Tag: Medicare

Health Care Reform in 2 Short Sentences

Jul 21, 2011• 25

By DAVID E. WILLIAMS

Foes of the Patient Protection and Affordable Care Act (PPACA) made a big point of complaining about the length of the bill. Personally, I think that criticism is unfair, because the law deals with a complex industry that’s almost one-fifth of the economy.

But today I read a brilliant two-sentence proposal in the letters section of the Wall Street Journal from David J. Gross, a Florida dermatologist. He was reacting to an article about the extensive cardiac care received by former vice president Dick Cheney.

Before any of Dick Cheney’s heirs get a nickel from his estate, Medicare should be reimbursed for the difference between what it paid out versus what he paid in all these years. This same paradigm should apply to all of us.

(Actually the essence is expressed in just one sentence.)

If we actually implemented that solution it would have significant salutary effects:

* Make Medicare financially viable for the long run
* Improve inter-generational equity
* Instill cost consciousness in Medicare beneficiaries, thus keeping a lid on expenses
* Reduce the need for an estate tax

Continue reading…

Trying Too Hard to Save Medicare

Jul 14, 2011• 29

By DAVID DRANOVE

In the latest edition of Health Affairs, Dr. Francis Crosson, chair of the Council of Accountable Physician Practices and senior fellow at Kaiser Institute of Health Policy, offers an impassioned defense of Accountable Care Organizations. Crosson’s main point is in his title: “The Concept is Too Vitally Important to Fail.” He adds:

“The accountable care organization model is intended as an option both for Medicare and for non-Medicare, commercial health care services. However, the general model and the specific shared savings model proposed for Medicare have come under criticism. Much of the criticism is valid and should be addressed. However, none should serve to prevent the evolution of this model.”

If the concept is “It sure would be nice to hold down costs and improve quality” then how can I argue? Who wants to argue against God, Mother or Country? But if the concept is “The only way to save the healthcare system is to organize everyone into ACOs,” well forgive me for disagreeing.

The Awful Dichotomy Between Health Care Politics and Policy

Jul 6, 2011• 28

By ROBERT LASZEWSKI

Amy Goldstein has an important article in today’s Washington Post detailing the place Don Berwick, the Medicare and Medicaid administrator finds himself in.

It is all but certain he will have to leave his post at year’s end, when his recess appointment expires, because the Senate will not confirm him for a lack of Republican support.

Berwick is one of the most respected health care experts in the country—his career has been dedicated to improving quality first and with that the cost of care. With the new law giving his agency more opportunities to experiment with new approaches and the ability to more quickly implement the things that work, he was the ideal choice.

But with the Democrats ramming the law through without a political consensus to support it, Berwick also became the political whipping boy for opponents to pile on. That he has been willing to point to the things that work in places like Britain only gave the political opportunists plenty of red meat to throw into an already red hot ideological debate.

Is Medicare A Good Deal?

Jul 5, 2011• 51

By JOHN GOODMAN

Think about everything you will pay to support Medicare: the payroll taxes while you are working, the premiums during retirement, and your share of the income taxes that subsidize the system. Then compare that to the benefits of Medicare insurance, say, from age 65 until the day you die.

Are you likely to come out ahead? That depends in part on how old you are. If you are a typical 85-year-old, for example, you can expect about $55,000 of insurance benefits over and above everything you have been paying into the system. If you’re a typical 25-year-old, however, you will pay an extra $111,000 into the system, over and above any benefits you can expect to receive.

By the way, this is not the sort of calculations you want to try at home on a pocket calculator. It’s too complicated. Fortunately the heavy lifting has already been done by Andrew Rettenmaier and Courtney Collins in a report for the National Center for Policy Analysis and summarized in this chart.

