The truth about Medicare – post healthcare reform
Participants in Medicare – and the baby boomers soon to join their ranks – continue to express genuine concern over what proposed budget cuts will mean to the quality of care they can expect should health care reform succeed.
On the surface, one might find reason to worry. The President tells us that 2/3 of the additional trillion dollars we would be spending to improve the health care system will be achieved by cuts in the Medicare budget. Supposedly, these cuts are going to happen through effective savings in Medicare that will not take away benefits.
Come on… who in their right mind would believe that the government can actually save all this money without screwing up this popular program?
It turns out, it can actually be done and done in a way that even the government might not be able to screw it up. Shocked? Stunned? Thinking I must be having a brain hemorrhage if I actually believe such a ridiculous idea?
Maybe all of the above. But let’s take a look as you might be surprised.
House Bill 3200, the Bill which emerged from Henry Waxman’s Committee, lays out what we might expect.
Here is where the savings are to be found:
Medicare Advantage – 32% of the proposed savings would come from Medicare Advantage- the private Medicare insurance plan that offers “all-in-one” medical and drug coverage. These plans, which operate very much like the private insurance programs with which we are familiar, offer HMO and PPO style coverage. Medicare Advantage came into existence in 2003 and has become fairly popular with about 10 million people enrolled since its creation.
The problem is that the plan has not worked out as originally conceived. The idea had been to better organize Medicare delivery through the Medicare Advantage program in the hope that a better managed private program would actually lower Medicare expenditures. Certainly, Medicare expected the operators to make a profit but after the savings they accomplished and with the profit they would earn, is was supposed to be a wash. It didn’t happen. Currently, Medicare Advantage programs are being reimbursed by the government at the rate of 114% of the cost to provide identical services directly from basic Medicare. And where is this extra 14% going? Obviously, not towards efficiency to save the government money or it would not be costing the government more than doing it themselves. Rather, the 14% is going directly to the bottom line of the insurance companies offering these programs.
HR 3200 would pull these reimbursements back to basic Medicare rates over several years. The plans could continue – but they would not be permitted to cost the government more money than if the government just did it themselves.
It’s not hard to see how this will save money without costing Medicare participants any benefits.
Provider Payments- An additional 37% in Medicare cuts would be accomplished by cuts in provider payments over a ten year period. This is not a cut in current rates paid to your doctor- it is a reduction in the amount of increases in the rates that are to be paid to providers over the next ten years. An argument could be made that if we don’t adequately reimburse our health care providers, they will cease taking on Medicare patients. We have, after all, seen some of that already. If this were to occur, it would be fair to say that this, in and of itself, is a reduction of benefits to participants. However, HR 3200 actually adds $320 billion to the budget for the express purpose of adding incentives to physicians to become primary care doctors by helping them with the cost of their medical education and other benefits to encourage them to enter a primary care practice. This should result in an increase in primary care physicians available, helping to repair a shortage which is currently reaching crisis proportions. By widening the base of primary care docs available there would likely be more physicians happy to take on Medicare participants.
In fact, according to Joe Baker, president of the watchdog organization Medicare Rights Center, health care providers are indicating approval with this change as they anticipate an increase of “business” as a result of the added patient base that will be created through reform (more people with access to health care) and less need to provide charity care.
Reducing Hospital Readmissions- Currently, approximately 30% of people sent home from a stay in the hospital are back in a hospital bed within 30 days. This is the result of a failure of follow-up care on the part of patients and their doctors. The new legislation would require hospitals to put in place programs designed to stay on top of discharged patients to lower these numbers. If successful, this would not only greatly benefit patients but would dramatically lower the costs of patients coming back to the hospital when it should not be necessary.
Maybe these savings aren’t so crazy after all. Each of these provisions in HR 3200 can be simply implemented and are very likely to survive even the most inept branch of government. Go figure.
It gets better. Not only do the provisions of HR 3200 stand a decent change of cutting costs so that they can be used to improve the health care system, the bill actually adds some benefits to Medicare recipients. Most importantly, HR3200 would close the dreaded “donut hole” in Medicare Part D which leaves many of our senior citizens having to ration their prescription drugs once they hit the limit of what Medicare will currently pay. As it stands now, once a Medicare participant spends $2500 on drugs within a calendar year, they are on their own to cover their drug expenses up to $4500. This leaves more people than you might imagine cutting back on their prescription amounts, taking half the dosage they are supposed to take in order to make the drugs last longer. Where do you think this leads? Right to a stay in the hospital which simply adds billions of extra costs to care for these people versus what it would have cost to allow them to take their meds as prescribed in the first place. After a patient has reached the $4500 amount, if they can afford to get there, their catastrophic coverage becomes effective and Medicare begins paying the drug bills once again. If passed, HR 3200 would phase out the donut hole gap over a 14 year period.
