March 03, 2008
Always Blame Govt. Spending First
A new study on projected health care costs from the Center for Medicare and Medicaid Services actuaries triggered headlines last week: fast-rising expenditures for Medicare and Medicaid will drive health care to nearly 20 percent of the economy by 2017, forcing massive tax increases or bankrupting the government.
The dutiful notetaker Robert Pear of the New York Times repeated that theme this morning in his "analysis" of the two competing Democrat's health care plans. "While Senators Hillary Rodham Clinton and Barack Obama fight over who has the better health plan for the uninsured, they say little about a more immediate challenge that will confront the next administration, whether Democratic or Republican: how to tame the soaring costs of Medicare and Medicaid," is how he led the piece.
Why this fixation on rising government costs for health? Private sector health care costs (insurance premiums plus out-of-pocket costs for consumers) will rise nearly as fast: 82 percent over the next ten years. The only reason public sector programs are projected to rise faster (100 percent over the next decade) is because of the senior citizen drug benefit enacted for Medicare in 2003. Give Medicare the same right to negotiate prices that private insurers have and the difference largely disappears.
To be fair, the news analysis eventually gets around to mentioning that "spending on Medicare and Medicaid tends to increase in tandem with health spending generally." The author even quotes comptroller David M. Walker to that effect. "To rein in the costs of Medicare and Medicaid, (Walker) said, it will be necessary to slow the growth of health costs generally."
When is that going to be the lead, instead of buried in the bottom half of stories that mislead readers into thinking that government health care programs have a problem that is somehow distinct from our out-of-control health care system as a whole?
(Side note: There's good reason to question some of the assumptions in the CMS report that contributed to the slightly slower rise in private sector spending. The actuaries projected individual payments like co-pays and deductibles to rise just 72 percent over the period and "other payments," which refers to private philanthropic support for health care programs, to grow by just 67 percent -- both significantly slower than government spending. That might happen if we get universal coverage. But without serious health care reform, individuals and foundations, it seems to me, are likely to be making relatively higher outlays for health care compared to government and employers, not lower as assumed in this report.)
Posted by gooznews at March 3, 2008 08:05 AMMerrill,
There's an implicit argument arising that seems "off" to me, though less so in today's Pear piece than in an NYT Week in Review piece yesterday by Kevin Sack.
Sack seemed to argue that full HI coverage and cost containment are competing goals. I certainly agree that it will take more public spending to insure more people, but I think these goals are more complementary that that. IE, if done as in plans like Hacker, HRC/BHO, Edwards, there are cost savings to be made by covering everyone. They come from risk pooling, savings on administrative costs, and some degree of cost effectiveness rationing.
No?
Posted by: Jared Bernstein at March 3, 2008 10:29 AMThere's some cost savings from lowering administrative overhead in the campaign plans and the Hacker plan. But it's nowhere near as much as going to single-payer; and, in either case, it's a one-time savings.
Risk pooling will redistribute costs as much as save money, since, in theory at least, adding the previously uninsured to the pool should lower costs for those who previously paid for their uncompensated care through higher premiums. But to get either savings, it will require tight national regulation of the insurance market to make certain those savings are returned to premium payers or the self-insured.
The major savings from getting the uninsured better care are long-term, as are the savings from better comparative effectiveness information.
The surest route to short-term savings involves adopting rational decisionmaking in health care (a la NICE in Great Britain), which some call rationing. I saw David Cutler (Obama's health care adviser) quoted somewhere this morning admitting we could cut out 20 percent of health care expenditures without affecting overall health. The problem, he said, was that we don't know which 20 percent. Actually, I think we have a pretty good idea where much of that 20 percent is. The problem is the political will to go after it.
That's one of the problems with the Lewin estimates on the Hacker plan, which doesn't focus on inappropriate care, but focuses on overall payments to providers like physicians. They claim the Hacker plan can pick up $50 billion a year in reduced physician payments. Oh yeah? There's two ways to squeeze physician payments in the current fee-for-service system. Either reduce the quantity delivered (see above on the difficulties of achieving that). Or reduce the unit price of individual services. Congress refuses to go along with already enacted physician payment cuts every year. Never forget that one person's cost savings is another person's paycheck.
Posted by: Merrill at March 3, 2008 10:56 AMMerrill,
Very much agree on your point on the Hacker plan, but I think you may have missed the point of Cutler. He is focused on doing 20% less activity, not just cutting compensation 20%. And while I do think there are some pretty clear areas of waste, it is far from clear which 20% of current medical activity is waste. I'd suggest that there's probably around $50 billion in "clear" waste, but that's 5% of the pie. $200 billion (20%) is much harder to get to-- Cutler's right on this point.
Posted by: wisewon at March 3, 2008 11:15 AMWe certainly DO know how to cut a sunstantial part of the 20% excess. It's by getting care back in the hands of primary care physicians. Secondary care physicians ('specialists') do a lot more unnecessary workups (because they have an unreasonably high suspiciion of serious illness as a result of their training) and at a lot higher costs. Anyone who needs evidence supporting this can read (or request) the following paper:Starfield et al, Milbank Fund Quarterly, 2005). And this can be done at the same time as health of the population is improved.
Why will none of the candidates touch this issue? Think about the enormous lobbying power of the vested interests.
Merrill--
You're entirely right-most of the savings will
be long-term. As you wrote in your comment above:
"The major savings from getting the uninsured better care are long-term, as are the savings from better comparative effectiveness information"
In the short-term, the upfront costs will definitely outweigh the savings.
Jared-- the administrative savings of health care reform (if we moved from privare insures to 100 percent public secctor insurance, i.e singel apyer) equal just 4.5% of the total $2.2 trillion that we spend on health care. (I've done the numbers here http://www.healthbeatblog.org/2007/12/health-care-spe.html )
That 4.5 percent savings would be wiped out by just 9 months of inflation in health care costs (As you, know the average inflation rate for health care spending is now roughly 6%.
In addition, in order to implement Hacker's plan (which I also like very much ) we'll need electronic medical records. (I've talked to Hacker about this; he agrees.) And most doctors and hospitals cannot afford to pay for IT themselves.
Secondly, the amount of waste in the system is closer to 30% in unneeded tests, unncessary, often proven procedures, adn over-priced drugs and devices that are no better than the older, less expensive products that they replaced.
We have three decades of widely accepted research (from Dartmouth) showing that in states where doctors and hospitals practice less aggressive, less intensive medicine--and Medicare spends 30% less (after adjusting for differnces in race, age, and underlying health of the population)--outcomes are
just as good.
In fact, often outcomes are better.
Lower spending and higher quality go hand in hand.
So-called "rationing" would not involve cutting out useful treatments. It would mean that
patients would no longer be exposed to treatment that offer little or no benefit--and many risks.
Overtreatment is hazardous to our health.
And, as you say, we know where much of the waste is. Treatments that offer little benefit and many risks for a large number of people are being sold every day.
Look at the latest news on statins--cholesterol-lowering drugs, like Lipitor which help roughly half of the Americans who take them--and we know which half: Patients under the age of 65 who already have established heart disease (already have had a heart attack) or suffer from diabetes.
For people over 65, or those under 65 who haven't alrady had a heart attack, there is no evidence that drugs like Lipitor save lives.Meanwhile, these patients are being exposed to serious side effects (memory loss, severe muscle pain, increased risk of cancer) with no benefit.
This is not something we just discovered. Merrill wrote about this a number of years ago--I've cited his work in what I wrote recently on www.healthbeatblog.org on cholesterol (see Part I)
Posted by: maggie mahr at March 8, 2008 10:53 PM