GOP Wants To Pay For Health Care After All
Well, well, well.
Remember how Republicans have been whining that using federal tax dollars to pay for health care is some kind of evil Hitlerian Kenyan socialism that has all our Founding Fathers spinning in their graves? Turns out it’s bullshit.
Kate Sheppard at Mother Jones reports:
A bill that Rep. Cliff Stearns (R-Fla.) introduced in January would provide federal funds for the purchase of sonogram machines at organizations that counsel women against having an abortion (the American Independent reported on this bill last week). These crisis pregnancy outfits, sometimes called “pregnancy resource centers,” are often run by religious groups; many have been found to provide women with false and misleading information to dissuade them from having an abortion.
The bill, H.R. 165, laughably called the Informed Choice Act, appears quite simple:
To authorize the Secretary of Health and Human Services to make grants to nonprofit tax-exempt organizations for the purchase of ultrasound equipment to provide free examinations to pregnant women needing such services, and for other purposes.
But of course it doesn’t allow all organizations to apply for funding. There are a few restrictions, according to Mother Jones.
To be eligible for this grant, a facility would have to show every woman seeking services the ultrasound image and describe to them the “general anatomical and physiological description of the characteristics of the fetus.” The facility would be required to provide women with “alternatives to abortion such as childbirth and adoption and information concerning public and private agencies that will assist in those alternatives.” It also must offer its services free of charge. That last condition would disqualify abortion providers, such as Planned Parenthood, which charges on a sliding scale based on a woman’s income.
Crisis pregnancy centers are nothing more than religious centers that try to dissuade women from obtaining abortions by using false and misleading information.To review:
Such centers have repeatedly been found to give women false medical information for the explicit purpose of preventing them from obtaining, or even learning about, abortions.A 2006 Congressional report, False and Misleading Health Information Provided by Federally Funded Pregnancy Resource Centers, concluded:
Pregnant teenagers and women turn to federally funded pregnancy resource centers for advice and counseling at a difficult time in their lives. These centers, however, frequently fail to provide medically accurate information. The vast majority of pregnancy centers contacted in this investigation misrepresented the medical consequences of abortion, often grossly exaggerating the risks. This tactic may be effective in frightening pregnant teenagers and women and discouraging abortion. But it denies the teenagers and women vital health information, prevents them from making an informed decision, and is not an accepted public health practice.
The bill’s sponsor is the same Cliff Stearns who wanted to investigate Planned Parenthood over the O’Keefe-style sting videos that tried to show Planned Parenthood covering up a prostitution ring. That would be the same Cliff Stearns who last month said that “defunding Planned Parenthood should be a fiscal and moral priority for Congress, and for the American people.” Why?
Our national debt exceeds $14 trillion and after running a federal deficit of $1.3 trillion last year, we will see a $1.5 trillion deficit this year. I get one clear message in talking with the American people – promote job growth and control government spending.The federal government funds thousands of programs and projects, and Congress must look at all federal expenditures and reduce or eliminate those that do not meet the needs of the American people.
So while Rep. Stearns and his fellow Republicans think there’s just no room in our budget for the nation’s largest women’s reproductive health care provider, there is, apparently, $5 million a year to fund fake health care clinics run by religious zealots.
No word yet from Stearns on how this will “promote job growth and control government spending.”
By: Kaili Joy Gray, Daily Kos, March 29, 2011
The Affordable Care Act, One Year Later
A year ago this week, Capitol Hill was full of noise as the House of Representatives debated, and then voted, on the Affordable Care Act. But one of the most vivid memories of that experience for me was an extended moment of silence.
It came very late on Sunday evening–after the floor speeches, the votes, and the press conferences had ended. The galleries had long since emptied and the Capitol building itself was virtually unoccupied, so that it was possible to walk the entire length of the building, on the ground floor hallway that stretches from the House all the way to the Senate, without hearing so much as a single conversation.
It felt more than silent. It felt peaceful and, yes, satisfying. A prolonged, difficult debate had finally ended. It was time to move on.
