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The Obama Health Plan Has Serious Threats to Medicare
Michael Lyon, SF Gray Panthers
Obama’s Health Plan is fatally flawed because it uses insurance companies to deliver healthcare, but the Health Plan also directly threatens Medicare.
People talk about “the healthcare crisis,” but actually there are two healthcare crises.
For us, the healthcare crisis is 51 million uninsured, stripping workers’ health plans, unaffordable health insurance that denies claims and charges high co-pays and deductibles, medical bankruptcies, a tattered safety net, dangerous mistakes in hospitals, and some of the worst health indicators in the industrialized word.
For corporations, the healthcare crisis is the high cost of healthcare premiums for employers, raising the price of US goods so they can’t compete in the world market.
As the debate over healthcare reform developed, media attention shifted from our healthcare crisis to the corporate healthcare crisis. Obama certainly talks about the healthcare crisis from the corporate perspective, and we can see the Obama health plan reduces healthcare costs for government and business, but does not reduce costs for workers and their families.
In fact, the Obama health plan introduces huge increases in costs, by guaranteeing trillions of dollars in profits for health corporations, particularly insurance and drug companies. If the Obama health plan was structured to guarantee huge profits for health corporations, where is the cost containment supposed to come from? Whose costs will get reduced?
Medicare is where costs will be reduced. In fact, more than half the cost of the entire Obama health plan comes from scaling back increases in Medicare spending over the next ten years. The entire Obama health plan will cost about $1 trillion over the next 10 years, and $575 billion will come from scaling back future Medicare increases that are needed to balance out inflation and to care for the baby boomers, who start getting Medicare in 2011.
How big a cut is this $575 billion? Total Medicare spending for 2010 to 2019 was expected to exceed $7 trillion, so this $575 billion reduction is up to an 8% cut, applied over the same period that 35 million baby-boomers will enter Medicare. Put differently, for the past 20 years Medicare spending grew 8% per year. The Obama Plan will clamp down Medicare cost growth to 6% per year. It’s not fair: Medicare and its patients would have to reduce their healthcare enough to achieve overall cost savings, even though monumental waste has just been cemented in place.
What’s insidious about this plan is that most of these Medicare cuts will NOT be felt by Medicare patients as direct cost increases or healthcare restrictions. Instead, the Medicare cuts will be to providers of Medicare treatment: the doctors, and hospitals, and home care agencies, rehabilitation facilities, and even durable medical equipment suppliers. These cuts will reduce providers’ incentive to treat Medicare patients, until the providers finally stop taking them. Like today’s Medicaid patients, Medicare patients will have problems finding someone to care for them.
The figure of $575 billion scaling back of Medicare spending increases from 2010-2019 was calculated by Medicare’s own Actuary, and is considered a better estimate than Congressional Budget Office figures because the Actuary’s calculations give a more complete picture. Accordingly, all the following estimates of cuts from various parts of the Obama Health Plan come from the Medicare Actuary’s April 22 report “Estimated Financial Effects of the “Patient Protection and Affordable Care Act as Amended”
Some highlights of the reductions:
- $145 billion in payment cuts to private Medicare Advantage plans, scaling their payments back to the level of traditional Medicare.
- $233 billion cuts in direct payments to the providers of Medicare hospital and outpatient care, plus penalties for their expected failure to meet “productivity” goals.
- $50 billion in cuts to Medicare “DSH” payments to hospitals serving low-income Medicare, Medicaid, and uninsured patients.
- Cuts in payments to “inefficient” hospitals, mostly in low-income, medically-underserved areas, often large teaching hospitals serving the poor and uninsured.
- $24 billion in cuts ordered by the Independent Payment Advisory Board, a new, independent, high-power, cost-containment commission built into the Obama Plan.
- Payment reforms: putting Medicare doctors under Managed Care.
Let’s look at these cuts in more detail:
$145 billion in payment cuts to private Medicare Advantage plans, scaling their payments back to the level of traditional Medicare.
In 2012, Medicare will begin reducing payments to the privately-operated Medicare Advantage Plans. This will take 3-7 years, depending on how much reduction is needed to bring an individual plan’s payment down to traditional Medicare levels. This is the Medicare cut most people have heard about. Obama has tried to get us to support the Medicare cuts by conjuring up images of him slashing the bloated payments to greedy private insurance companies administering Medicare Advantage plans. (While off-camera he gives private insurers tens of millions of new customers in 2014!)
