Freezes and Clawbacks and Cliffs, Oh My!

Today’s Managing Health Care Costs Indicator is 29.4%

The Congressional Budget Office  just released  physician fee schedule that would be required in 2012 under current Medicare rules. The SGR short for sustainable growth rate, mandates that if the increase in total physician costs exceeds an index of practice cost inflation, unit prices will be decreased by up to 7% the following year. The SGR has generated steep physician fee schedule cuts each year since 2002, and Congress has stepped in on multiple occasions to “fix” the SGR and be sure that physician fees would be level, or go up slightly. 

But Congress hasn’t simply appropriated more money for Medicare to account for reversing these fee schedule decreases.  That would have been too transparent!

Instead, Congress has utilized a two accounting maneuvers to maintain a fiction that increased costs in the next year would be recouped at some point in the future.   These accounting maneuvers have been used through Democratic and Republican administrations and legislative majorities. They have allowed our representatives to kick the can forward.     

                                                                                                                                                                            The CBO explains these accounting maneuvers in yesterday’s briefing.

Clawback:   Congress pretends that costs will be decreased  in the ‘out’ years, so that when the CBO is scoring ten year impact, it appears that there is little or no cost to preserving the physician fee schedule.

Cliff: Congress eliminates the floor for payment, and pretends that in subsequent years the SGR could lower fees by more than the initial SGR would have allowed.  Again, the CBO would follow this fiction and project little or no cost to the SGR override over a ten year time horizon.

 

Congress has intermittently also chosen to freeze, rather than decrease physician fees.   A freeze keeps fees at current levels, offering no cost of living increase.  Freezes mean that overall Medicare costs continue to climb, as physicians deliver more and higher intensity services.  A freeze means that no one is happy – Medicare costs go up AND physicians see their office expenses increase without a corresponding increase in their reimbursement.

As I said at the top of the post, a 29.4% decrease in Medicare reimbursement of physicians would be catastrophic.  Most nonprocedural physicians have office expense that approaches or exceeds 50% of revenue – so losing a third of revenue could theoretically cut physician income by 2.3.  Physician access for senior citizens would be severely diminished, and the viability of many physician practices would be threatened.   I don’t think there are any responsible health policy experts who think that’s a good idea.

Click to enlarge. Note "baseline" assumes that SGR is reversed and there is no 29.4% physician fee decrease. 

As you can see in the CBO chart, every option leads to higher provider costs over the next 10 years.   The “baseline” case assumes that the 29.4% decrease is implemented this January.   We’ve had ten years of accounting tricks that obscure the real cost of Medicare.  We need to overturn this potentially devastating cut in physician payment. We also need to support fundamental reform, including bundling payments to limit fee-for-service and implementing  the Independent Payment Advisory Board, bundling payments to address the underlying causes of increasing Medicare costs.

"Truthiness" and the Republican Presidential Debate

Today's Managing Health Care Costs Indicator is

 800,000

The Kaiser Family Foundation  has done us the favor of extracting the health questions from last night’s Republican presidential debate.

My take on the ‘truthiness’ of selected answers:

The Congressional Budget Office has said that Obamacare will kill 800,000 jobs.  -  Michele Bachman

The CBO estimated that the Affordable Care Act would slightly lower the overall cost of health care premiums for large employers, which could create new jobs.   It will be hard to create net new jobs in health care and lower health care costs.  Politifact  calls this “barely true” because the CBO noted that ½% of the workforce that works for health insurance only might choose not to work.

Obamacare….  took away $500 billion, a half-trillion dollars out of Medicare  - Michele Bachman

The Affordable Care Act cut future growth of Medicare by $500 billion over 10 years.  There is no way to cure the deficit without cutting Medicare’s future growth.  It’s not nearly the cut in future Medicare costs envisioned by the Paul Ryan budget plan.  It’s also not taking money from Medicare beneficiaries, but lowering future rate increases for providers.

We didn't raise taxes in Massachusetts. – Mitt Romney

We were lucky in Massachusetts to have over half a billion dollars in federal Medicaid waivers to help support health care reform.  We also did use additonal money from general tax revenue. There was no tax increase simply because the economy was in good shape and we had dollars available in the then-current tax base.

When you get into a mandate, it ultimately ends up with unconstitutional powers. –Newt Gingrich

The courts will ultimately decide.   The individual mandate was initially championed by conservatives.  It’s hard to avoid adverse selection and make insurance inexpensive for all without some penalty for not having insurance.  John McDonough has an excellent commentary reviewing this history.

If you're an average couple and you paid your entire amount into -- into Medicare, you would have put $140,000 into it. And in your lifetime, you will take out more than three times that much.  –Ron Paul

This is true.  Medicare is a good bargain because it costs less than commercial insurance, and a better bargain still for beneficiaries because there is a considerable subsidy.  Medicare is not fully funded by taxes directed to Medicare only.  Paul goes on to say that Medicare is “insolvent.”  It’s not really – it just will require decreasing costs or increasing tax subsidies.

We have to have more competition in medicine.  – Ron Paul

Michael Porter and others argue that we don’t need more competition – we need different competition.  We need competition among providers for meaningful bundles of services, rather than competition among health plans that don’t have enough impact on actual care delivery.

Why can't we opt out of the whole system and take care of ourselves?  - Ron Paul

Works when you’re healthy, can be deadly if you’re sick unless you have huge personal wealth!

My own plan… will feature performance pay rather than just volume pay to hospitals and clinics and providers.  –Tim Pawlenty  

Many agree that fee for service payment is a major problem leading to considerable provider-driven overutilization. This is a good idea, and I’ll await his plan eagerly.