Except that we haven’t moved on. We are still having arguments about health care reform. In fact, we are still having the same arguments about health care reform. The Affordable Care Act is law of the land now, yes, but its critics are determined to change that. And while the prospects of repealing it legislatively remain relatively slim, the prospects of repealing at least part of it judicially seem far more realistic than they did in the spring of 2010.
So perhaps it is worth taking a step back, just for a moment, and remembering how we got to this point–why this debate started in the first place and why it led to the enactment of this law.
It’s really not that complicated. Around one-fifth of the non-elderly population, or somewhere in the neighborhood of 50 million people, have no health insurance. Many millions more have insurance with major gaps or limitations, leaving them at risk of financial or medical catastrophe. Notwithstanding legitimate debates over exactly how many people go bankrupt or suffer physical hardship because they can’t pay their medical bills, virtually nobody denies that the human toll is real and significant.
These problems are the product, in part, a dysfunctional health insurance system that evolved haphazardly during the 20th Century. They also the product of a medical system as inefficient as it is costly. The United States pays more–far, far more–for health care than any other developed nation. But the care does not seem to be better overall, to say nothing of the fact that it is patently less available.
The goal of reform was really two-fold: In the short term, to make sure everybody can afford to pay for medical bills without financial distress; it the long term, to make the health care system as a whole more efficient, so that it no longer applied such a crushing financial burden on society. A single-payer system, like the ones in France or Taiwan, would have accomplished this. So would a scheme that turned health insurance into a regulated utility, as the Dutch and Swiss governments have done.
Political compromises, dating back to the earliest days of the 2008 presidential campaign, left the U.S. with a second-best–or, more accurately, a third- or fourth-best solution. It bolsters two existing insurance arrangements: Employer-sponsored coverage for workers in most companies, Medicaid for the very poor. It creates a new, regulated marketplace–insurance “exchanges”–for everybody else. Then, through a combination of tax changes and alterations to Medicare, it tries to reengineer medical care itself, wringing out administrative waste and focusing resources on the treatments, and care styles, that provide the most bang for the buck.
It’s easy to find the flaws–and to figure out who’s responsible for them. Doctors, hospitals, drug manufacturers, and device makers fought changes in the delivery of medical care that might affect their incomes; unions lobbied against tax reforms designed to discourage overly generous insurance; everyday Americans resisted changes to plans they already had. All of this blunted the Affordable Care Act’s efforts at cost control, which explains why, ten years from now, the best projections suggest we’ll have spent roughly as much on health care–as a government and as a country–as we would have if the law never passed.
At the same time, political conservatives fought to limit the bill’s expanse, demanding that the new outlays not exceed a $1 trillion, give or take. They had extra power, thanks to the filibuster, and were able to make the demand stick. As a result, the expansion of insurance coverage–via Medicaid and subsidies for private insurance–will not begin until 2014. Even then, somewhere around 20 million people, or 8 percent of the total population, will remain uninsured. And for some of the insured, the coverage will remain meager.
But the law’s shortcomings should not tarnish its many virtues. Eight percent uninsured means 92 percent insured, or around 95 of residents here legally. Or, to put it another way, more than 30 million additional people will have health insurance because of this law. The coverage, if not always as generous as it should be, will be enough to keep many if not most of the newly insured out of bankruptcy–and it will be available to almost everybody, regardless of pre-existing condition or insurance status.
The cost picture is also encouraging. The official projections suggest that, as of 2021, government spending (and, apparently, the country’s total spending) on health care will not be rising as fast as it is now. This is the critical distinction, because it’s the long-term burden of health care that threatens to bankrupt us. Critics doubt that officials will enforce planned changes to health care financing, but today’s lawmakers have no way to force action by their counterparts in the future. All they can do is put laws on the books–and that’s what they have done.
Are there better alternatives? Of course. But the loudest critics of the law, from the right, don’t have them. For all of their screaming, they have yet to put forward a credible plan that can do as much, let alone more, for less money. Their plans, stripped of misleading rhetoric, generally involve covering far fewer people, dramatically reducing the coverage that people have, or some combination of the two. Their dispute is not with the means Democrats have used to make health care affordable to all. It’s with the goal itself.
