Medicare is projected to become nearly 6% of GDP by 2040 and less than 1/3 of that is financed by existing sources of income (payroll taxes and premiums) — the rest is going to come from deficits and transfers from general tax revenues. This good news was recently released this month by the Medicare Trustees and is based on some rosy assumptions — namely the SGR actually happens (25% cut in doctor fees) — which has been postponed by Congress for the last 10 years. For those of you who want to be educated about the finances of this critical entitlement and why/how it is driving our Federal and State budgets into further deficits, I encourage you to read this quick analysis by one of the public trustees.
My take is we need to reform Medicare — how it is financed and how it operates — if we hope to have any chance of getting government spending under control. Yes, we need to provide health coverage to our citizens. But it makes no sense to do so in a way that clearly does not work and is unsustainable. As I have written in the past — we need to focus on ‘value’ in our health delivery system (better outcomes for less inputs) and not just access (insurance coverage and benefits). IMHO, this means the consumer/citizen needs to be more accountable and have more choices. The political dialog needs to start with citizens having a better understanding of our programs and what they cost. You are not going to get that from the mainstream media — I hope you all read the analysis.
I respect Don Berwick and Zeke Emanuel as smart, thoughtful and well intentioned policy folks. Yesterday in an Op-Ed in the WSJ they tried to position Obamacare as ‘market-friendly’. The audacity of positioning Obamacare as ‘market-friendly’ vs. the proposals of Romney/Ryan is just so outrageous that it can’t be allowed to stand without comment. They must be subscribing to the theory the bigger the lie they tell — the more likely it is for the public to believe it. From a quick scan of the online comments — at least they aren’t fooling the WSJ online readers.
One should really worry about the diagnosis and treatment plan from their physician when they either don’t see/acknowledge relevant facts or miscontrue the evidence to fit their preconceived notions, as is the case here. Let’s go through some missing facts/evidence:
- Medicare Part D — prescription drug benefits: the market based approach of multiple plans, with different prices/formularies competing — with the consumer able to choose the right fit for them — has been a huge success and been substantially more cost-effective than any CBO or CMS projection at the time.
- Medicare Advantage Plans: super popular with Medicare beneficiaries — over 12M+ enrollees. Again a program where the consumer chooses and the market is competing for their business. Oh wait — maybe they didn’t mention this because Obamacare takes a lot of money from this program. Furthermore — the whole point of MA plans is to encourage a focus on value (not volume) as they say they want (and I agree is critical — see prior post) — but just not in this ‘market-friendly’ approach.
- Their approach is totally top down (ever see a top down, centrally controlled market work?):
- support point 1 — administrative costs lower in CMS vs. private insurance — this is a total red-herring of comparing apples and oranges — but demonstrates clear bias to government centered
- support point 2 — experts have determined that ‘bundles of care’ is critical to payment reform and CMS will help determine what payment models will work. The rate of innovation will be determined by CMS and is again ‘expert-centered’ or government controlled. This isn’t the way most markets work well. Now — I accept that somehow CMS payments have to be reformed. Seems like ‘vouchers’ with consumers choosing and suppliers competing might be a lot more likely to succeed here — even if it is messier.
- support point 3 — IPAB. This is the epitome of government centered without accountability. I accept IPAB might be better than Congress in making recommendations on how to control costs — but to position it as ‘market-friendly’ and innovative — really?
- Ryan Voucher plan: the authors simply assert the Ryan voucher plan is “inadequate” and imply that throwing Medicare members on the ‘private market’ is inhumane….but provide no evidence (see first two facts above). They prefer one size fits all vs. consumers/suppliers interacting in a marketplace to figure it out and drive continuous improvement. The IOM recently released a report that estimated 33% of today’s health spend is waste and does not add to “value” in the form of better health outcomes — that is $750B in annual spend. Here is some evidence to suggest there is no credible reason today to say the ‘vouchers’ are inadequate. It is more like the Chicago Teachers Union saying vouchers and charter schools can’t work — despite all the evidence that they do in the communities that have tried them.
