Wednesday, September 14, 2011

Surrealism surrounds federal payment discussions

The discussions in Washington, DC, about the future of Medicare and Medicaid have gone totally haywire.  Check out this story in the New York Times.

We'll start with the lede:

As Congress opens a politically charged exploration of ways to pare the deficit, President Obama is expected to seek hundreds of billions of dollars in savings in Medicare and Medicaid, delighting Republicans and dismaying many Democrats who fear that his proposals will become a starting point for bigger cuts in the popular health programs.

Is this some odd way of the President delivering on his promises relative to his health care reform legislation?  Remember, he said he was hoping for three things: (1) a reduction in health care costs; (2) an increase in access for people currently uninsured or under-insured; and (3) maintaining choice for people in their selection of doctors and hospitals. But, as I noted at the time:

On the cost front, the president for now seems to be confusing underlying costs with how much the government chooses to pay. . . .  Reductions in appropriations might reduce costs to the federal government, but they do not reduce the underlying costs of care. 

Well, maybe they intend to just cut the rates to doctors.  After all, each year, just before an automatically scheduled rate reduction occurs, Congress votes to defer it.  But this year for sure.  Right.

Or maybe they will change the eligibility age for Medicare.  From the Times:

In negotiations with Congressional Republicans in July, Mr. Obama went further. He indicated that he was willing to consider a gradual increase in the age of eligibility for Medicare . . .

Gee, we've come a long way from proposals that might have decreased the age of eligibility.

. . .  and cuts in federal payments to states for Medicaid. 

The head of the New York Hospital Association explains:

Further cuts in the growth of Medicare and Medicaid would not only impair access to care, but also lead to job loss in the health care industry, directly contravening the president’s goal of job creation.

I have made this point, too:

With 50% of American hospitals operating at a deficit right now, it is hard to imagine how a reduction in federal payments . . .  deals with the cost problem. 

It isn't often that I hope for gridlock in Washington, DC, but these folks seem so confused about what's up that paralysis might be just what the doctor ordered.


Anonymous said...

Medicare and Medicaid are far from the only Washington discussions which have gone 'totally haywire', I fear. However, your point is excellent that none of these proposals address the root cause of the problem - continually rising health care costs, not reimbursements.


@jordangrumet said...

From Twitter:

I agree...gridlock preferable.

Keith said...

Any snapshot of hospital finances can be very deceiving. The AHA often points to statistics showing a large percentage of hospitals losing money in a given year, but a better gauge would be a 5 to 10 year interval to look at hospital finances.

Here in Chicago we have a building boom of shiney new hospitals and a barage of advertising to tout these new facilities and their cutting edge equipment and techniques. Each of these new hospitals will claim it loses money on Medicare, but when you invest bilions of dollars in fixed plant costs that inflate your expenses, what do you expect?

My examination of many of these large institutions show that from year to year, many will report losses on their form 990. Almost always, these losses are due to downturns in the stock market that reflect losses in their large endowments they have stashed away, and do not relect big deficits in day to day operating costs.

The problem is one of payment for hospital services and relates more to location of hospitals and whether a given hospital services a large populaton of uninsured and Medicaid recipients. Health care reform hopefully corrects this to some degree by insuring more of the population, but unfortunately most of this newly insured pool will have Medicaid insurance that still provides payments that do not cover full costs.

Bottom line, I am not sure you can make the argument that Medicare cannot be cut for hospital care given what the reality dictates. Maybe the only way to stop this medical arms race is to starve the beast and make healthcare execs make hard decisions about what is most pertinent for delivery of cost effective health care to their community.