Costs Are Not The Same As Rates

Many “old” media outlets do not identify the authors of their editorials. Thus, when an opinion is offered, you have no way of knowing who wrote it or what their qualifications are. Your only recourse when there is something unsupported or absurd used to be to send a letter to the editor, where you have about a 0.5% chance of being chosen for publication. And they would edit what you sent in. Then, blogs were invented.

This thought was prompted last week when I read a New York Times editorial entitled, “Financing Health Care Reform.” Here’s the quote in question:

Meanwhile, it will be important to get some guaranteed fast savings from the health care industries by cutting and reallocating hundreds of billions of dollars from projected spending on Medicare and Medicaid, as the Obama administration has proposed and Congress is considering. Just to be sure, Congress ought to establish a fail-safe mechanism that could impose additional cuts after a few years if savings are less than projected.

Since I don’t know the author(s) or whether he/she/they actually know anything about Medicare and Medicaid, I am uncertain how to respond to this suggestion. Except to say: “Are you out of your mind?” Medicare rates just barely cover costs today, and Medicaid rates have not covered their costs in years.

This is all part of a general confusion about cost savings versus appropriation savings, a point I madeĀ back in March:

On the cost front, the president for now seems to be confusing underlying costs with how much the government chooses to pay. His budget proposal apparently would reduce Medicare payments to doctors and hospitals as a way of building a savings account for greater access. Reductions in appropriations might reduce costs to the federal government, but they do not reduce the underlying costs of care. With 50% of American hospitals operating at a deficit right now, it is hard to imagine how a reduction in federal payments for Medicare patients deals with the cost problem.

If we have a desire, which I support, to provide greater access to health care, let’s consider it a national priority and pay for it directly. But a fear of using the dreaded “T” word — taxes — is causing the executive and legislative branches to force cuts in services. And meanwhile, the President doesn’t want to us to use the word rationing because he knows the negative political ramifications of that (even though we certainly ration care today, mainly by family income). But what do you think will happen if you cut revenue to health care institutions and doctors?

Readers here know that I strongly support improvements in the quality and safety of patient care and the reduction of inefficiencies in the provision of care. Washington seems to think you are more likely get those improvements by underpaying hospitals and doctors for the care they deliver. You will not.

How you get there is not simple, but it involves transparency of clinical outcomes and rate structures so employers and workers can see the actual value offered by different health care providers. This would stimulate competition, too, in that insurance companies could then offer plans and products that reflect providers’ relative value propositions to their subscribers. Meanwhile, let’s pay primary care doctors and other cognitive specialists rates commensurate with their real importance in the health system. Then, they could take the time needed to care for patients appropriately and not just act as a triage way station to higher cost specialties and invasive procedures.

Isn’t it revealing that Medicare and Medicaid could today set an example for all by requiring this kind of transparency and these payment changes, but there has not been the will to do so?

So, instead, we take a political shortcut, one that will have adverse consequences for years to come.

Paul Levy is the President and CEO of Beth Israel Deconess Medical Center in Boston. He blogs about his experiences at Running a Hospital, one of the few blogs we know of maintained by a senior hospital executive.

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