The problem is the amount is not enough. If growth in Medicare’s payments to doctors were limited by the SGR, the payments would drop by about one-fifth, and they would stop seeing Medicare patients. So, at least once a year, Congress increases the payments for a few months. The latest patch (H.R. 4302) was passed in March 2014 and runs through March 31, 2015. It costs $15.8 billion.

This has happened 17 times since 1997. Congress has never allowed Medicare’s physician fees to drop. So, why not pass a long-term fix? This would finally free politicians from having to grub around every year finding money to pay doctors, and they could turn their attention to loftier matters.

Actually, there are plenty of reasons to be skeptical of any “doc fix”, and certainly this one.

New Bipartisan Taskforce Seeks to Reform Veterans Health Care

 

American Heroes IITwo weeks ago a bipartisan group of U.S. Representatives joined prominent members of the veteran’s community to discuss Concerned Veterans for America’s new VA reform proposal, The Veterans Independence Act.

Dubbed the Fixing Veterans Health Care Summit, the event featured accomplished speakers and notable health care experts including: Avik Roy (Taskforce Co-Chair and Senior Fellow at the Manhattan Institute’s Center for Medical Progress), Senator Marco Rubio (Rep-FL), Newt Gingrich (former Speaker of the House) and many others.

At least for the moment, taskforce members are not alone in their desire to overhaul the VA. Bear in mind, there remains public distrust in the VA after last year’s discovery that numerous veterans died while awaiting medical treatment.

Obamacare is Driving Up Medicare Premiums

 

Obamacare includes a “health insurance providers fee” that is significantly increasing premiums. The fee is a fixed-dollar amount that is divvied up among insurers according to the amount of premium they write.

People who are really getting hit by this fee include Medicare Advantage beneficiaries who are enrolled in through retiree benefits. Because their former employers pay a share of their premium, the insurance fee has a disproportionate impact.

One reader sent me correspondence from his former employer’s HR department explaining why premiums are going up. In 2011, he paid $32.81 per month for both himself and his wife. In 2012 and 2013, the premium was $42.93. In 2014, it jumped up to $121.03, and $138.93 this year.

According the HR department, $40 (per person) of the 2014 increase was due to the fee, and $8-$10 of the 2015 increase:

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Well, the total increase in premium for 2014 was $78.10. So, we can conclude that the increase was entirely accounted for by the fee. Indeed, their premium would have gone down a couple of bucks, if not for the fee. The same is true for the 2015 increase.

Premiums almost tripled, for the sole purpose of funding Obamacare. No wonder seniors want this repealed and replaced.

Congressional Budget Resolutions Shoot for the Sky; Miss Low-Hanging Fruit

 

The House Budget Committee and the Senate Budget Committee have passed budget resolutions that shoot for the sky with respect to health reform. Their proposals recommit the Republican majorities to patient-centered health reform and show a path forward for the next president. However, they do not harvest some low-hanging fruit offered by President Obama. Failure to do so might doom patient-centered health reform to the forever future.

Obamacare Beneficiaries 2.5 Times More Likely to Have HIV/AIDS Than Commercially Insured

 

One of our themes is that Obamacare causes health plans to attract the healthy and shun the sick. However, they do not succeed, according to a report by Prime Therapeutics, a pharmacy-benefit manager:

During tVariety of Medicine in Pill Bottleshe first year public health exchanges existed, Prime Therapeutics’ (Prime) members who enrolled in plans on these exchanges filled an average of 11.7 prescriptions, exceeding fills by commercial members by 13.6 percent. Public exchange members were also 2.5 times more likely to have hepatitis C or HIV, driving an almost 200 percent higher spend on related medicines.

More specifically, nearly $1 out of every $5 spent on drugs for public exchange members was spent to treat                                               hepatitis C or HIV.

The report also states that exchange beneficiaries are significantly older than commercially insured persons: 42.6 years versus 34.7 years old, on average. 28 percent of Obamacare beneficiaries were between 55 and 64 years old, versus only 16 percent of commercially insured persons.

Why does this matter? While Obamacare beneficiaries are older and sicker than people with employer-based benefits, they have less access to health services. Obamacare is not the right way to take care of these peoples’ needs.

“Next Frontier” – Health Plans Covering Yoga?