Medicare Advantage never should have happened. Traditional Medicare was developed in the mid-1960s. Since that time there have been significant developments in medicine such as pharmaceuticals, an increased ability to treat illness on an outpatient basis, and technical advances such as medical imaging, endoscopic surgery, and prostheses. Also, since the mid-1960s, there has been a new attention to diseases of older people, such as chronic disease or mental problems. The potential of these advances has unquestionably been marred by market forces, yet, on balance, they are advances.
These advances should have been incorporated into the government’s basic Medicare plan, allowing Medicare to advance in step with medical science. Instead, corporate forces have blocked Medicare’s evolution, and many of the last 45 years of medical advances are only available to Medicare patients through private corporations. Medicare patients’ two choices are either (1) private Medigap insurance policies, which Medicare patients buy themselves to add benefits on top of their traditional Medicare benefits or pay for their traditional Medicare’s patient charges, or (2) private Medicare Advantage plans, which contract with Medicare to provide all Medicare services, and are paid for mostly by government payments to the corporations running the plans, and partly by patients buying into the plan.
The government and Medicare didn’t intend to subsidize these private Medicare Advantage plans. In 1997, HMOs and their lobbyists originally promoted these plans promising that these private corporations could provide traditional Medicare services plus modern medical advances and make a profit. Almost 5 million seniors enrolled in these plans. But the HMOs found they could not make enough profits to satisfy investors, and they started withdrawing their plans. By 2003, 2.4 million patients had been dropped.  Rather than responding to this crisis by adding modern medical advances to basic Medicare, the government caved in to corporate pressure, and increased its payments to Medicare Advantage plans, saying their purpose was no longer saving money but expanding benefits to consumers through the magic of private plans. With this magic, of course, also comes difficulties reaching doctors, misinformation on benefits, restrictions and denials of care, changes in benefits, and unwillingness to care for seriously sick patients. Nevertheless, payments to Medicare Advantage plans have been roughly 114% of payments for comparable patients in traditional Medicare.
It is this government subsidy to private plans which the Obama Health Plan eliminates. The Obama administration is OK with letting Medicare patients bear the extra cost of buying private Medigap policies for complete and modern healthcare. This explains why AARP, which sells Medigap policies, did not oppose the Obama Plan. And the Obama administration is OK with letting patients with just traditional Medicare pay out-of-pocket for additional services. But the Obama administration does NOT want the government to even partly subsidize the additional benefits of some Medicare Advantage plans. Once again, the Obama health plan lowers costs for government, but raises costs for beneficiaries.
The payments cuts to Medicare Advantage plans are expected to lead to huge premium increases, benefit cuts, or outright cancellation of programs, which would decrease Medicare Advantage enrollment by 50%. Before we gloat, remember, private insurers might lose up to 5 million Medicare Advantage customers, but they’ll be gaining at least four times that number in 2014 when “universal coverage” kicks in. But the millions on Medicare Advantage patients who are forced back onto traditional Medicare will be stuck with higher out-of-pocket costs or forced to buy private Medigap policies.
To be sure, people’s feelings do differ about the government’s cutting back on payments to private Medicare Advantage plans, but the important thing to remember is that these cuts to Medicare Advantage plans are only ¼ of the total Medicare cuts. What are the rest of the cuts, and how will they affect Medicare beneficiaries?
$233 billion cut in direct payments to the providers of Medicare hospital and outpatient care, plus penalties for their expected failure to meet “productivity” goals. This will lead to a shortage of Medicare providers.
These two kinds of cuts apply to virtually every kind of Medicare provider except doctors. They include hospitals, long-term care hospitals, skilled nursing facilities, inpatient rehabilitation facilities, inpatient psychiatric facilities, hospices, home health agencies, and even durable medical equipment suppliers.
The first kind of cut is a scaling-back of the yearly payment increases these providers get to compensate for their increased costs in providing care to Medicare patients. Actually, these payment increases have never kept up with inflation of medical costs. The yearly payment increases have ranged from 2.0-3.5% over the last decade, but medical care costs in general have increased about 6% annually. In spite of this, the Obama plan will deduct a significant fraction of each year’s payment increase, and the deduction gets worse as time goes on. Medicare providers will have less and less incentive to treat Medicare patients.
The second kind of cut is a one-time penalty which will be deducted from federal payments to providers if these providers cannot increase their “productivity” as fast as the rest of the nation’s economy. CMS, the Centers for Medicare & Medicaid Services, knows it will be virtually impossible for providers to meet this “productivity” target, and its Actuary has already included these deductions as cuts in Medicare payments to providers. One financial adviser to hospital systems wrote “Within the next 6-12 months, healthcare organizations will need to find a way to reduce their expenses or increase revenue by 3-5% to offset Medicare productivity adjustments.” 
