By John E. McDonough

Between October 1 and 17, the federal government ceased all nonessential operations because of a partisan stalemate over Obamacare. Although it is premature to declare this the greatest example of misgovernance in modern U.S. Congressional history, this impasse ranks highly.

One casualty of the showdown was any consideration of changes to lessen the impact of the across-the-board sequestration cuts that began on March 1. The cuts have caused economic and other distress across the nation, including serious impacts within the health care sector. Nearly eight months into sequestration, we can move beyond predictions and begin to quantify these effects.

Consider the following impacts of sequestration on Federal health agencies and activities:

NATIONAL INSTITUTES OF HEALTH

Cuts to the FY13 budget: $1.71 billion or 5.5%

This includes:

A 5.8% cut to the National Cancer Institute, including 6% to ongoing grants, 6.5% to cancer centers, and 8.5% to existing contracts

A 5.0% cut to National Institute of General Medical Sciences, and a 21.6% drop in new grant awards

Among the effects:

• 703 fewer new and competing research projects
• 1,357 fewer research grants in total
• 750 or 7% fewer patients admitted to NIH Clinical Center
• $3 billion in lost economic activity and 20,500 lost jobs
• Estimated lost medical and scientific funding in California, Massachusetts, and New York alone of $180, $128, and $104 million respectively.

Dr. Randy Schekman, whose first major grant was from the National Institutes of Health in 1978, said winning this year’s Nobel Prize for Medicine made him reflect on how his original proposal might have fared in today’s depressed funding climate. “It would have been much, much more difficult to get support,” he said.  Congresswoman Zoe Lofgren (D-Calif.) noted the irony that because of sequester cuts, NIH funding was reduced for the research that resulted in Yale’s James Rothman sharing in the 2013 Nobel Prize for Medicine.

Continue reading “The Sequestration Cuts That Are Harming Health Care”

By David Williams

I was a bit surprised by the front-page headline and accompanying article in the weekend Wall Street Journal (IBM to Move Retirees Off Its Health Rolls). The headline and subtext of the article are that IBM is ending health benefits for retirees, leaving them to fend for themselves. But as I read through the specifics that doesn’t appear to be at all what’s happening. Unfortunately, the article’s main impact is to leave an unduly negative impression of private health insurance exchanges.

Retiree health benefits are a big deal, especially for employees who retire before they reach the Medicare eligibility age of 65. A typical early retiree in his or her 50s will face high premiums in the individual market compared to a younger, and typically healthier, person. If they are among the few whose company provides generous coverage they are very lucky.

[On a side note, life is about to get easier for early retirees who have to buy their own insurance, thanks to Obamacare's banning of medical underwriting and limits on the ratio of premiums charged to older people versus younger ones.]

When a person turns 65 life gets a lot easier on the health insurance front as the federal government takes over the vast majority of costs. As a result, a retiree on Medicare is much cheaper for an employer to provide health care benefits to, since they are essentially just paying for supplemental coverage.

Continue reading “Health Exchange Confusion: Why We’re Getting the IBM Story Wrong”

By Michael L. Millenson

If you wanted to know what doctors thought about money and medical practice, including plumber envy, you’d read American Medical News(AMN). That’s the biweekly newspaper the American Medical Association just announced it’s shutting down.

Unlike JAMA, in which doctors appear as white-coated scientists, AMN focused on practical and political issues, not least of which was the bottom line. For outsiders, that’s provided a fascinating window into the House of Medicine.

Take, for instance, the sensitive topic of plumber envy. A 1955 AMA report I discovered during research on a book I wrote some years ago lamented physicians’ “consistent preoccupation with their economic insecurity,” including envious comparisons to “what plumbers make for house calls.”

Flash forward to 1967. Thanks to most patients now enjoying private or public health insurance, doctors’ incomes have improved substantially. The pages of AMN include advertisements for Cadillacs and convention hotels (Miami Beach is “Vacationland USA”). However, one man’s income is another man’s expenses, and complaints about rising medical costs have surged. When AFL-CIO president George Meany joins the chorus of carping, an AMN headline asks, “How about plumbing?”

