The Sound Bite:
Increased longevity costs will bankrupt medicare.
Fact or Fiction?
This is partly fact, partly fiction. Medicare entitlement begins when a person ages in at 65, however just because beneficiaries are living longer does not necessarily mean higher Medicare costs.
The customary formulation of this myth is that Medicare is doomed by its own success in keeping its beneficiaries alive. Not only will the ranks of the program’s beneficiaries increase as the vaunted baby boom generation reaches the statutory age of eligibility, but because people are staying alive longer, Medicare’s costs will explode. The first part of this contention is indisputably true: entitlement to Medicare occurs when a person reaches age sixty-five, and the baby boom generation that is generally calibrated as starting in 1946 has arrived at that threshold. As a result, additional Medicare beneficiaries enter that program every day, and because the baby boom generation dwarfs any preceding age cohort, it is highly likely that more beneficiaries will be added to the program than are lost as older beneficiaries pass away. Consequently, the number of Medicare beneficiaries will inexorably increase over the next decade or so. Ceteris paribus, more beneficiaries mean higher aggregate costs.
The second part of the contention, however, is myth. Just because today’s Medicare beneficiaries live longer than did their predecessors does not necessarily translate into higher costs for the Medicare program. The source of this apparently counterintuitive proposition is the panoply of programmatic limitations that Medicare imposes on its coverages, regarding the myth that Medicare pays for long-term care. More specifically, beneficiaries who live longer typically do incur higher cumulative health care costs over their post-sixty-five lifetimes, but many of those costs are not borne by the Medicare program. This phenomenon is well illustrated by the following graph from an important analysis that appeared in The New England Journal of Medicine:
FIGURE 1: Cumulative Health Care Expenditures From the Age of 65 Years Until Death, According to the Type of Health Service and the Age of Death
Who is going to end up making all the money in the end if Obamacare continues to be in place?” Republican National Committee chairman Reince Priebus growled Monday on Sean Hannity’s Fox News show. “It’s going to be the big corporations, right? And who gets screwed? The middle class.”
The Republican Party makeover is breathtaking. Now, suddenly, instead of accusing Democrats of being “redistributionists,” the GOP is posing as defender of the middle class against corporate America — and it’s doing so by proposing to do away with the most progressive piece of legislation in well over a decade.
Paul Ryan’s new budget purportedly gets about 40 percent of its $4.6 trillion in spending cuts over ten years by repealing Obamacare, but Ryan’s budget document doesn’t mention that such a repeal would also lower taxes on corporations and the wealthy that foot Obamacare’s bill.
Lost in the weeds of President Obama’s budget proposal is a 10-year, $11 billion reduction in Medicare funding for graduate medical education (GME). GME is the “residency” part of medical training, in which medical school graduates (newly minted MDs and DOs) spend 3-7 years learning the ropes of their specialties in teaching hospitals across the country.
Medicare currently spends almost $10 billion annually on GME. One-third of that is for “Direct Medical Education” (DME), which pays teaching hospitals so that they in turn can provide salaries and benefits to residents (current salaries average around $50,000/year, regardless of specialty; there are variances by region). No problem there.
The proposed cuts come from the Medicare portion known as “Indirect Medical Education” (IME) payments. Though IME accounts for two-thirds of the Medicare GME pie, it’s not easy for hospitals to itemize what exactly it is they provide for this significant amount of funding. Instead, hospitals bill Medicare based on a complex algorithm that includes the ‘resident-to-bed’ ratio, among other variables.
A 2009 Rand Corporation study commissioned by Medicare to evaluate aspects of residency training called on the government to tie IME payments directly to improvements in educational and hospital quality, lest the money be perceived to be going down a series of non-specific sinkholes. That idea has caught on, and legislators in both parties now see the healthy IME slice of Medicare education funding as a plum target for cost-cutting, as the direct benefits are difficult to enumerate, let alone quantify.
This has medical educators very worried that we will have to do more with much less (disclosure: I am one).
A few weeks ago, The Health Care Blog published a truly outstanding commentary by Jeff Goldsmith, on why practice redesign isn’t going to solve the primary care shortage. In the post, Goldsmith explains why a proposed model of high-volume primary care practice — having docs see even more patients per day, and grouping them in pods — is unlikely to be accepted by either tomorrow’s doctors or tomorrow’s boomer patients. He points out that we are replacing a generation of workaholic boomer PCPs with “Gen Y physicians with a revealed preference for 35-hour work weeks.” (Guilty as charged.) Goldsmith ends by predicting a “horrendous shortfall” of front-line clinicians in the next decade.
Now, not everyone believes that a shortfall of PCPs is a serious problem.
However, if you believe, as I do, that the most pressing health services problems to solve pertain to Medicare, then a shortfall of PCPs is a very serious problem indeed.
So serious that maybe it’s time to consider the unthinkable: encouraging clinicians to become Medicare PCPs by aligning the job with a 35 hour work week.
I can already hear all clinicians and readers older than myself harrumphing, but bear with me and let’s see if I can make a persuasive case for this.
The dreaded sequester cuts mandated by the Budget Control Act of 2011 went into effect this month, putting into place a 2 percent cut in Medicare spending.
While Congress can still enact a “fix” that will delay or amend these cuts, that seems unlikely as of this writing. Yet how the cuts will impact Medicare and its nearly 50 million beneficiaries is a still a moving target.
In a joint study issued September 2012 by the American Hospital Association, the American Medical Association and the American Nurses Association, it was estimated that some 766,000 jobs would be lost by 2021 if the sequester cuts went into effect.