The combination of the across-the-board reductions and the penalties for not meeting productivity targets means many providers will experience absolute decreases in funding from one year to the next.
Medicare’s own Actuary estimates these two types of payment reductions could cause 15 percent of hospitals and other institutions to become unprofitable and stop providing Medicare services by 2019. By 2030 it would be 25 percent of hospitals. According to Richard Foster’s April 23, 2010 report “providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibility jeopardizing access to care for beneficiaries). Simulations by the Office of the Actuary suggest that roughly 15 percent of Part A (inpatient) providers would become unprofitable within the ten year projection period (2010-2019) as a result of the productivity adjustments.”
$50 billion in cuts to Medicare “DSH” payments to hospitals serving low-income Medicare, Medicaid, and uninsured patients.
The Disproportionate Share Hospital (DSH) program provides special funding to hospitals in recognition of their higher costs in treating low-income patients. Starting in 2014, Medicare “DSH” payments to these hospitals will get big cuts.
The Medicare “DSH” payments to individual hospitals were started in 1986 to reflect the higher cost of treating Medicare patients in poor areas where Medicare patients are sicker. Over time, the rationale for Medicare DSH payments was expanded to assure hospital access for all poor and uninsured patients, and payments were based on individual hospital’s days of care for poor Medicare and Medicaid patients. In March of 2007, Medicare’s advisory board MedPAC estimated that 75% of DSH payments were not “empirically justified.”
Beginning in 2014, hospitals receiving Medicare DSH funds will be assured of receiving only 25% of their normally-calculated DSH funds.
The remaining 75% of normally-calculated DSH funds have a percentage cut each year equal to that year’s percentage drop in uninsured population compared to 2013, plus an additional percentage which increases every year from 2014 to 2019.  The result is that the hospital’s DSH funds are cut faster than its drop in uninsured patients.
After 2019 DSH funds would be distributed to hospitals based on each hospital’s level of uncompensated care compared to total uncompensated care for all hospitals.
The CMS Actuary estimates these cuts be $50 billion from 2014 to 2019. 
Cuts in payments to “inefficient” hospitals, mostly in low-income, medically-underserved areas, often large teaching hospitals serving the poor and uninsured.
Obama’s speeches on his health plan have tried to reassure older people that the Medicare cuts would be benign because they would be restricted to (1) cutting the bloated payments to greedy Medicare Advantage companies, and (2) improving efficiency in the Medicare system. The concept of efficiency has come to the forefront in the discussion of healthcare financing. How has this happened?
For two decades, the Dartmouth Institute for Health Policy and Clinical Practice has studied Medicare hospital costs and published its results in the Dartmouth Atlas. The Atlas shows big geographic differences in how much is spent, and purports to demonstrate that the high-spending hospitals don’t have better medical outcomes, and sometimes have worse outcomes.
This has all been put together into wild claims by health policy researchers and Obama officials that 30% of medical spending is waste and could be cut without affecting quality of care. Donald Berwick, Obama’s appointee to direct the Centers for Medicare & Medicaid Services, CMS, which administers Medicare and Medicaid, says 50% of medical spending is waste and could be eliminated without affecting quality of care.
A cottage industry of motivational speakers has sprung up, urging seniors to empower themselves and assert their rights to refuse complex medical treatment. For example, pathologist Dr. George Lundberg spoke at San Francisco’s Commonwealth Club in July. He waved his arms and practically shouted to seniors in the audience “Forget those heart by-pass operations! You don’t need them!” He said the same thing about CAT scans and mammography and even advised women not to examine their breasts. After his talk, he praised the Dartmouth Atlas to the sky, and sold autographed copies of his book Severed Trust, Why American Medicine Hasn’t Been Fixed, which advocates limiting access to the healthcare system. Dr. Lundberg is currently editor of the online journal Medscape and was editor of the Journal of the American Medical Association.
Not surprisingly, Dartmouth Atlas director Elliot Fisher is a consultant for the Peter G. Peterson Foundation, which has spent years trying to gut Social Security, Medicare, and Medicaid. Nor is it surprising that insurance companies help finance the Dartmouth Atlas.