If today’s doctors have finally piped down about plumbers ­– an electronic search of AMN archives back to 2004 produced no plumbing references – it may be because the average plumber earned about $51,830 in 2011, according to the Bureau of Labor Statistics, while the average general internist earned $183,170. Meanwhile, the AMN ads for cars ­were long ago replaced by ads for drugs, where influencing a doctor’s choice can drive millions or billions in revenue.

Unsurprisingly, the issue of rising medical costs and its causes has been a persistent theme in AMN since its launch in 1958. (For my book research, I pored through its indexes and old issues.) While AMN ran articles with titles like, “Medicine Called ‘Best Bargain Ever,’” the AMA leadership knew health cost unhappiness was not a psychosomatic disorder.

Continue reading “What the Death of American Medical News Says About the Future of American Medicine”

By Brian Klepper & Paul Fischer, MD

With the recent release of two mainstream exposes, one in the Washington Post and another in the Washington Monthly, the American Medical Association’s (AMA) medical procedure valuation franchise, the Relative Value Scale Update Committee (RUC), has been exposed to the light of public scrutiny. “Special Deal,” Haley Sweetland Edwards’ piece in the Monthly, provides by far the more detailed and lucid explanation of the mechanics of the RUC’s arrangement with the Centers for Medicare and Medicaid Services (CMS). (It is also wittier. “The RUC, like that third Margarita, seemed like a good idea at the time.

For its part, the Post contributed valuable new information by calculating the difference between the time Medicare currently credits a physician for certain procedures and actual time spent. Many readers undoubtedly were shocked to learn that, while the RUC’s time valuations are often way off, in some cases physicians are paid for more than 24 hours of procedures in a single day. It is nice work if somebody else is paying for it.

Two days after the Post ran its RUC article on the front page, it reported that the AMA is already visiting Congress in force, presumably to protect its role defining the value of medical services for Medicare. The question now is whether Congress will take steps to remedy the situation.

Continue reading “Why Congress Should Pass the Accuracy in Medicare Physician Payment Act”

By Dan Diamond

“Half of primary care physicians in survey would leave medicine … if they had an alternative.” — CNN, November 2008

“Doctors are increasingly leaving the Medicare program given its unpredictable funding.” – Forbes, January 2013

Doctors, it seems, love medicine so much … that they’re always threatening to quit.

In some cases, it’s all in how the question is asked. (Because of methodology, several eye-catching surveys have since been discredited.)

But physicians’ mounting frustration is a very real problem, one that gets to the heart of how health care is delivered and paid for. Is the Affordable Care Act helping or hurting? The evidence is mixed.

Doctors’ Thoughts on Medicare: Not as Dire as Originally Reported

The Wall Street Journal last month portrayed physician unhappiness with Medicare as a burning issue, with a cover story that detailed why many more doctors are opting out of the program.

And yes, the number of doctors saying no to Medicare has proportionately risen quite a bit — from 3,700 doctors in 2009 to 9,539 in 2012. (And in some cases, Obamacare has been a convenient scapegoat.)

But that’s only part of the story.

What the Journal didn’t report is that, per CMS, the number of physicians who agreed to accept Medicare patients continues to grow year-over-year, from 705,568 in 2012 to 735,041 in 2013.

Continue reading “Why Reports of the Death of Physician Participation in Medicare May Be Greatly Exaggerated”

By Peter R. Orszag

For Medicare, this has been a summer of good and bad news. On one hand, the program’s costs continue to rise remarkably slowly. So far this fiscal year, they have gone up by only 2.7 percent in nominal terms, the Congressional Budget Office reports.

On the other hand, opposition to the Independent Payment Advisory Board — created as part of the Affordable Care Act — continues to mount. And opponents continue to mischaracterize the whole point of the board.

What they seem not to understand is that the board is needed mostly so that that Medicare can continue to encourage slower growth in costs.

One reason costs have been rising so slowly is that systems for paying hospitals and doctors are changing. We’re moving away from the old fee-for-service plan and toward paying for value in health care — and we’re making the shift more rapidly than expected.