According to the study, “Researchers forecast that more than 496,000 jobs will be lost during the first year of sequestration, and these cuts will impact health-care sectors in every state. In California alone, the health sector could lose more than 78,000 jobs by 2021.”
The recent news that thousands of seniors with cancer are being denied treatment with expensive chemotherapy drugs as a result of sequestration-mandated budget cuts raises the question of whether other patients are being equally harmed, but less visibly.
A careful study of the impact of past federal budget cutting suggests a troubling answer. That study, in a National Bureau of Economic Research Working Paper published in 2011 and revised last year, established an eerily direct link between slashing hospital reimbursement and whether Medicare patients with a heart attack live or die.
Using data from California hospitals, researchers Vivian Y. Wu of the University of California and Yu-Chu Shen of the Naval Postgraduate School examined mortality rates for heart attack patients following the Medicare payment cuts resulting from the Balanced Budget Act (BBA) of 1997. The impact of the BBA was not as sudden or clear as the current situation, where Medicare’s two percent across-the-board cut on April 1 instantly transformed some expensive chemotherapy drugs into money losers, but it was significant and long-lasting.
The researchers examined hospitals claims data for a three-year period before the BBA, a three-year period when the BBA first took effect and, finally, a six-year period after budget cuts had either permanently changed care or failed to do so. They also tried to adjust for the severity of illness of the heart attack patients – the condition is formally known as acute myocardial infarction (AMI) – and other factors.
In the end, the researchers were able to trace a clear path from Congressional budget decisions to the patient’s bedside. Payment reductions triggered by the BBA , Wu and Shen concluded, led to “worse Medicare AMI patient outcomes, and more importantly, that the adverse effect only became measurable several years after the policy took place.”
They even quantified the effect: every thousand dollars of Medicare revenue loss from the BBA translated to a six to eight percent increase in mortality rates from heart attack.Continue reading…
Every day, over 7,600 baby boomers turn 65. By 2029, this number will rise to over 11,000. As more and more Americans approach senior citizenship, health care for seniors through Medicare becomes increasingly relevant. The question is, how will this affect you?
We all have questions about how the current budget battle and resulting spending cuts are going to impact Medicare. It seems unavoidable that Medicare costs will have to be reduced in some manner. Both Democrats and Republicans have proposed fixes to counteract these budget cuts. President Obama, in his State of the Union address, recommended adjustments to Medicare Part D that would enforce mandatory rebates–in other words, price controls–on drug companies.
But we need to ask ourselves: why would we make changes to the most successful part of Medicare by far? Polls indicate that 90 percent of seniors are happy with their current Part D coverage. Not only is Part D popular; it is also cost effective. It has cost 30 percent less than originally estimated. Premiums are an average of half the price originally estimated. Meanwhile, price controls are estimated to increase drug costs by 40 percent. Clearly, they are not the answer to cutting Medicare costs.
In the past, neither hospitals nor practicing physicians were accustomed to being measured and judged. Aside from periodic inspections by the Joint Commission (for which they had years of notice and on which failures were rare), hospitals did not publicly report their quality data, and payment was based on volume, not performance.
Physicians endured an orgy of judgment during their formative years – in high school, college, medical school, and in residency and fellowship. But then it stopped, or at least it used to. At the tender age of 29 and having passed “the boards,” I remember the feeling of relief knowing that my professional work would never again be subject to the judgment of others.
In the past few years, all of that has changed, as society has found our healthcare “product” wanting and determined that the best way to spark improvement is to measure us, to report the measures publicly, and to pay differentially based on these measures. The strategy is sound, even if the measures are often not.
For a large and growing number of us with meager or no coverage, health care is the ultimate “gotcha.” Events conspire, we receive care and then are on the hook for a car- or house-sized bill. There are few alternatives except going without or going broke.
Steven Brill’s recent Time cover story clearly detailed the predatory health care pricing that has been ruinous for many rank-and-file Americans. In Brill’s report, a key mechanism, the hospital chargemaster, with pricing “devoid of any calculation related to cost,” facilitated US health care’s rise to become the nation’s largest and wealthiest industry. His recommendations, like Medicare for all with price controls, seem sensible and compelling.But efforts to implement Brill’s ideas, on their own, would likely fail, just as many others have, because he does not fully acknowledge the deeper roots of health care’s power.
This is how sexy the chatter gets over cocktails at health policy wonk-ins in Washington. This is how sexy the chatter gets over cocktails at health policy wonk-ins in Washington.
“No pre-ex’s, community rating, guaranteed issue.”
“No, that’s Obamacare stuff,” I said to my colleague, as she read a summary of Congressman Paul Ryan’s House Republican budget plan released on Tuesday. “Everyone in Medicare already has those. You must have the wrong memo.”
She scrolled to the top of her iPhone and pointed at the screen. “Summary of the Ryan Budget Plan – Medicare.”
“Maybe just a gimme for popular support?” I speculated, knowing from headline coverage earlier in the day that the Ryan plan sought to repeal Obamacare, not strengthen its most popular consumer protections. “Guaranteed issue but no mandate — that would sure hang the insurers out to dry. But why would you put that in a budget?”
“Here’s why,” she read. “‘Seniors buy coverage through new Medicare Exchange.'”
Consumers need protections only when they are turned into consumers. And that is what Congressman Paul Ryan’s budget seeks to do for — or do to, depending on your feelings about medical capitalism — future Medicare beneficiaries.