One glaring problem with the Dartmouth Atlas studies is that they only look at patients who died 6-24 months after their hospital admission. So patients whose costly care improved their health and saved them from dying are excluded from the study. This biases the results to say that more spending does not improve outcomes. Other studies which include survivors say the opposite: that more costly care can improve outcomes. A December 23, 2009 NY Times article focused on a comparison of hospitals treating heart failure, which included survivors. The UCLA hospital, often cited as high-cost by the Dartmouth Atlas, had 1/3 fewer deaths from heart failure.
The other glaring problem is that the high-spending poor-outcome “inefficient” hospitals cited by the Dartmouth Atlas are in urban or rural areas with high poverty, unhealthy living and working conditions, poor access to medical care, and a shortage of primary care providers. The result is that patients are already in poorer health when they go into Medicare, and need more treatment, and more expensive treatment. Inadequacies in primary care in these areas means Medicare patients are sicker when admitted to hospitals. These patients also have fewer resources for good after-hospital care, so there are higher rates of re-admission. So of course these hospitals’ Medicare costs are higher and their medical outcomes are worse than the “efficient” hospitals in upper-middle class white areas.
In addition, the large, high-cost, “inefficient” hospitals are usually in big cities where salaries are higher, so all healthcare is more expensive. These hospitals are also often teaching hospitals, which have added expenses that are routinely (and legally) charged to Medicare.
The Dartmouth Atlas people, and their supporters in the Obama Administration, claim that they’ve factored these differences in, but other knowledgeable health policy people say this isn’t the case. A June 2, 2010 NY Times article focuses on these issues.
The Dartmouth mania ties into Medicare cost reductions because in future years the Obama plan will decrease payments to “inefficient” hospitals with higher costs and/or worse outcomes. In 2012, incentive payments will go to hospitals with good quality-of-care data for heart attack, heart failure, pneumonia, surgeries, and healthcare-acquired infections. In 2013, incentive payments would also reward hospitals with low spending per Medicare patient. These quality-of-care provisions of the Obama Plan must be “budget neutral,” so other hospitals’ payments will be reduced to pay for the incentive payments. There will also be penalties that will especially hit hospitals with sicker or poorer patients, and hospitals with tighter budgets. There will be $8.2 billion in penalties for hospitals with higher readmissions and $3.2 billion in penalties for hospitals with higher rates of hospital-acquired infections.
The “efficiency” and “quality” rewards and punishments are the medical equivalent of the “No Child Left Behind” program, which lowers school funding overall, and closes low-performing schools in areas of poverty, non-English-speaking populations, and chronically underfunded education.
$24 billion in cuts ordered by the Independent Payment Advisory Board, a new, independent, high-power, cost-containment commission built into the Obama Plan.
The Independent Payment Advisory Board (IPAB) is charged with clamping down the growth of average per-person Medicare costs. Its powers are essentially beyond the reach of Congress. The Board’s 15 unelected members are experts in medicine, health policy, health care delivery etc., and are appointed by the President with Senate concurrence. The Board can also recommend measures to cut total national health spending.
Starting in 2013, each year’s growth in average per-person Medicare cost will be compared with a threshold growth, based on a modified Consumer Price Index, or later, the Gross National Product. If, in any year, average per-person Medicare cost growth exceeds that year’s threshold, the Board must recommend legislation to either (1) reduce per-person Medicare spending up to 1.5%, or (2) otherwise limit Medicare cost growth to that year’s threshold, whichever is less.  The CMS Actuary estimates these cuts will be $24 billion from 2010 to 2019.
The Board’s cost-cutting recommendations become law unless the House and the Senate each adopt a resolution to block them, by a three-fifths majority. If Congress does reject the proposals, Congress must pass its own solutions yielding equivalent cost reduction within 7 months or Health and Human Services will implement the Board’s recommendation. No judicial review of a Board action is allowed.
Since the Obama Health Plan gives insurance and drug companies such large profits and so little regulation, Medicare beneficiaries’ costs are bound to rise faster than the Consumer Price Index or the Gross Domestic Product, and the Board will have to clamp down on Medicare spending almost every year. Medicare’s own Actuary states that if such a Board had been established 25 years ago, it would have had to act in 21 of those years.
The Board is prohibited from rationing care, increasing taxes, and changing Medicare’s benefits, eligibility or beneficiary cost-sharing, and there is a Consumer Panel that advises the Board to make sure the prohibitions are not broken. So the Board has to reduce payments to providers: physicians, home health, pharmaceutical and medical devices, durable medical equipment, and after 2020, to hospitals. Medicare specialists are very worried.
