Last week’s report that the Medicare hospital trust fund will not run out of money until 2029 is perplexing. The system’s trustees said last year that insolvency would occur in 2017, so the 12-year extension of Medicare’s viability comes as quite a surprise. The only major change since the previous annual reports was passage of two convoluted laws that are uniformly criticized for their failure to “bend the cost curve.”
Yes, the reform legislation of 2010 includes dramatic cuts in future federal payments for Medicare services, but it does not meaningfully address the numerous market failures that generate wasteful increases in the volume and costs of care. These structural problems are succinctly and cogently presented in the Statement of Actuarial Opinion at the end (http://www.cms.gov/ReportsTrustFunds/downloads/tr2010.pdf, pp. 281-283). Even the Trustees’ commentary includes appropriate caveats. Nevertheless, their overall message conveys an optimistic outlook that I do not share.
The report’s positive spin is based on a possibility “that providers can improve their productivity, reduce wasteful expenditures, and take other steps to keep their costs within the bounds imposed by Medicare price limitations.” (p. 2) I’ve argued for years that improving productivity and reducing waste are imperatives for providers and payers, for economic and professional reasons independent of Medicare. I fear that the new reform laws will actually thwart the private sector’s efforts to become efficient and effective (i.e., to do things right all the time, as inexpensively as possible). Time and money that should be dedicated to improving operations will be diverted to trying to understand the complicated laws and complying with an exploding array of cumbersome regulations.
As a medical economist focused on building a world-class health care system by incorporating information technologies and performance improvement techniques into daily operations, I am particularly bothered by reform provisions prohibiting providers and payers from using comparative data to reallocate resources toward the least-expensive clinical interventions that provide acceptable outcomes. Economic analysis shows that trade-offs must be made when an economic system hits the limit of its resources. Consequently, providers and payers will increasingly find themselves in an economic Catch-22—better data will support making “discriminatory” coverage decisions that are not allowed under the reform laws of 2010.
All other things being equal, cutting Medicare expenditures would extend the solvency of the trust fund. However, other things are not equal, and Medicare’s gain will create pain elsewhere, sooner rather than later. We still have a broken health system that desperately needs to be fixed. Hence, last week’s report on the trust fund’s extended future does not give me any reason to breathe a sigh of relief. What do you think? Is there a silver lining in the dark cloud of Medicare cuts?
1 comments:
In addition to the erudite comments of Dr. Bauer, the fact is that even the actuary recognizes that Congress has a poor track record of actually allowing cuts to go into effect. The federal government keeps counting the mythical 'savings' from a reduction in reimbursement rates. But once again, Congress has deferred the SGR cuts from going into effect -- going so far, in most instances, as actually raising the reimbursement rates.
This is nothing but a cynical game of pretending to cut and then using the threat of the cut going into effect to garner campaign contributions and then rewarding another constituency for paying off congress to cancel (or defer) the cut.
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