After 60 years of a largely single payer, government run system in England the Cameron government has proposed real reforms that would move their system to be way more ‘market-friendly’, innovative in health delivery and empowering of consumer choice than Obamacare. I prefer their treatment plan tothe authors.
We need a real political dialog in this country about the best framework to get more “value” from our health care expenditures — public and private. The framers and spin handlers of Obamacare did not stimulate that objective debate….which was a huge disappointment and a lost opportunity.
Healthcare executives know and frequently recite that the majority of health care expenditures in a given year are from an incredibly small number of patients. I don’t believe our U.S. citizenry generally understands neither this fact nor its implications. I have heard various numbers over the years – 5% of patients account for more than 50% of the spend or as this WSJ article (sorry subscription required) on “The Crushing Cost of Care” reports — 10% of Medicare beneficiaries account for 64% of Medicare hospital spend in 2009. There are two main drivers for this concentrated spending distribution – people with chronic conditions (more accurately multiple chronic conditions) and as demonstrated by the WSJ article – end of life care.
I don’t claim to know the right answer or even how to frame a constructive dialog about end of life care. (Check out the comments to the WSJ article as a depressing start). Personally I have had to deal with several family members end of life issues and they are incredibly emotional and challenging without having to consider economic consequences. However, I believe and have frequently written that ‘health care’ is an economic good. As such, we (society) don’t have a limitless ability to supply ‘free’ health care. Our country is nearly broke today – and when one considers existing entitlement spending projected into the future, especially on health – we know we can’t afford it without some change. Furthermore, our current framework of indirect payments and complete lack of transparency of costs to both physicians and patients exacerbates the problem.
Neither political party is being responsible regarding this issue. The Republican sound bite about “death panels” is inappropriately used as a political weapon that shuts down public education and constructive dialog – and ultimately makes the problem worse. The Democrats fail to acknowledge that the current system is simply unsustainable economically and as a result forces the ultimate economic trade-offs to a faceless bureaucracy (the wrong place) and gives credence to the Republican argument. Both sides are being disingenuous if not dishonest – which is not helping society learn how to deal with the amazing benefits/possibilities/costs of modern medicine and the inevitability of death and the moral dilemmas for doctors, patients and families that result.
One can’t have a serious health blog and not discuss the Supreme Court decision to uphold most of Obamacare. My initial reaction was real disappointment — because I truly believe the law is a bad law and bad for the future of our country. I am not a lawyer and Roberts’ logic seems somewhat tortured, but after reading several legal blogs on the topic — I believe Roberts was sincere and apolitical in his reasoning and I support the outcome and the process.
As I have written previoulsy, the real problem is Obamacare does little to solve the true health care crisis in our country. Worse, the political dialog regarding Obamacare has done nothing to educate the citizenry about the dysfunctional health system which could have enabled a more sustainable set of solutions.
There are three pillars — Access, Cost and Quality — that are part of any discussion for improving our health care system. They are all important and intertwined. Obamacare primarily deals with Access (individual mandate, pre-existing conditions, insurance exchanges etc.) but it does nothing meaningfuj and systematic to improve either Cost or Quality. The biggest issue in our healthcare system is economic — we are not getting sufficient Value out of our huge healthcare spend (Value = quality of health outcomes – cost over time). For example, the IOM and other experts believe that 30+% of our $2.2 trillion of spend is wasted — that is $750B annually!!! The only sustainable solution to increasing Access is to make health care more economically affordable, which requires an improvement in Value, which requires changing the way the system is organized and incentivized. Obamacare does not do this and in fact, probably makes things worse re: affordability and sustainability. Increased Access to insurance within the current framework obviously does not drive or improve affordability — or we would not have the unsustainable health care cost trend we do.
I will develop further the themes of Value and affordability in future blogs. This WSJ op-ed is a good start. My strongly held personal belief is that free enterprise, marketplaces and competition amongst providers and payers is much more likely to improve Value and affordability than more government rules and bureaucracy.
Which leads me to my biggest concern resulting from the Obamacare political debate…which is; is our country headed more toward socialism vs. our traditional strength of ‘free markets and free peoples’. As Chief Justice Roberts noted in his opinion — it is not the job of the Supreme Court to “protect the people from the consequences of their political choices.”