Redesigning the payment system is a fundamentally different approach to containing costs. The old way was to simply slash the amounts that Medicare pays for services. And here is where the criticism of the Independent Payment Advisory Board becomes somewhat Orwellian.

The point of having such a board — and here I can perhaps speak with some authority, as I was present at the creation — is to create a process for tweaking our evolving payment system in response to incoming data and experience, a process that is more facile and dynamic than turning to Congress for legislation.

Medicare Experiments
In particular, as Medicare experiments with accountable care organizations, bundled payments and other new strategies, the agency will inevitably need to make adjustments. Questions will come up, such as: How should the payments to doctors, hospitals and other providers be changed to reflect what is learned about the quality of care they provide? How much should the penalties or bonuses be? Is it better to have hospitals face all the costs associated with patient (as in an accountable care organization) or only the costs incurred during a specific episode of care (as in bundled payments)?

Continue reading “The Critics Are Wrong About IPAB”

By Bob Wachter, MD

There are tens of thousands of policies in Medicare’s policy manual, which makes for stiff competition for the “Most Maddening” award. But my vote goes to the policy around “observation status,” which is crazy-making for patients, administrators, and physicians.

“Obs status” began life as Medicare’s way of characterizing those patients who needed a little more time after their ED stay to sort out whether they truly needed admission. In many hospitals, “obs units” sprung up to care for such patients – a few beds in a room adjacent to the ED where the patients could get another nebulizer treatment or bag of saline to see if they might be able to go home. Giving the hospital a full DRG payment for an inpatient admission seemed wrong, and yet these patients really weren’t outpatients either. The Center for Medicare & Medicaid Services’ (CMS’s) original definition of obs status spoke to the specific needs of these just-a-few-more-hours patients: a “well-defined set of specific, clinically appropriate services,” usually lasting less than 24 hours. Only in “rare and exceptional cases,” they continued, should it last more than 48 hours.

A recent article in JAMA Internal Medicine, written by a team from the University of Wisconsin, vividly illustrates how far the policy has veered from its sensible origins. Chronicling all admissions over an 18-month period, Ann Sheehy and colleagues found that observation status was anything but rare, well defined, or brief. Fully one in ten hospital stays were characterized as observation. The mean length of these stays was 33 hours; 17 percent of them were for more than 48 hours. And “well defined?” Not with 1,141 distinct observation codes.

To underscore just how arbitrary the rules regarding observation are, an investigation by the Inspector General of the U.S. Department of Health and Human Services released today found that “obs patients” and “inpatients” were clinically indistinguishable. Their major difference: which hospital they happened to be admitted to.

Continue reading “Medicare’s Observation Status-and Why Attempts to Make Things Better May Make Them Worse”

By Bruce Chernof, MD

Simplistic rhetoric that Medicare is “broken” fails to diagnose where the real challenge lies in creating enduring financial stability for this critical program. Medicare is doing exactly what it was designed to do: draw in funds from working individuals and beneficiaries to help millions of older Americans and people with disabilities pay for medical care. A fundamental problem is how Medicare pays for services and how the delivery system responds to that payment structure.

The current medical care delivery system that Medicare pays for is fragmented, uncoordinated, favors the health care provider over the person receiving care, and is exceedingly expensive. How traditional Medicare pays for services — through a fee-for-service model that values quantity of services over quality of health outcomes — validates the current delivery system. However, with growing overall health care costs, increased use of expensive high-tech medical services, and the coming of age of baby boomers, rising Medicare costs for this broken delivery system threaten to upend the program and bankrupt the nation. But there is hope: Medicare can be used to transform our broken health care system by changing the way it pays for services.

Medicare’s antiquated payment system and the inefficient health care delivery system it encourages creates an even more egregious problem for those individuals who are part of Medicare’s most expensive population: seniors who have chronic health conditions (such as heart disease, asthma or cancer) combined with difficulty with activities of daily life. They see multiple doctors, take numerous medications, and are faced with the difficult task of managing this complex array of providers, services and treatments on their own. The 15 percent of seniors who have both chronic conditions and functional impairments account for nearly one-third of total Medicare costs. Medicare spends almost three times more on these individuals than on those with chronic conditions alone.