The Independent Payment Advisory Board is the Medicare cost-cutter of last resort. If any other cost-cutting mechanism fails, the board will make recommendations to make up the difference.
In Medicare Actuary Richard Foster’s April 22, 2010 Report, he wrote “limiting actual Medicare cost growth to a level below medical price inflation alone would represent an exceedingly difficult challenge. Actual Medicare cost growth per beneficiary was below the target level in only 4 of the last 25 years, with 3 of those years immediately following the Balanced Budget Act of 1997; (and) the (negative) impact of the BBA prompted Congress to pass legislation in 1999 and 2000 moderating many of the BBA provisions.” (The 1997 Balanced Budget Act, that ended welfare as we know it, included Medicare cuts even more severe than the Obama Plan, including the Sustainable Growth Rate, SGR, formula for limiting Medicare doctor payments.)
Champion budget hawk Peter Orzag said the IPAB is among the most important of the health reform provisions for “sustaining” Medicare, saying for Congress it represented “the single-biggest yielding of power to an independent entity since the creation of the Federal Reserve.” Orzag called it more than a means of cutting government spending, but also a means of wresting the constitutional responsibility for budgeting away from powerful Congressional committee chairmen.
Payment reforms: putting Medicare doctors under Managed Care
Much attention is being given to “payment methodology” reforms in how Medicare doctors get paid. Almost everyone is familiar with cases of real or hyped abuse of the “fee-for-service” payment system, where doctors are paid for each visit, procedure, or test they order, and so there is a profit incentive to over-treat patients.
But patient abuse also occurs under a capitated payment system, where doctors are paid a fixed amount to cover a patient for a year. Here, there is a profit incentive to under-treat patients or treat them as little as possible, since any treatment cuts into the amount of money the doctor was given to cover the patient. (In fact, the only way to remove incentives to over-treat or under-treat is for doctors to be paid by salary as workers, not business-people.)
Managed Care is a variation of the capitated payment system, where an organization that hires doctors is paid the fixed amount to cover a patient for a year, and the organization maximizes its profits by encouraging the doctors to treat patients as little as possible, through either rewards, penalties, or threats. In the late 1980s and early 1990s, managed care dominated healthcare, which led to large numbers of cases of HMOs denying necessary medical care or providing poor medical care. A major push-back of patients led to patient protection laws and letting up of managed care pressures.
The main thrust of the payment reforms in the Obama plan is to move Medicare doctors away from fee-for-service payment, and instead to work under managed care payment.
One new way to push doctors into managed care is Payment Bundling. In Payment Bundling, doctors, hospitals, nursing homes, and other providers would work together to be jointly accountable for providing care for eight kinds of patient care, such as a hip replacement or cardiac by-pass. For each patient care episode, the group would receive its set fee and divide the money between the doctor, the hospital, the nursing home etc. Hospitals already get a fixed payment for particular episodes of patient care, called the DRG system, but Bundled Payments extend this managed care payment to doctors, since they would get a fixed payment per episode. Payment Bundling is an experimental program beginning in 2013, and Health and Human Services has not chosen what kinds of patient care would use bundled payment.
Another new way to push Medicare doctors into managed care is Accountable Care Organizations (ACOs). ACOs would be groupings of doctors and hospitals who form a legal structure to (1) take responsibility for complete care of at least 5,000 Medicare patients, (2) accept fixed payments from Health and Human Services, and (3) distribute the fixed payments to the providers in the ACO. If, during a 3-year period, an ACO can reduce its average per-person Medicare spending to meet a goal set by Health and Human Services, the ACO can collect an award. If ACOs significantly reduce Medicare costs, planners envisage them managing the healthcare of 40-75% of Medicare patients.
As with any per-capita payment method, the incentive in both Bundled Payments and ACOs is to give less care, since any care given eats into the fixed payment the group receives. If the patient develops an infection, or fails to recover as fast as expected, any extra care given represents a loss in profits.
Many of these new payment reform strategies, like Bundled Payments or ACOs are to be developed by a new Center for Medicare and Medicaid Innovation, CMI, which is to start in 2011. These new payment reform strategies are sketched out in the Obama Health Plan as “pilot projects,” meaning they are yet to be planned out and tested even on a small-scale basis. The term “pilot project´ has a legal meaning: it can be completely planned, expanded, and put into general practice by the Department of Health and Human Services, an arm of the Executive branch, without any oversight by Congress, as long as they don’t increase spending. The Center is expected to develop other programs including care for chronic diseases, remote monitoring of very ill Medicare patients in local hospitals by specialists, moving doctors to salaried positions, and perhaps testing state single payer programs.