No, the way to improve the law is to build upon it–to bolster the insurance coverage, reach those Americans the law as written will not reach, and to strengthen the experiments in cost control that work. The best analysis of the law remains the one Senator Tom Harkin gave: The Affordable Care Act is not a mansion. It’s a starter home. But it’s got a solid foundation, a sturdy roof, and room for expansion.
A year from now, the presidential campaign will be well underway and the debate about the Affordable Care Act will likely be, if anything, more acrimonious than it is now. But perhaps after the election and, hopefully, after 2014, the country really will move on.
By: Jonathan Cohn, The New Republic, March 23, 2022
The Importance of Independence: Affordable Care Act’s Independent Payment Advisory Board Key to Quality Care at Lower Cost
A year ago this week, President Barack Obama signed into law our nation’s first comprehensive health reform law, the Affordable Care Act, which not only extends health insurance protection to tens of millions of Americans but also actually reduces the deficit—in large part because of measures the law takes to responsibly slow the growth in Medicare and overall health spending. Lowering the projected growth of health care costs is a key promise of the law because these ever-escalating costs drain businesses, government coffers, and individuals’ savings. Yet many who criticize the law as a budget buster are aiming to repeal some of its key cost-containment features.
The Independent Payment Advisory Board is a case in point. The Affordable Care Act establishes this board to serve as a guarantor that the law’s cost-containment goals will actually be achieved. If the government’s main health care program for the elderly and disabled Medicare exceeds its per capita cost-growth targets under the new law, then the Independent Payment Advisory Board is empowered to recommend ways to reduce program expenditures by changing the way Medicare pays health care providers.
The secretary of health and human services must implement these recommendations unless Congress passes an alternative proposal or discontinues the cost-containment review process by the Independent Payment Advisory Board. Some legislators propose to eliminate the board. This would be a mistake.
Understanding the purpose of the board—as part of the Affordable Care Act’s cost-containment strategy overall—makes it clear that keeping and strengthening the independent board makes sense. The new health law’s cost-containment strategy includes both reducing excessive payments to providers under Medicare’s current payment mechanisms and moving Medicare—and, by example, the private sector—away from a payment system that rewards volume of services, without regard to health benefits, to payment arrangements that reward effective care, efficiently provided.
The Independent Payment Advisory Board will reinforce this twin focus on quality care at lower cost.
The Affordable Care Act holds hospitals and other institutional health care providers to productivity gains—something every other sector of our economy has achieved over the past several decades. Between 1995 and 2008 average annual productivity growth across the vast majority of U.S. businesses was 2.4 percentage points—just more than 1 percentage point higher than the previous two decades. In contrast, the health care, education, and social services sectors combined have produced average annual productivity growth rates of negative 0.2 percentage points.
The Affordable Care Act’s push for providers to produce productivity gains on par with other sectors promotes the efficiencies needed to reduce health care costs. But to assure that growth rates actually slow, the Affordable Care Act sets a target for Medicare spending growth and requires the Independent Payment Advisory Board to develop and recommend payment changes to achieve it. Both the Congressional Budget Office and the executive branch’s Centers for Medicare and Medicaid Services predict that explicit payment changes will produce most but not all of the savings needed to realize the independent board’s spending-growth targets through 2019 under the new law.
Avoiding excessive increases in the rates Medicare pays historically slows spending growth across the entire health care industry and can do so in the future. But tightening fee-for-service does nothing to improve quality or efficiency in care delivery—a critical goal of health reform. That’s why the Affordable Care Act includes multiple strategies to promote payment and delivery reform.
First, the new law stops rewarding bad behavior. The law authorizes the secretary of health and human services, without seeking congressional action, to review and alter “misvalued” fees, such as paying more for services than they’re worth, and to reduce payments for clearly undesirable behavior, such as hospital-acquired infections or conditions, inappropriate hospital readmissions, and, even more egregious, outright fraud. These new steps will deliver market-based signals to Medicare health care providers—and by example to the entire industry—that the wrong kinds of services that drive up current costs will no longer be rewarded.