In terms of dollars in and dollars out, Medicare breaks down this way:

A typical 85-year-old is going to get back $2.69 in benefits for every dollar paid into the system in the form of premiums and taxes—a good deal by any measure.
People turning 65 today don’t do nearly as well — they get back $1.25 for every dollar they pay in.
The average worker under age 50 loses under the system — with a 45-year-old getting back only 95 cents on the dollar.
That’s better than the deal 25-year-olds get, however; they can expect to get back 75 cents for every dollar they contribute.Continue reading…

Seriously, Some Consensus About Health Care

Jun 21, 2011• 10

By GREGORY MANKIW

We are entering the season of polarization. With various Republicans vying to replace Barack Obama, the president eager to keep his job, and both the House and the Senate up for grabs, candidates from both sides of the aisle will spend the next year and a half stressing their differences.

But beneath this veneer of partisanship lie a few fundamental agreements. Consider health care, which will be at the center of the political debate. Here are four aspects of the issue in which Republicans and Democrats have stumbled into consensus.

THE VALUE OF COMPETITION Representative Paul D. Ryan, Republican of Wisconsin, has attracted much attention with his plan to reform Medicare. He proposes replacing the current fee-for-service program, in which the government picks up the bill for medical expenses, with a “premium-support” system in which seniors use federal dollars to choose among competing private insurance plans.

Democratic critics of the plan suggest that enacting it would be akin to pushing Grandma over a cliff. But they rarely point out that the premium-support model is in some ways similar to the system set up under President Obama’s health care law. If choosing among competing private plans on a government-regulated exchange is a good idea for someone at age 50, why is it so horrific for someone who is 70?

Republicans, meanwhile, are eager to repeal Obamacare and so are also reluctant to point out its parallels with Ryancare. We can take heart, however, in the kernel of agreement about the value of private competition.

Lessons Learned from my Uncle’s Sacrifice

Jun 20, 2011• 6

By JOHN MAA, MD

My uncle’s tale illustrates the fundamentally American tragedy of experiencing financial and medical catastrophes simultaneously, and having to choose between rationing one’s own care or depleting precious financial resources for potentially lifesaving treatment that could as well be futile.

From my perspective as a surgeon, an additional tragedy is that my uncle never got the chance to know his cause of death with certainty. There is a small chance (approximately 5 percent) that his jaundice arose from a benign or treatable condition such as lymphoma, an autoimmune process, or another noncancerous condition, and that if he had received full treatment he would be alive and well today. But a diagnostic surgery would likely have added $100,000 to his final medical costs. Thus my uncle weighed the odds and rationed his own care to preserve his daughters’ inheritance for their future benefit.

To answer the question I posed at the end of the previous article, I do not believe that my uncle was treated fairly by the system. Sadly, he was just a few years too young to receive Medicare benefits, despite having paid into the system for decades. I was especially struck by the feedback about my uncle’s story from readers in France, Poland, Canada, Cyprus, and other countries with universal health care who were stunned to read of the dreadful timing in this desperate situation.

There’s No Choice but Change

Jun 14, 2011• 52

By GRACE-MARIE TURNER

The outrageous distortions about the Ryan Medicare reform plan are coming from people who are accelerating the program’s path to insolvency.

Medicare is being used as a piggy bank by Democrats, with $575 billion in payment cuts used to finance two massive new entitlement programs in Obamacare. And this April, the president proposed taking another $480 billion out of the program to lower the deficit.

Payments to providers will be cut so deeply that seniors will find it harder and harder to get care. Doctors will stop taking Medicare or go bankrupt. A whopping 87 percent of doctors say they will stop seeing or will restrict the number of Medicare patients they see, further shrinking the pool of providers and further restricting access to care.

The powerful, 15-member Independent Payment Advisory Board will use price controls to meet ever-elusive spending targets. Rationing is inevitable, especially of newer medicines and technologies.

House Energy and Commerce chairman Fred Upton explained, “Last year, Medicare expenditures reached $523 billion, but the income was only $486 billion — leaving a $37 billion deficit in just one year. And with 10,000 new individuals becoming eligible each day, it’s only going to get worse.”

Medicare is $38 trillion in the red, and it accelerated five years toward insolvency in just the last year, according to the Medicare Trustees’ latest report.

Economists Gone Wild

Jun 13, 2011• 5

By PAUL LEVY

Economists are so embedded in their training with the concept of ceteris paribus — “all other things held equal” — that their policy prescriptions often go awry. Here are two recent examples:

First, in the March 10, 2011 issue of the New England Journal of Medicine, David Cutler and Leemore Dafney argue against transparency of pricing in the health care sector.