Are business and government serious about making these Medicare cuts?
The Obama Health Plan stabilizes and guarantees billions in profits to insurers, drug companies, and hospitals, yet demands that Medicare alone reduce its future expenses enough to control overall health costs, even as 79 million baby boomers are about to enter the system. This is patently unfair. As Brookings Institution’s Henry Aaron told the House Budget Committee in his June 2008 testimony, “Growth of Medicare spending per person has closely tracked growth of per person spending on health care in general. That parallelism simply reflects the central purpose of Medicare and Medicaid: to assure that the elderly, disabled, and poor receive care similar to that available to the general population. … Holding growth of per person spending on Medicare and Medicaid below that for the general population would imply the gradual abandonment of the national commitment to assure the elderly, disabled, and poor standard health care.”
Many critics, both from the left and the right, criticize the Obama plan, saying it cannot control costs. Critics from the left point to the huge profits to healthcare companies. But many other critics are saying the Medicare cuts we’ve outlined will never happen; that as the cuts come due, Congress will reverse them.
As evidence, they point to the limits on Medicare doctor payments that were written into the severe cuts in the 1997 Balanced Budget Act. These laws said Medicare doctor payments could not grow faster than a so-called Sustainable Growth Rate (SGR). Year after year Congress backed away from enforcing the SGR limit, so that enforcing it now would require a 21% payment cut to doctors. (Attempts to appropriate money to fill this hole were called the “doc fix.”)
Nobody has a crystal ball to see the future with certainty, but I see absolutely no reason why Congress would prevent these cuts from being made. Given the determination of business and government to cut services, particularly federally mandated services to seniors, and given the enthusiasm in Congress to make the same cuts, I think it highly probable they will try to make these Medicare cuts, even as they see the wave of 79 million seniors approaching. But before we place our bets, let’s look at some aspects of the Obama plan that might show promise.
Government Intervention: Quality Control? Cost Control? Is there a distinction?
These new payment reforms are being combined with much greater monitoring and oversight of doctors’ and hospitals’ practices, quality of care, and costs. This new monitoring and oversight are described as “value-based purchasing” or “rewarding value over volume.” These methods would standardize patient care, by adopting standard care plans and prescribed drugs that would be developed through studies of comparative effectiveness and cost. The methods would also require doctors and hospitals to report detailed data on their Medicare costs and quality-of-care indicators. “Quality-of-care” data would report both bad indicators like dosage errors, infections, bedsores, falls, etc. Quality-of-care data would also measure adherence to the standard treatment plans and drug choice protocols.
These interventional aspects of the Obama Health Plan could actually improve patient care by promoting “evidence-based medicine” and close monitoring of quality-of-care data. This standardization and quality control could be very welcome to committed clinicians who are discouraged because so much medical research is sponsored by drug companies or who are outraged because of the laxness and lack of uniformity in medical practice, where a doctor can prescribe powerful adult anti-psychotic drugs off-label to an 18 month old child, as reported recently.
But Dr. Marcia Angell, former editor of the New England Journal of Medicine wrote an important and fresh perspective on these improvements in the Obama plan: “Initiatives such as electronic records, case management, preventive care, and comparative effectiveness studies may improve care, but the Congressional Budget Office and most health economists agree that they are unlikely to save much money.”
Marcia Angell’s position is a very different from Obama’s position, which states that these improvements in healthcare will save significant money. Why is this difference important? It is important because by conflating healthcare improvement with cost reduction, Obama is making the Medicare “savings” seem benign, as though the “savings” are an additional payoff of these measures to improve care. It is similar to Obama’s casting Medicare cuts as improvements in efficiency in order to make the cuts seem benign.
In fact, these interventional measures give Health and Human Services and Centers for Medicare & Medicaid Services tremendous centralized power to ratchet back costs to the point of compromising patient care. It gives the government power to standardize patient care plans and drug choices, to reduce payments to doctors for not following the plans, to reduce payments to doctors who spend too much, to reduce payments to hospitals for not meeting productivity standards, to set the payments doctors and hospital get for particular treatments, to push doctors into managed care and then set the payment for coverage per-person per-year, and finally to give an independent commission carte blanche power to reduce provider payment. Given the rampant deficit hysteria in Washington, and demands for corporate tax cuts “to stimulate the economy,” can we be sure these interventions aren’t to ration care to Medicare beneficiaries?