Alongside what might be considered these “sticks” to change behavior come a set of essential “carrots,” or rewards to deliver more effective and efficient care. At the most basic level, these rewards are extra payments to providers for doing “good” things—say, meeting a set of efficiency standards while maintaining quality care. But more importantly, these rewards reside in alternative payment mechanisms to replace today’s fee-for-service payment system.
Among the new payment systems the new health law encourages is “bundling” separate fees into a single payment for services associated with a specific condition, such as a hip fracture, which today would include separate fees for diagnosis, surgery, and postoperative care. Another provision of the law promotes the financial and health benefits of primary care and chronic care management through newly created “medical homes,” which coordinate health care for their patients. And yet another new approach to health care promoted by the new law are so-called “accountable care organizations,” which are collaboratives of inpatient and outpatient providers who are rewarded for delivering quality care to a defined set of patients at lower-than-projected costs.
The new law sets a clear timetable for implementing some of these measures and creates the Center for Medicare and Medicaid Payment Innovation to initiate, evaluate, and broadly extend the application of these methods as part of “rapid cycle change.”
The law also recognizes that these efficiencies and the savings they can deliver will not be realized if changes in payment systems are limited to the public sector, and therefore encourages public-private partnerships. Medicare is a large payer, accounting for 20 percent of our nation’s medical bill in 2009. Private payers have historically followed Medicare payment practices. But that outcome is neither automatic nor immediate.
What’s more, inconsistent payment mechanisms across payers discourage providers from changing behavior, impede efficiency improvements, and create opportunities for offsetting one payer’s spending reductions with increases for others. Indeed, a recent study by the Medicare Payment Advisory Commission, an independent congressional agency, finds that hospitals squeezed by both Medicare and private payers changed their operations to become more efficient, yet hospitals with generous private payments ignored Medicare constraints, took losses on Medicare patients, and continued business as usual. Better quality care at lower costs requires that the public and private sectors work in tandem.
The health reform law encourages common action in different ways. The law gives preference to innovations where providers engage with private payers alongside Medicare in adopting new payment incentives Other provisions in the law further support payment reform in the private sector by extending access to Medicare provider performance data to guide private payers’ payment-reform efforts, and requiring private health plans to regularly report on those efforts. These data will inform the Independent Payment Review Board when it uses its authority to make nonbinding recommendations for private-payer reforms alongside binding recommendations for public programs.
This is a key provision of the new law. From 1970 to 2000 the private sector was less effective than Medicare in promoting efficiency, with an average annual growth rate per enrollee of 11.1 percent compared to Medicare’s rate of 9.6 percent. An effort that addresses public-sector but not private-sector health care spending risks limited access for beneficiaries as well as missed opportunities to encourage health care providers to operate more effectively and efficiently. Therefore, the broader the new board’s authority is to influence not only public but also private spending, the more effective it will be.
A focus on policy tools alone, however, obscures the most important element of the Independent Payment Review Board’s potential impact. Payment improvements in the past were stymied by legislators responding to providers’ resistance to change. Provider payment is rarely a partisan issue but it is a political issue. The new law takes the politics out of the equation by giving the independent board the authority to make Medicare payment recommendations that become law unless explicitly overridden by legislative action. This gives a major boost to policy over politics in containing health care costs.
And it’s precisely this boost that special interest groups want to prevent. Opponents of the new board complain it undermines congressional authority and removes from their control an important budgetary lever at a time when the federal budget deficit is rising at an unsustainable rate. But the real concern of many of these critics, who often are the fiercest advocates of fiscal restraint, is that the board’s authority diminishes their influence and their ability to fashion a Medicare budget that benefits the pharmaceutical industry and other special interest groups that are in a position to lose the most from the board’s future recommendations.
Other critics of the Independent Payment Advisory Board fear the Affordable Care Act did not go far enough in granting it authority, leaving too many loopholes for special interest groups to avoid payment adjustments. In making adjustments the board is prohibited from addressing payments to hospitals, skilled nursing facilities, and other health care providers who are scheduled to receive “productivity adjustments” under the Affordable Care Act. Rather than repeal the board, the more sensible option would be to close these loopholes and extend accountability for unacceptable health care cost increases.
