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national health care spending

On the eve of the release of this year’s Medicare Trustees report, the Obama administration released its own version of it. In the administration’s telling:

  • Health reform (ObamaCare) will save taxpayers $200 billion in the Medicare program through 2016.
  • About 90% of these savings will be produced by lowering “excessive payments” to Medicare Advantage plans, lower payments to doctors, hospitals and other providers to reflect their “improved productivity,” and through efficiencies gained by what is learned from “demonstration projects.”
  • The demonstration projects include pay for performance, bundling, Accountable Care Organizations, and other frequently discussed ideas.

But whereas the Trustees report is expected to be a serious document, reflecting accepted accounting principles, the administration’s document was clearly a piece of political propaganda — one that stretched the truth so much that the word “spin” would be a charitable description. For example, the administration’s document failed to mention that:

  • The Congressional Budget Office has studied the demonstration projects on three separate occasions (here, here and here) and each time has concluded that they are producing no serious savings and are unlikely to do so in the future.
  • Medicare’s Actuary has determined that reductions in payments to Medicare Advantage plans will not only result in lower benefits for the one in four seniors who are in these plans, but that about 7 ½ million enrollees will actually lose their coverage and have to seek more expensive Medigap insurance elsewhere.

Continue reading “Bernie Madoff Accounting for Medicare”

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The Wall Street Journal (Pain for Europe’s Smaller Drug Firms) notes that Spain, Greece, and Italy are putting the squeeze on drugmakers as part of national austerity programs designed to ease the debt crisis. Companies like Almirall and Alapis that depend heavily on those markets are suffering mightily as national health systems cut reimbursements. There’s less appetite for cuts to hospitals and physicians, and none for taking away coverage.

The US fiscal situation isn’t as pressing as Southern Europe’s. Still if present trends continue, we’ll get there. In fact, uncontrolled health care spending –mainly Medicare– is the culprit. So what can we expect in a 10 year time frame, assuming the US’s finances aren’t straightened out by then?

  • Hospitals and physicians are likely to get hit harder in the US than Europe. That’s partly because physicians get paid more here than Europe and also because Medicare sets rates and pays providers directly
  • Pharmaceutical companies won’t escape the axe, but they’re a bit less vulnerable politically in the US because they are a major source of R&D spending, are seen as innovative and a more attuned to the political system

Continue reading “Is Southern Europe’s Debt Crisis an Omen for US Health Care?”

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Vikram Khanna
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