Ultimately, our decision whether to embrace these interventions as a prelude to better healthcare, or fight them as a prelude to rationing, should depend on how much influence we have over policy development. Judging by our recent struggle just to have single-payer mentioned, I would say we have little influence, and therefore these interventions are a threat we need to warn people about.
One can’t ignore the context in which these cuts are being introduced. – Deficit hysteria cultivated in Washington. — Strong agitation by both Democrats and Republicans to cut Social Security, Medicare, and Medicaid. — Demands for corporate tax breaks “to stimulate the economy.” — Economic meltdown followed by persistent, high, long-term unemployment. — Years of huge projected shortfalls in State and County budgets with deep health and welfare cuts. — Years of war projected to secure oil, pipelines for oil and gas, or containment of China or Russia.
These are times when business’s and government’s backs are to the wall. For them, health and social services for elders, people with disabilities, kids, and poor people are not necessary. We are going to have to fight like hell to keep them.
My earlier remarks on health reform still apply:
First single-payer was off the table. Then a public option anyone could use was off the table. Then the Medicare buy-in was off the table. And negotiated drug prices. And cost controls. And .. And…
Most of us are angry, and whipsawed back and forth between pessimism and optimism. The health bill is a gigantic bailout for insurance, drug, hospital, and doctor industries, forcing us onto private insurance, while at the same time forcing down the value of that insurance and making us pay more out-of-pocket, and taking five hundred billion dollars from Medicare over the next ten years. Our optimistic side says maybe 30 of the 50 million uninsured will get insured in four years, though many won’t be able to afford it and will choose to pay extra taxes instead. Many of us have children barely able to keep a roof over their heads, maybe they’ll qualify for Medicaid, though Obama wants to cut Medicaid costs. And what if this awful health bill failed? These thoughts drive us nuts.
It has been a very bitter pill to see how marginalized we are. Deep down, we hoped or expected that once business realized the cost of insurance-based healthcare was unsustainable, our day would come, and our plan of removing insurance companies would be taken seriously. We were wrong.
The truth is we do not have a movement that’s capable of mounting a serious threat to the functioning of the economy or government, through strikes, sit-ins, or occupations. We do not have the General Strikes that forced the government to cough up Social Security. Nor the emerging sit-ins and marches against Jim Crow racism that forced them to cough up Medicare and Medicaid. We cannot expect different results until we have the kind of movement, that can, and will, stop the gears for long enough to inflict serious pain.
Is healthcare more of a human right than food, when a quarter of US children are food-insecure. Is healthcare more of a human right than housing, when families with kids wait for months for shelter beds in San Francisco? What about education?
We need to stop asking for our needs to be on the table. We need to kick the table over.
 Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010, p. 2
 Congressional Research Service, “Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA): Summary and Timeline,” June 30, 2010, p. 5
(Available at http://www.aamc.org/reform/summary/crstimeline.pdf )
 Congressional Research Service, “Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA): Summary and Timeline,” June 30, 2010, p. 7-8
(Available as http://www.aamc.org/reform/summary/crstimeline.pdf )
 Congressional Research Service, “Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA): Summary and Timeline,” June 30, 2010, p. 7
(Available as http://www.aamc.org/reform/summary/crstimeline.pdf )
 Don McCanne, “CMS Actuary’s report on financial effects of PPACA,” April 26, 2010,
 Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010,
 Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010, Table 3, page 26, Section 3201, “Medicare Advantage Payment”,
 The Commonwealth Fund, “Timeline for Health Care Reform Implementation: System and Delivery Reform Provisions,” April 1, 2010, Accessed Sept 15, 2010, listed under “2011, Medicare Advantage”
(Available in cached version at http://tinyurl.com/29cqu4e )
Health and Human Services, Testimony on Medicare Advantage to House Subcommittee on Health, March 21, 2007, (Available at http://www.hhs.gov/asl/testify/2007/03/t20070321a.html )
 San Francisco Chronicle, “40,000 could lose Medicare, U.S. insurers say payments not up with medical costs” September 9, 2003
(Available at http://tinyurl.com/25zhtsu )
 Medicare Rights Center, “Why Consumers Disenroll from Medicare Private Health Plans,” June 15, 2010, (Available at http://www.medicarerights.org/pdf/Why-Consumers-Disenroll-from-MA.pdf )
(Available at www.kff.org/medicare/upload/2052-12.pdf )
 ABC News, “Report Says Health Care Will Cover More, Cost More” April 23, 2010
(Available at http://abcnews.go.com/print?id=10454567 )
 Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010, Table 3, page 27, Section 3401, “Market Basket Revisions and Productivity Adjustments”,
 Congressional Research Service, “Medicare Provisions in PPACA (P.L. 111-148),” April 21, 2010, p. 88, Appendix B. (Available at http://www.aahsa.org/WorkArea/DownloadAsset.aspx?id=11313 )
 Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010, p. 27, Section 3401 “Market Basket Revisions and Productivity Adjustments,” (Available at https://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf )
 West Johnson and Gordon Mountford, “Key Healthcare Reform Initiatives – Medicare Market Basket Productivity Adjustments,” August 12, 2010.