In fact, members of Congress and policymakers in the federal government should be thinking of ways to strengthen the Independent Payment Advisory Board given the fiscal reality facing the federal government today. The new board is one of the Affordable Care Act’s most important cost-containment tools. We can’t afford to lose it.
By: Judy Feder, Senior Fellow, Center For American Progress, March 21, 2011
The Anniversary of the Affordable Care Act: A Year Later, The False Attacks Continue
Conservatives often push myths and misconceptions of the Affordable Care Act of 2010 as a way to increase opposition. During the debate in Congress in the run-up to passage of the new health reform law, conservatives pushed wild accusations that the law would be a “government takeover” and establish “death panels,” claims that were labeled “the lie of the year.” Now, a year after the Affordable Care Act was signed into law, inaccurate claims and mistruths against the law continue.
Conservatives continue to make false claims against the law as a way to repeal it, undermine consumer protections, and put insurance companies back in charge of our health system. The reason these false statements endure is clear: There are those who would rather take us back to the way our health system was before when insurance companies were in charge rather than move forward and protect our care.
This issue brief is a response to recent false attacks conservatives have made against the law. As we will demonstrate, the Affordable Care Act will create jobs, lower health care costs for families, help small businesses provide health insurance to their employees while maintaining the private sector’s key role in health insurance, and ensure we provide quality health care to all Americans at a lower cost to them and American taxpayers.
The Affordable Care Act will help create jobs
The Affordable Care Act helps our economic recovery by bringing health costs under control, freeing businesses to use that money to invest in job creation. The real threat to job creation is the conservative push to take us back to the old health system where costs were on an unsustainable path. Harvard University professor and Center for American Progress Senior Fellow David Cutler found that repealing the Affordable Care Act—and going back to the unsustainable costs—would cost up to 400,000 jobs annually over the next decade.
To push this “job destroying” argument, conservatives cite the nonpartisan Congressional Budget Office’s estimates that the law will reduce the labor supply (although conservatives dismiss CBO reports when they conclude the law will cut the deficit and reduce premiums). Yet conservatives fail to recognize that one reason for this reduction is that older workers, now forced to hold on to jobs to get health insurance, will now be able to retire—with insurance—when they choose.
The Affordable Care Act lowers premiums and costs for families
The Affordable Care Act takes steps to get our health costs under control and lowers costs for families. The real threat to costs is the conservative push to repeal the law. Cutler found that repealing the Affordable Care Act would increase total health spending by $125 billion and raise family premiums by nearly $2,000.
More small businesses are providing health coverage to their employees, thanks in part to the Affordable Care Act
Conservatives try to downplay the impact of the small business tax credits to provide health insurance to their employees. The truth is that last year, more than 4 million small businesses were eligible to receive a tax credit to make health coverage more affordable. According to the Los Angeles Times, “major insurers around the country are reporting that a growing number of small businesses are signing up to give their workers health benefits,” adding that an “important selling point” was the small business tax credits.
The Affordable Care Act keeps the employer-based health system intact
Conservatives claim the Affordable Care Act will undermine the employer-sponsored health coverage that millions of Americans enjoy when the state health insurance market exchanges become functional. This is not true. According to Mercer’s recent “National Survey of Employer-Sponsored Health Plans,” the vast majority of employers, particularly large employers, will continue to offer their employees health coverage. Indeed, the survey notes that if the Affordable Care Act follows the Massachusetts health law, “few employers of any size” will choose to drop coverage.
The Affordable Care Act ensures quality care and has flexibility for states
The Affordable Care Act provides states with considerable flexibility. Each state gets to decide how to set up their own marketplace of health options for consumers to choose which plan suits them best. States have flexibility in how they implement insurance reforms and consumer protections. The law encourages state innovation by allowing them to obtain waivers from some requirements provided the alternative proposal provides comparable coverage and affordability. President Obama recently endorsed legislation from Sens. Ron Wyden (D-OR) and Scott Brown (R-MA) that would move the start date for those waivers by three years.