[I] would allow… private contracting so those people who want to voluntarily could contract with their doctor or their hospital in addition to Medicare, and it would be outside the current system and it would relieve the pricing pressure on the current system.  –Newt Gingrich

Individuals contracting with their physician or hospital would have little leverage to lower prices, and the administrative costs of such a system would be hard to imagine.

 We think you can save $70 billion to $120 billion in Medicare and Medicaid annually by not paying crooks... –Newt Gingrich

Many suspect that fraud and abuse could be as much as 10% of medical costs.  Medicare and Medicaid together cost almost $900 billion, so this is possible.  However, it’s not as easy as it looks, and many who oppose regulation have a difficult time accepting the type of oversight that could be required.

I wholeheartedly support…a program that is identical to what seniors already have. It’s called Medicare Part D….[and it] is 41 percent under budget because seniors are involved in controlling costs – Rick Santorum

The Ryan Plan, which Santorum supports, is very different than Medicare Part D.  The Ryan plan would cap government expenditure, whereas Part D allows government costs to rise with medical inflation rate.  Medicare Part D is under budget not because of competition or seniors with “skin  in the game,” but because of generic drugs and much lower senior enrollment than projected.

The Independent Payment Advisory Board [is going to] ration care from top to bottom –Rick Santorum

There is a good thought article yesterday from the Concord Coalition , a center-right anti-deficit group, about why the IPAB is a critical part of health care reform.   We need to make tough decisions, and this approach is much like the way we deal with potential military base closings.  

Changes Oncologists Could Make That Would Lower Costs

Today’s Managing Health Care Costs Indicator is $173 billion

Two courageous oncologists wrote in the May 26 New England Journal of Medicine (Free full text) that there were five changes in behavior and five changes in attitude that could lower overall health care costs.  They cite a projection that the cost of oncology care in the US will be $173 billion in 2020, and state that continued increases are unsustainable.   

The behavior changes (reworded by me):

1. Don’t do routine tests of cancer survivors looking for recurrence, except where there is evidence that this improves quality of life or survival
2. Give a single chemotherapy agent for most solid tumors –don’t use multiple agents except where there is good evidence to do so
3. Don’t give chemotherapy to patients who are so frail that they can’t walk
4. Don’t routinely use medicines to raise white blood cell counts. (This is for solid tumors – chemotherapy for leukemias and lymphomas does sometimes require these medications)
5. If patients fail three chemo regimens, limit further chemo to clinical trials.

The changes in attitudes (also reworded)

1. Recognize that costs are due to choices that oncologists make
2. Have realistic expectations
3. Pay more for cognitive services rather than chemo
4. Start palliative care earlier
5. Support comparative effectiveness research, and accept that there will be some limits on the care we can offer.

We’ve had over a generation of the “war on cancer,” and we’ve promised society that we can ‘cure’ cancer.   The authors suggest that we should acknowledge that palliation is often the best goal, and we should avoid costs for treatment that has not been shown to be valuable. 

This is rational – but could easily be misconstrued to be an endorsement of “death panels.”  I think this is an important addition to the dialog on how to lower health care costs. We will clearly need to bring patient advocates along for this approach, and sometimes it’s hard to tell patient advocates from parties interested in maintaining high health care costs (and company revenues). 

Obesity: The Problem is Clearer than the Solution

Today’s Managing Health Care Costs Indicator is 42%

We all know America is getting more obese, and Ezra Klein had a post yesterday pointing out that while cigarettes kill, obesity often doesn’t kill –but causes disability, chronic disease, and expenses that are 42% higher than the nonobese.  

So – we could save a lot if obese people would lose a lot of weight.

However, moving from this conclusion to practical steps to skinny down the population isn’t easy.   It’s a challenge to figure out how to get people to lose weight. 

June’s Journal of Occupational and Environmental Medicine has a careful study from the Netherlands where construction workers at high risk for heart disease were randomized to either an intervention, an average of 5 visits with a health coach over 6 months, or a control group.   (Groeneveld, et al, JOEM 2011 53:610 .  I’ll post a link in the future – the article isn’t yet indexed in pubmed)

The good news – the construction workers lost weight.  On average, they lost 2 kg (4.4 lbs). 

The unsurprising bad news – the intervention wasn’t cheap, and the cost of the intervention group exceeded the cost for the control group. The cost for each pound of weight loss was 145 euros ($210). The cost over 12 months of the intervened workers, including all health care costs, work productivity, and any costs of lifestyle related expenses, was 254 euros more ($369) than the control group. 

There are a lot of programs out there promising to deliver lower weight and short-term decrease in health care costs.  Some of them give statistics on average weight loss of those who lost weight, utterly ignoring any participants who gain weight. Most assess weight loss over a very short period of time, ignoring the fact that many who initially lose weight gain it right back again.  Most programs impute savings based on the fact that skinnier people have lower health care costs.

However, those who were overweight don’t necessarily cost less immediately after successful weight loss.  Further, there are precious few programs that help patients lose weight and keep it off.  In fact, the evidence for bariatric surgery is good, and the evidence of sustained effectiveness for all other interventions is modest to nonexistent.  

Treating the obese is not the way to address this major public health and health care cost crisis. 

What we need is public health interventions to make it easier to exercise and easier to get filling, nutritious, and healthy food – even in the hurried lifestyle we lead.  Many efforts, like zoning laws to encourage dense housing in close proximity to public transit, could take more than a generation to bear fruit.   Bike lanes, bike racks, and walking paths can take years to plan and build.   Other initiatives, like posting of calories, or employers offering healthy frozen dinners to take home,  could have an impact much sooner. 

None of these interventions will save health care dollars today - they can decrease obesity and prevent health care expenses much later.   

Preventing obesity won’t be easy – but it’s more likely to be successful and affordable than merely treating those who are already obese.