(Available at http://tinyurl.com/2w2vnda )
 HealthReformStat, “Provider Reimbursement – reduction in market basket updates,” June 5, 2010.
(Available at http://tinyurl.com/2weyqhl )
 Centers for Medicare & Medicaid Services, “Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers,” (August 5, 2010), p. 6
(Available at http://tinyurl.com/2cokhh5 )
 Centers for Medicare & Medicaid Services, “Estimated Financial Effects of the ‘Patient Protection and Affordable Care Act,’ As Amended,” (April 22, 2010), p. 9-10
(Available at http://tinyurl.com/2cw2e2e )
 Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010, Table 3, page 26, Section 3133, “Improvement to Medicare DSH Payment”,
 Congressional Research Service, “Medicare Provisions in PPACA (P.L. 111-148),” April 21, 2010, p. 9.
(Available at http://www.aahsa.org/WorkArea/DownloadAsset.aspx?id=11313 )
 Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010, p. 26, section 3133
(Available at http://www.dartmouthatlas.org/ )
 Dartmouth Institute for Health Policy & Clinical Practice, “Reflections on Geographic Variations in U.S. Health Care,” May 12, 2010, p. 3
 Personal observation at a talk by Dr. George Lundberg on reducing medical costs, Monday, July 12, 2010, Commonwealth Club, San Francisco. Also see George Lundberg, “How to Rein in Medical Costs, RIGHT NOW,” August 11, 2010, (Available at http://tinyurl.com/oowxb2 )
 Fiscal Sustainability Teach-In, “Countering the Peterson Foundation’s “Let Them Eat Catfood (and die) Summit,”” April 27, 2010
(Available at http://www.fiscalsustainability.org/node/58 )
(Available at http://www.foley.com/abc.aspx?Publication=7151 )
 Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010, Table 3, page 2, Section 3025, “Hospital Re-Admissions Reduction Program”,
 Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010, Table 3, page 25, Section 3008, “Payment Adjustment for Conditions Acquired in Hospitals”,
 Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010, Table 3, page 28, Section 3403, “Independent Payment Advisory Board”,
 Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010, p. 28, section 3403,
 Centers for Medicare & Medicaid Services, “Estimated Financial Effects of the ‘Patient Protection and Affordable Care Act,’ As Amended,” (April 22, 2010), p. 10
 Fierce Healthcare, “Specialty Physicians Support Senate Bill to Repeal the IPAB,” (July 27, 2010)
(Available at http://tinyurl.com/2dplc4y )
 Centers for Medicare & Medicaid Services, “Estimated Financial Effects of the ‘Patient Protection and Affordable Care Act,’ As Amended,” (April 22, 2010), p. 10
(Available at http://www.nytimes.com/2010/07/29/us/politics/29bai.html )
(Available at http://www.foley.com/publications/pub_detail.aspx?pubid=7141 )
(Available at http://www.foley.com/publications/pub_detail.aspx?pubid=7141 ) and
Congressional Research Service, “Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA): Summary and Timeline,” June 30, 2010, p. 31
(Available at http://www.aamc.org/reform/summary/crstimeline.pdf )
 California Healthline, “Reform Law To Establish New Center for Medicare, Medicaid Innovation, April 8, 2010,
(Available at http://tinyurl.com/25zqlav )
 Health Beat, “What Many Liberals Don’t Understand About Health-Care Reform,” (June 16, 2010)
(Available at http://tinyurl.com/276xpjj )
 Commonwealth Fund, “Breaking Traditions: Medicare Innovations Tucked in Law Could be a Tough Sell,” April 5, 2010, (Available as http://tinyurl.com/2cgsjdn )
on H.R. 3654, June 24, 2008, p. 4
(Available at http://budget.house.gov/hearings/2008/06.24aaron.pdf )
 New York Times, “Child’s Ordeal Shows Risks of Psychosis Drugs for Young,” (September 1, 2010)
(Available at http://tinyurl.com/oosgxs )