The rationale for price transparency is compelling. Without it, how can consumers choose the most efficient providers of care? But though textbook economics argues for access to meaningful information, it does not argue for access to all information. In particular, the wrong kind of transparency could actually harm patients, rather than help them.

Applying the sunshine rule in the provider–payer context, however, could have the opposite of the intended effect: it could actually raise prices charged to patients.

[T]he sunshine policy would create a perverse incentive for the hospital to raise prices (on average), and as a result its rivals could do the same. This adverse effect of price transparency would arise only in cases in which the buyer or supplier in question had some leverage (market power), but such leverage is fairly common in health care settings, including many local hospital markets.

What’s the flaw here? In markets like Eastern Massachusetts, there is a dominant provider which uses its market power to garner above average prices from the insurance companies in its service area. That provider, in turn, can use those revenues to offer higher salaries than its competitors, drawing doctors into its orbit. It also has more resources to expand its ambulatory care facilities. Both steps serve to further expand its market power.

Vouchercare for Cancer

Jun 7, 2011• 10

By MERRILL GOOZNER

The health care cost debate takes place on two stages using two languages, one scientific, the other economic. The net result is a failure to communicate.

The scientific texts emanated over the weekend from the American Society of Clinical Oncology meeting in Chicago. Ongoing clinical trials showed that science has come up with new drugs that can reduce the incidence of breast cancer and prolong life for people with skin cancer. The former is an estrogen inhibitor that would have to be taken by tens of millions of older women to have a major impact on reducing the rate of breast cancer. The latter would only be given to a subset of the 68,000 new cases of melanoma each year, and would extend life from a few months to a few years for some of the 7,700 who die from the disease each year. Again, most of those people are older, although there are a number of younger people, especially young women, who disproportionately get advanced skin cancer.

For both groups, the cost to the health care system when these drugs are approved, as they inevitably will be, will be calculated in the billions. Medicare will pick up the lion’s share of the tab, since most of the patients in both groups will be over 65.

Now let’s step around the corner to stage two, where the debate in this morning’s papers (if you read the Washington Post and New York Times every day, as I do) is over Rep. Paul Ryan’s plan to turn Medicare into a voucher program. Paul Samuelson, the top economics columnist in the Post, essentially endorses the plan saying “under Ryan’s plan, incentive would shift. Medicare would no longer be an open ATM; the vouchers would limit total spending.” What he doesn’t say is that it would only limit total spending by government. It would require seniors to pick up a growing share of the bill, and limit their own purchasing of health care, either by purchasing plans that didn’t cover expensive end-of-life care, or simply denying themselves routine treatments to avoid co-pays and deductibles.Continue reading…

Some of My Best Friends are in Private Equity

Jun 5, 2011• 3

By PAUL LEVY

Like moths to a flame, private equity investors are quick to pounce on those sectors of the economy that have the potential for higher than average returns. Such investors also have an appetite for the higher risk that accompanies those sectors. In this manner, private equity can serve a useful role in capital formation for the economy. It also helps money managers who want a portion of their portfolio to be in that part of the risk-reward spectrum.

Health care is a fertile field for private equity. You might not think so because of concern about rising costs, but as someone once said, “One person’s costs are another person’s income.” Let’s look at it this way. First, more people will have access to insurance to pay for diagnosis and treatment because they will be newly eligible for private insurance under the national health care reform law. Second, demographic changes in society are producing an ever-increasing demand for health care services. Longer lifespans and the aging population offer a growing number of people with cancer and the other diseases that are more likely to occur with age. The number of Medicare beneficiaries is projected to rise from 46.6 million today to 78 million in 2030. (It was 40 million in the year 2000.)

It is with this background that we should consider the growing interest by private equity in proton beam facilities. You have heard before about my real concern about the cost impact of rapid expansion of the number of such facilities.

I want to expand on that today and give you a sense of how the dollars work in this kind of investment. I have pointed out how the Medicare rate-setting process contributes to its profitability. Let’s look at this in very rough form.Continue reading…