Tag: "Medicare"

Why Does Medicare Spending Differ from One Area to the Next?

Answer: It’s not supply-induced demand or differences in practice patterns (the favorite answers of the Dartmouth Atlas crowd).  It’s differences in health status. This is from the study:

Nonetheless, a key finding from this work is that key conclusions from prior small area analyses (e.g., Fisher et al. 2003; Center for the Evaluative Clinical Services 2007) that much of the variation in cost of treating Medicare beneficiaries is driven by supply-induced demand (e.g., “supply-sensitive care”) cannot be supported when one comprehensively controls for health status and conducts analysis at the beneficiary level. Zuckerman et al. (2010) reaches a similar conclusion. Medical specialists serving as USOCs and the proportion of medical specialists in the county were the only two supply-side variables with positive effects on costs consistent with other research (Fisher et al. 2003; Baicker and Chandra 2004). However, the strength of the medical specialist results, though not trivial, would explain little of the geographic variation documented in the Dartmouth Atlas. The supplies of hospital beds had significant positive effects among high-cost beneficiaries, but elasticities suggest that the magnitude of the effect is extremely small: doubling hospital bed supply would increase costs by <2 percent.

Physician choice of treatments may still have some impact on cost for certain procedures although the latest research seems to indicate that its effect on regional variation for total spending is small. Further, over time, the physician discretion may decrease in the Internet age due to 1) patients being more informed of their treatment options and 2) physicians gaining easier access to information on best practices. Nevertheless, the most recent research clearly indicates that patient health status is the key driver of medical spending.

HT: Jason Shafrin

Sep 20, 2011 | 5 comments | by

Comparing Lifetime Costs and Benefits of Entitlement Programs

This is from Gene Steuerle:

[o]ver a wide range of scenarios, [Medicare] beneficiaries retiring at age 65 in 2011 can expect to receive dramatically more in total benefits than they have paid in dedicated taxes. For example, single beneficiaries and dual-earner couples who had earned the average wage throughout their working careers can expect to receive about $3 in Medicare benefits for every $1 paid in Medicare payroll taxes. If only one member of the couple had worked, we calculate a six-fold difference between contributions and benefits since both spouses are eligible for Medicare yet only one has paid taxes….

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Sep 15, 2011 | 3 comments | by

How to Raise Revenue without Raising Taxes

When Medicare was established, it had two parts, A and B. Part A pays for hospitalization and is financed by a payroll tax that all workers pay. Part B pays for doctors’ visits and is voluntary. Its cost is financed by premiums paid by beneficiaries and by general revenues.

Originally, beneficiaries paid for 50 percent of Part B’s benefits. But in 1973, the law was changed and the percentage of benefits covered by premiums fell steadily until 1985, when premiums were fixed at 25 percent of the program’s costs. Thus if beneficiaries still paid as much of Medicare Part B’s costs as they originally were supposed to then federal revenues would be $65 billion higher this year.

And here’s the kicker: higher Part B premiums wouldn’t count as higher revenues, but as lower spending for Medicare. Therefore, it would not be a tax increase, would not violate the sacred pledge and would cut Medicare, which Republicans all say they want to do.

Full Bruce Bartlett column worth reading.

Sep 15, 2011 | 3 comments | by

Can Medicare be Cut Without Harming Patients?

Yes, according to former White House advisors, Zeke Emanuel and Jeff Liebman:

  • Late last year, the Food and Drug Administration determined that the drug Avastin, which has serious side effects, is not effective for treating breast cancer. Astonishingly, Medicare declared it will still pay for Avastin — at a cost of about $88,000 per year for each patient.
  • Consider colonoscopies. The United States Preventive Services Task Force recommends not doing colonoscopies for most people over 75 because there is no evidence that they save lives in this population. Moreover, the risk of perforating the intestines rises with age. Yet Medicare pays for the procedure regardless of the patient’s age.
  • Every year more than 1 million cardiac stents are placed in patients to open blocked arteries. Stents are essential immediately after a heart attack, but a 2007 randomized trial conducted at 50 medical centers in the United States and Canada showed that for patients with stable heart disease, stents do not reduce the number of heart attacks or save lives when compared with drug therapy. And they are substantially more expensive.
Aug 29, 2011 | 5 comments | by

Is Kathleen Sebelius Listening to the NCPA?

Apparently so. But she’s only understood half the message.

For several years now, NCPA scholars have been calling for a radical change in how Medicare pays doctors and hospitals — in The Wall Street Journal, in NCPA publications and at this blog.

Here’s the idea: Instead of having Medicare fix millions of prices for predetermined packages of care, we should allow providers the opportunity to produce better care and cheaper care by repackaging and re-pricing their services. Everyone on the provider side should be encouraged to make Medicare a better offer. Medicare should accept these offers provided that (1) the total cost to government does not increase, (2) patient quality of care does not decrease and (3) the provider proposes a reasonable method of assuring that (1) and (2) have been satisfied.

Instead of maximizing against reimbursement formulas, doctors and hospitals would be encouraged to discover more efficient ways of providing care. They would be able to make more money for themselves as long as they save taxpayers money and patients don’t suffer.

Last week Secretary Sebelius seemed to indicate she has heard the call. Going forward, providers will be able to offer to perform heart surgery and other procedures for a lump sum (bundled) price covering all aspects of the procedure and (like Priceline) they can name their own price! Medicare will accept the offer if taxpayers are likely to come out ahead on the deal.

Unfortunately, Medicare will dictate what the bundles will look like. Providers will be able to re-price, but not repackage. You might think this represents progress for people who were previously pushing pay-for-performance and other command-and-control strategies designed inside the Washington Beltway. Yet, ironically, re-pricing without repackaging could actually make things worse.

