Tag: Medicare Reform

Medicare Musings

Aug 18, 2011• 35

By DAVID DRANOVE

I have been thinking about the connection between healthcare cost growth and the budget crisis. Many pundits have pointed out that rising Medicare costs are one of the biggest contributors to our budget mess. Republicans want deep cuts in future Medicare spending while Democrats are sensitive to constituents who demand the Congress keeps its hands off “their Medicare.” Current Medicare spending growth trends are unsustainable – at some point the math will trump the politics.

There are several options for putting Medicare on a much lower cost trajectory. Here is what I have come up with:

1) Do nothing but pray. Projections of future spending growth are mostly guesswork. Maybe the guesses are wrong. Consider that technological change has been a major driver of cost growth. (It is interesting to ask why medical technology nearly always seems to cause spending to increase, but I will save that for another blog.) Perhaps medical science has reached the bottom of the well and that output of costly new technologies will slow to a trickle. Of course, this will also mean that a century of advances in medical care will come to an end. I don’t know if we will really be better off; we will spend less on medical care than we projected, but we will also receive fewer benefits than we projected. Besides, the head-in-the-sand approach to cost cutting hasn’t worked yet. (Note to readers. Please do not comment that we can save the system through prevention. The Committee on the Cost of Medical Care already made the same point – in 1932.)

Paul Ryan Still Doesn’t Get It

May 26, 2011• 99

By ROBERT REICH

Republican House Budget chief Paul Ryan still doesn’t get it. He blames Tuesday’s upset victory of Democrat Kathy Hochul over Republican Jane Corwin to represent New York’s 26^th congressional district on Democratic scare tactics.

Hochul had focused like a laser on the Republican plan to turn Medicare into vouchers that would funnel the money to private health insurers. Republicans didn’t exactly take it lying down. The National Republican Congressional Committee poured over $400,000 into the race, and Karl Rove’s American Crossroads provided Corwin an additional $700,000 of support. But the money didn’t work. Even in this traditionally Republican district – represented in the past by such GOP notables as Jack Kemp and William Miller, both of whom would become vice presidential candidates – Hochul’s message hit home.

Ryan calls it “demagoguery,” accusing Hochul and her fellow Democrats of trying to “scare seniors into thinking that their current benefits are being affected.”

Scare tactics? Seniors have every right to be scared. His plan would eviscerate Medicare by privatizing it with vouchers that would fall further and further behind the rising cost of health insurance. And Ryan and the Republicans offer no means of slowing rising health-care costs. To the contrary, they want to repeal every cost-containment measure enacted in last year’s health-reform legislation. The inevitable result: More and more seniors would be priced out of the market for health care.Continue reading…

Much More Reform Needed for Medicare?

May 19, 2011• 13

By ROGER COLLIER

This week’s startlingly gloomy annual report from the Trustees of the Medicare Trust Funds lent new urgency to the need for further Medicare expenditure reforms. Whether Washington DC politicians will respond with more than sound bites is less likely.

The Trustees’ report shows a dramatic deterioration—even based on the most optimistic assumptions— in the financial position of the Part A Trust Fund, along with expectations of continued faster-than-GDP growth for Parts B and D.

Compared with the prior year’s Trustees’ report, which forecast that the Part A Fund would run out of money in 2029, the latest report estimates that the fund will dry up in 2024—five years sooner. The reasons for the sudden acceleration of financial disaster include a significant drop in revenues from taxes on workers’ earnings due to the ongoing recession, and new forecasts of longer life spans for beneficiaries.

The report also includes new forecasts for Medicare Part B and Part D, which operate on a pay-as-you-go basis using mixes of beneficiary premiums and general federal monies. While Parts B and D will not exhaust their respective trust funds, they will have increasing impacts on the deficit as their federal subsidies are forced to increase. Medicare B costs are projected to grow at a 4.7 percent annual rate (based on current law), and Medicare D at a 9.7 percent rate through 2020, compared with forecasts of 5.2 percent annual GDP growth.Continue reading…

Goodman’s Law

Dec 17, 2010• 13

By JOHN C. GOODMAN, PhD

The other day I ran across five items of interest:

1. A news article about Medicare paying $800 to rent a wheelchair that could have been purchased outright for $350;

2. An article in The Atlantic arguing that the United States spends more on renal dialysis and gets worse results than other countries because of the nonsensical way we pay for dialysis;

3. A Uwe Reinhardt explanation of how Medicare pays hospitals (via an approving pointer from Austin Frakt) along with Uwe’s defense of the system; but nonetheless linking to

4. A Reinhardt Health Affairs interview with former CMS director Tom Scully who opines that “Medicare is a dumb payer;” and

5. A Reinhardt explanation of how Medicare pays doctors (7,000 physician tasks, each with a price that varies for every city, town and hamlet in the land), along with a challenge to readers to come up with a better way.

Okay. I accept the challenge.

I sometimes wonder if health economists actually understand how other markets work. Let’s try a thought experiment. Suppose you ran a business that purchased lots of wheelchairs and you had the misfortune of paying the way Medicare pays. What do you think would happen?

The minute your presence in the market was generally known — probably before the first wheelchair was even delivered — you would be visited by a rival vendor offering to meet your needs for, say, two-thirds of what you were paying. Then another rival would offer to top that — say, cutting your costs in half… and before long the cost of the wheelchair to you would be a fraction of what it started out to be. This is how normal, sensible people function in typical markets, day in and day out.