One more thing to keep in mind – as the baby boomers enter the age of Medicare, one incredibly powerful political constituency is being created. Today’s seniors already have a very loud voice. Now, imagine the addition of the baby boomers to the ranks of “senior-hood.”
Given the realities of politics, its not much of a stretch to see how Medicare will not only be protected, but should flourish for many years to come.
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You are so right on all counts. Medicare Advantage is costly, and fixable if we get the insurance profits out. My daughter, an RN with NC nonprofit, often works as a discharge nurse. If everyone had the services she provides (and knew the horror stories I survived with my good husband post-surgery) we could reduce hospital readmissions by about 90%.
This is a great, easy to read summary of the proposals on the table. But to really save money on Medicare, while improving healthcare delivery and outcomes, we need to get beyond the acute care bias for reimbursement. Case Management, by RNs, needs to be reimbursed by Medicare, as does expanded homecare for chronic illness. This would cut down on hospitalizations and ER visits by so-called “frequent flyers.” Its time to think outside the box on what constitutes healthcare delivery. There are some proposals to fund some of these programs – The Independence at Home Act, The CLASS Act, and changes to funding Adult Day programs have been proposed. Bundling services by diagnosis would also help.
Nothing will be resolved re:controlling costs until the reimbursement model changes – including the highly unpopular topic of controlling aggressive, futile, expensive end of life care, by implementing best practice, outcomes based models for reimbursement.
The statement that the extra 14% for Medicare Advantage is “going directly to the bottom line of the insurance companies offering these programs” is not accurate.
Do insurance companies make money on Medicare Advantage? Yes. Should payments be scaled back? Yes. But the truth is that almost all of the extra payments are going directly back to the members of these Medicare Advantage plans in the form of increased benefits. Therefore cutting the program will indeed cut the benefits for the 10 million currently enrolled in the program (25% of all beneficiaries).
I agree that the Medicare Advantage program did not create the efficiencies intended. But what is worrisome and ironic is that the other supposed Medicare savings in the form increased primary care and reduced hospital admissions are already what Medicare Advantage plans do. And this has not made the system more efficient or less costly.
bf72- Thanks for the comment. I do, however, think I must disagree with you. The 114% of Medicare Advantage payments versus the 100% of Medicare costs for the identical services. It is absolutely correct that Medicare Advantage does offer some benefits in addition to those covered directly by Medicare, but those benefits, and their cost, are not used in the comparative analysis. Thus, the 14$ overage is, indeed, an apples to apples comparison of medicare directly offered services.
In response to another comment. See in context »It’s not apples to apples. It’s been a media political driven message that the 114% is for identical services. It’s 114% over the cost of Original Medicare but not adjusted for benefits. To make it apples to apples Insurance companies are still overpaid but closer to 103%. I still agree that it should be cut back but everyone should recognize that this means less benefits and/or higher premiums for these 10 million (mostly low income) Medicare Advantage members.
In response to another comment. See in context »bf72- I disagree. The 114% is adjusted to match the actual services provided directly by Medicare. While many of the Medicare Advantage programs advertise that they provide substantially greater benefits, this is not as it would seem. Indeed, some have been busted for false advertising. The programs that provide some (and they are very few) additional benefits, charge a larger premium. The purpose of the Advantage program was to bring an HMO or PPO approach to Medicare. While Medicare allows you to see any doctor you want, the HMO and PPO approaches of Advantage are considerably more restrictive. A beneficiary seeking Medicare plus expanded benefits is dramatically better off electing the Part F supplement to Medicare. You will pay a bit more than the premium to pay to Advantage but you actually get something additional for it. Advantage is a rip-off, pure and simple and it provides scant added benefits – and considerably more limitations-than getting service directly from Medicare – and for 14% higher costs.
In response to another comment. See in context »I’m not sure why this doesn’t get more coverage. These are great little things that can be done. A thought I had recently about the public option, and its loss, is perhaps, this is part of the seemingly omniscient Obama plan. He started the bargaining higher than he really wanted, knowing that he could never get a public option, but that when it got shot down, the Republicans would be happy, and he would be happy to, because he would get what he wanted, and the Republicans would think they won too. Or not.
[...] of the myths of Medicare cutbacks in today’s posting; he refers readers to his previous The Truth About Medicare – Post Healthcare Reform for [...]