 

When a leading benefits consultant writes an article in the Harvard Business Review recommending that health plans should cover yoga, it should be glaringly apparent that we have perverse incentives in U.S. health benefits:

Cigna insurance CEO David Cordani says the Centers for Medicaid and Medicare Services’ recent payment changes that emphasize quality over quantity in healthcare will shift the focus on “sick care to more well care.” But a widespread embrace of diet, fitness and other wellness programs is still a way off……”

Insurers should cover “new wellness- and prevention-oriented treatments such as yoga and meditation, Sukanya Soderland, a partner in consulting firm Oliver Wyman’s health practice, wrote recently in the Harvard Business Review. (Jayne O’Donnell & Laura Ungar USA Today)

Organ Donation and Imminent Death

 

This blog occasionally discusses organ donation. Over the years, there has been increasing government control over organ transplantation. It is not an area where supply and demand can meet in the normal economic sense, because there is a fixed supply of organs that is not adequate to satisfy demand. Many libertarians have proposed that anybody who wants to sell one of his organs should be free to do so. (Currently, we are not.)

Government and the Private Sector: The Case of eHealth, Inc.

 

Businessman Sitting at His DeskFor years now, Wall Street has cheered as Obamacare fuelled the stock prices of corporations in the healthcare industry. One of them was eHealth, Inc., a private health-insurance exchange that was founded in 1997.

Obamacare – in case you need reminding – mandates the purchase of private health insurance for working-age Americans above a low income. Last April, The Motley Fool’s Keith Speights speculated that eHealth might have been “Obamacare’s biggest winner”.

Well, that’s not how things turned out.

eHealth, has announced that it will lay off 15 percent of its workforce and take a restructuring charge of up to $4.7 million. This announcement followed horrific fourth quarter earnings.

Paying for the Medicare “Doc Fix”

 

doctor-xray-2The Medicare Sustainable Growth Rate (SGR) formula was passed as part of the Balanced Budget Act of 1997 to reduce the growth in Medicare spending. The so-called SGR was designed to collectively penalize physicians for exceeding the benchmark expenditures established by Congress. The SGR automatically reduces physician payments under Medicare by a proportion that will lower spending back to the designated growth rate. However, the SGR has not reduced spending primarily because Congress has continually postponed the cuts year after year rather than reform Medicare in sustainable ways. Since 2003 Congress has postponed the cuts 17 times. Beginning in April, physician fees will be cut by 21.2 percent if Congress does not kick this can down the road an 18th time. Congress has not repealed the SGR mostly because it would cost $140 billion over 10 years and require offsets.

The SGR clearly isn’t working; the reason Congress won’t allow the cuts to take place is because too many seniors would lose access to physicians willing to treat them. What is needed is fundamental reform. But a good first step down that road would be to repeal the SGR and pay for it with several costly offsets. Two good ideas that President Obama has supported in the past include: 1) reducing the percentage of Medicaid provider taxes that states are allowed to use to qualify for a federal match; and 2) eliminating some of the Medigap Supplemental Plans that everyone agrees leads wasteful spending.

400 Percent Cost Difference to Treat Prostate Disease

 

UCLA researchers have for the first time described cost across an entire care process for a common condition called benign prostate hyperplasia (BPH) using time-driven activity-based costing. They found a 400 percent discrepancy between the least and most expensive ways to treat the condition.

The finding takes on even further importance as there isn’t any proven difference in outcomes between the lower and higher cost treatments, said study first author Dr. Alan Kaplan, a resident physician in the UCLA Department of Urology.

“The rising cost of health care is unsustainable, and a big part of the problem is that health systems, health care providers and policy makers have a poor understanding of how much health care really costs,” Kaplan said. “Until this is well understood, taxpayers, insurers and patients alike will continue to bear the burden of soaring health care costs.”(UCLA Health)

From the study itself: “Although listed as ‘optional’ in practice guidelines, invasive diagnostic testing can increase costs by 150% compared with the standalone urology clinic visit. Of five different surgical options, a 400% cost discrepancy exists between the most and least expensive treatments.

We know why this happens: Patients are not involved in forming prices in U.S. health care. One solution is reference pricing. Why that has not yet taken of like wildfire is a question that we will be addressing in future entries.