Continue reading “A Window of Hope for Fixing Medicare”

By Elliot Fisher, MD & Jonathan Skinner

Since 1973, when Jack Wennberg published his first paper describing geographic variations in health care, researchers have argued about both the magnitude and the causes of variation.  The argument gained greater policy relevance as U.S. health care spending reached 18 percent of GDP and as evidence mounted, largely from researchers at Dartmouth, that higher spending regions were failing to achieve better outcomes.   The possibility of substantial savings not only helped to motivate reform but also raised the stakes in what had been largely an academic argument.   Some began to raise questions about the Dartmouth research.

Today, the prestigious Institute of Medicine released a committee report, led by Harvard’s Professor Joseph Newhouse and Provost Alan Garber, that weighs in on these issues.

The report, called for by the Affordable Care Act and entitled “Variation in Health Care Spending: Target Decision Making, Not Geography,” deserves a careful read. The committee of 19 distinguished academics and policy experts spent several years documenting the causes and consequences of regional variations and developing solid policy recommendations on what to do about them.  (Disclosure: We helped write a background study for the committee).

But for those trying to make health care better and more affordable, whether in Washington or in communities around the country, there are a few areas where the headlines are likely to gloss over important details in the report.

And we believe that the Committee risks throwing out the baby with the bathwater by appearing, through its choice of title, to turn its back on regional initiatives to improve both health and health care.

What the committee found

The report confirmed three core findings of Dartmouth’s research.

First, geographic variations in spending are substantial, pervasive and persistent over time — the variations are not just random noise. Second, adjusting for individuals’ age, sex, income, race, and health status attenuates these variations, but there’s still plenty that remain. Third, there is little or no correlation between spending and health care quality. The report also effectively identifies the puzzling empirical patterns that don’t fit conveniently into the Dartmouth framework, such as a lack of association between spending in commercial insurance and Medicare populations.

Continue reading “Making Sense of Geographic Variations in Health Care: the New IOM Report”

By Douglas Holtz-Eakin & Kenneth Thorpe

Every day, 10,000 people in the U.S. celebrate their 65th birthday, making each one of these seniors eligible for Medicare. The very program that gives America’s seniors access to affordable health care will turn a youngish 48 on July 30, but in a biting irony, it could go bankrupt before reaching its 65th birthday.

We cannot wish away or ignore the reality that Medicare’s Part A trust fund — the portion that pays hospital claims — is currently projected to run out of money by 2026. The good news, however, is that it is possible to put Medicare on a sustainable path if we can surmount current political hurdles.

It is no secret that Washington is better known for what it is not doing than what it is doing these days. Partisan gridlock has proved to be an insurmountable impasse for potentially worthy legislative efforts. This is especially true when it comes to making the changes needed to sustain Medicare’s future, where Washington is truly making things much harder than they need to be.

Much of the current debate has focused on reforms that would only slightly defer Medicare’s pending insolvency, with the potential for mere cost-shifting. With many of those recommendations, political disagreement is so strong that an extremely limited chance exists to pass a compromise version. However, even if enacted, these reforms would only address the symptoms of Medicare’s condition rather than the underlying problem. The result would only help Medicare limp to its 65th birthday at best.

There is a much more meaningful reform out there that addresses the underlying problem, and, surprisingly, bipartisan consensus exists around the need to end the fee-for-service system in Medicare.

The current fee-for-service payment system compensates physicians and other health care providers for each service they deliver, such as an office visit, test or other procedure. While it is critical that providers be fairly compensated, Medicare’s fee-for-service structure contributes to inefficient care that is often disconnected with actual patient outcomes. It has accelerated the program’s financial imbalance with inflationary spending that has little or no connection to helping beneficiaries get healthier.
Continue reading “Can Medicare Reach Its 65th Birthday?”