 

I’ve tried and tried

To say what’s on my mind

 

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Aug 29, 2011 | 20 comments | by

CMS’ Noncompetitive Bidding Process

Last Friday, CMS announced that it will be expanding its durable medical equipment bidding pilot program nationwide. Although the term “competitive bidding” might make you think that this is a good program, the reality is much different. Benjamin Zycher explains it best:

The experimental literature on the CMS auction design is unambiguous: it yields prices too low. This outcome results from the design features: bids are not treated as binding commitments, the contract price is the median among the winning bids rather than the bid reflecting marginal cost, the composite bid system of averaging over heterogeneous products skews bids in ways driven by perceived errors in demand projections, and the allocation of market shares is opaque. These problems yield prices about one-third to two-thirds below the competitive price.

What does all of this mean? Expect to see more medical device suppliers go out of business and increasing medical supply scarcity. This will increase Medicare costs as seniors go back to the hospital due to complications from lack of supplies.

What started as a program to save money for Medicare is now going to drive up costs, and it’s all because CMS doesn’t understand how a real competitive bid is supposed to work. If you’re feeling especially brave, try reading through the competitive bidding regulations. A real competitive bidding process doesn’t need 100 pages of guidelines.

Aug 26, 2011 | 3 comments | by

Is Medicare More Efficient than the Private Sector?

This post was written by Tom Saving and me and originally appeared at the Health Affairs blog. Readers may want to check out the extensive debate in the comments section.

Of all the issues bandied about in the recent debate over the debt ceiling, none generated more contention, more TV ads and more unseemly rhetoric than potential changes to Medicare.

Health economists generally believe that Medicare is on an unsustainable course and is desperately in need of reform. Yet public opinion polls show that most seniors disagree. They not only resist cuts in Medicare to solve the problem of federal deficit spending, they also resisted the spending cuts and delivery of care innovations envisioned by the Affordable Care Act (ACA), as well as the private insurance innovations envisioned by Rep. Paul Ryan (R-WI) and the House Republicans.

In short, most seniors would like to keep Medicare just like it is.

A similar view is held by a small, but vocal group on the left that favors single-payer national health insurance. The Physicians for a National Health Program, for example, claims that Medicare has lower administrative costs than private insurance and is able to use its monopsony (single-buyer) power to suppress provider fees. The group, which is resistant to managed care, favors “Medicare for all” and endorses a bill to do just that by John Conyers.

Paul Krugman, writing in The New York Times, also argues this way. He points to a chart (see Figure I) which seems to show that Medicare per capita spending is growing at a slower rate than private insurance. Krugman, along with others, touts the slower rate growth in the Canadian health care system (also called “Medicare”). In recent editorials, both Krugman and Robert Reich have joined the call for Medicare for everyone.

Are these unconventional critics right?

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Aug 22, 2011 | 17 comments | by

A Market for Health Care Rationing

Here’s the proposal:

  • Assign new Medicare enrollees a credit for total benefits capped at, say, $150,000 that would be adjusted for inflation annually. After the credit’s exhausted, they’d be on their own.
  • Permit beneficiaries to buy or sell Medicare credits, at whatever [price] that could be negotiated.
  • Limit the percentage of one’s credits that could be sold, so that no beneficiary could fritter away all his or her allotment on flat-screen TVs or Caribbean cruises.
Aug 18, 2011 | 15 comments | by

Health Policy Schizophrenia

The Obama administration has told us how it intends to change Medicare many times and in many places.

It wants to replace fragmented decision making by independent doctors with coordinated care delivered by doctors working in teams, connected to a medical home. It wants Medicare to purchase quality, not quantity. It wants decisions to be evidence-based. It wants electronic records in order to standardize care and reduce errors.

So how does the administration plan to get all this done?  It plans to spend hundreds of millions of dollars on pilot programs to try all these ideas out and then ……

Wait a minute. Aren’t these ideas already being tried out somewhere? Yes. In Medicare, as a matter of fact. How well are they working? As a long-time critic of managed care, I admit the results look pretty good.

So if the Obama administration’s core ideas have already been tried and tested and they are well underway, why are we spending hundreds of millions of dollars reinventing the health delivery wheel? I thought you’d never ask. If you are practical and pragmatic, you wouldn’t — especially when the government is running out of money anyway. But if you are intensely ideological, there are three reasons:

  • First, the place where these ideas are being implemented and vetted is in Medicare Advantage plans; Barack Obama campaigned against these plans in his presidential bid, claiming that they were over-paid.
  • Second, the Medicare Advantage plans are run by private insurance companies; many legislators hate them because (a) they are private, (b) they are insurance, and (c) they represent “privatization” of Medicare.
  • Third, the ideas that are being tried and vetted are originating in a competitive marketplace instead of where the administration thinks that health delivery ideas are supposed to come from — a government bureaucracy.

I know. It’s so bizarre that not even J.K. Rowling could make up a story like this.


Crazy

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Aug 17, 2011 | 50 comments | by

Should the Age of Eligibility for Medicare be Increased?

Here is Arnold Kling, explaining a Timothy Taylor point better than Timothy explains it:

The reason that raising the age of eligibility for Medicare does not produce a large effect is the phenomenon of “morbidity compression.” Basically, no matter how long you live, if you die a natural death, most of your health problems will be concentrated in roughly the last three years of your life. Bad problems kick in at around 72 for people who die at 75, and at 92 for people who die at 95. These days, if you make it to age 65, there is a good chance you will not have really expensive medical problems until you are in your late 70s, so raising the age of government dependency for health care does not do much to reduce Medicare’s cost.

 

Aug 15, 2011 | 6 comments | by
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