Mar 03 2010
Annual Medicare Payment Advisory Commission Issues Report, Addresses Rising Cost of Health Care
There has been quite a bit of discussion, research studies, and of course proposed legislative language with respect to reforming health-care in this country. In this regard, I thought this recent Commission report deserved a closer look as TRICARE reimbursement rates are tied to Medicare’s. As required by the Congress, each March the Medicare Payment Advisory Commission (commonly referred to as MedPAC, and is non-partisan independent agency), reviews and makes recommendations for Medicare payment systems. These are the fee for service systems (FFS) and the Medicare Advantage (MA) program. This report is widely anticipated as its principal purpose is to make recommendations for annual rate increases and updates under Medicare’s various FFS payment systems.
The goal of Medicare payment policy is to get good value for the program’s expenditures, which means maintaining beneficiaries’ access to high-quality services while encouraging efficient use of resources. This is good, in that as a taxpayer, anything less would not serve either those that rely on this system, or those of us who finance this system through our taxes.
The report gives great consideration to the current national environment for context in setting its payment policy. The report makes very clear that the Medicare program and other U.S. health care payers are on an “un-sustainable financial path”. For most of the post-World War II period, health care costs have risen faster than the economy. The Centers for Medicare Services (CMS) reports that health cares total share of the economy rose from 7% in 1970 to an estimated 17% in 2009. This high rate of growth is projected to continue, absent meaningful financing and delivery reforms. Hence, the drive for some degree and level of health care reform. This is at least a start.
A number of factors are responsible for the sustained high rates of growth in health care costs for public and private programs. The Congressional Budget Office (CBO) cites advances in medical technology, national wealth, and the consumption-increasing effects of insurance as major contributors to historic and projected growth. Other factors include changes in demographics and disease burden, rising personal incomes, and increases in prices charged by providers.
Rising spending places an increased burden on those who fund it. For example, higher premiums for health care benefits have resulted in increased costs for employees (which are starting to surpass any increase in their wages), and for Medicare beneficaries a growing share of their income must be used to pay Medicare premiums and cost sharing, and higher taxes.
Most importantly, numerous studies have shown that much of the increase in health care spending is not explained by improvements in health status, clinical outcomes, or quality of life. These findings, combined with the projected increases in health spending, represent the core challenges for policy makers. That is: how to increase quality, improve the efficiency of the delivery system, and find the resources to finance care.
To begin to address these issues, the Commission has recommended a number of changes, such as rewarding providers for improving quality and holding providers accountable for the quality of care beneficiaries recieve and the resources expended to provide it. Many of these recommended changes aim to improve the quality of care and health outcomes by creating incentives for providers to work together to coordinate care, to decrease fragmation in the system and promote true patient centered care models.
Some selected findings:
- Hospital Inpatient and Outpatient Services. In aggregate, most indicators of payment adequacy are positive, but profit margins on Medicare patients remain negative for most of the 3500 hospitals participating in the Medicare payment systems. In other words, most hospitals have to balance their payor mix to achieve an overall positive rate of retern.
- Physician Services. Most indicators of payment adequacy for physician services are positive and stable, suggesting that most beneficiaries can obtain physician care on a timely basis. A 2008 survey found that most physicians (74%) accepted all or most new Medicare patients in their practice and more than 95% had participation agreements which require them to accept Medicare’s fee schedule.
Overall though, the Commission remains concerned about the access issue and the direction in which it might be heading. There are reiterations of recommendations to increase payments for selected primary care services and there are plans for future work on those issues in particurlar.
One issue that will certainly remain in the spotlight is that spending due to health cost growth, if it remains on its present trajectory, will surpass growth in GDP in a matter of a few years. This is a dialogue in which we all will need to participate in.