At the same time, conservatives argue there is not enough flexibility in the Affordable Care Act. They criticize the Obama administration for granting too many waivers on so-called “mini med” plans that have a low annual limit. Since many of the consumer protections and mechanisms to increase patient choice—such as the state marketplaces—are not operational until 2014, the administration has in some instances granted waivers from the law’s early requirements, to avoid leaving people with nothing. CAP Senior Fellow Judy Feder told Congress that until the law is fully implemented, the goal should be to “make matters better, without making them worse.”
States can save money from the Medicaid reforms under the law
Medicaid is a federal-state health program that provides health coverage to predominantly lower-income families, elderly people, and people with disabilities. The federal government matches state funding on the program. For people made newly eligible for Medicaid by the Affordable Care Act, the federal government will pay 100 percent of costs in the early implementation of the Affordable Care Act. In the later years, states will have to pay only 10 percent.
Conservatives charge that the Affordable Care Act will increase state Medicaid spending by $118 billion. An Urban Institute study, however, found that states will save between $40.6 billion and $131.9 billion from 2014-2019 by replacing state and local spending for uncompensated care and mental health with federal Medicaid funds and by replacing federal Medicaid funding for adults with incomes over 133 percent of the federal poverty level with federal subsidies in the marketplaces.
There is no secret $105 billion hidden in the law
Conservatives such as Reps. Michele Bachmann (R-MN) and Steve King (R-IA) claim that $105 billion of mandatory funding was secretly put in the law unbeknownst to members of Congress. This is false. The Washington Post’s Fact Checker said this claim is “bordering on ridiculous” and “does not have credibility.” The truth is there was a considerable amount of transparency before the Congress approved the Affordable Care Act. In the House alone, there were: 79 bipartisan hearings, totaling 100 hours; 181 witnesses; and 239 amendments considered. The House bill was posted online 30 days before committee markup.
The law keeps Medicare solvent and cuts the deficit
Conservatives argue that the Obama administration “double counted” the Medicare savings for the law, arguing it went to save the Medicare Trust Fund and cut the deficit. The facts are these: The law cuts the deficit by $1 trillion over the next two decades and keeps Medicare solvent until 2029—12 years longer than before the law was passed. The Center on Budget and Policy Priorities explained how this works before the House Budget Committee:
There’s no double-counting involved in recognizing that Medicare savings improve the status of both the federal budget and the Medicare trust funds. In the same way, when a baseball player hits a homer, it both adds one run to his team’s score and also improves his batting average. Neither situation involves double-counting.
Conclusion
The conservative false attacks are meant to repeal the Affordable Care Act and bring our health system back to the time when insurance companies could discriminate because of a pre-existing condition. Despite these false attacks, the facts are clear: Millions of families, small business owners, and seniors are seeing the benefits of the Affordable Care Act. More than 4 million small businesses are eligible to receive tax credits to make health coverage more affordable. As many as 4 million seniors received help to make their prescription drugs more affordable. Already this year, more than 150,000 seniors with Medicare had a free wellness exam. And children with pre-existing conditions can no longer be excluded from insurance plans. We should move forward with this law and tell those who want to repeal it that we won’t go back.
By: Tony Carrk, Center For American Progress, March 21, 2011
It’s Not Just Entitlements, The Real Issue: Controlling All Health Care Costs
The current cry to reduce Federal deficits and debt growth by reducing Medicare and Medicaid entitlements is totally missing the key issue: the need to moderate all health care inflation. This should be the time for a national debate on how to best tackle the underlying cost problem, for the sake of our future, the economy, and access to health care.
The June 13-19, 2009 Economist editorialized: “America has the most wasteful [health] system on the planet. Its fiscal future would be transformed if Congress passed reforms that emphasized control of costs as much as the expansion of coverage that Barack Obama rightly wants.”
Health reform failed to get an adequate handle on all health care costs. Now there are constant calls by various expert commissions and many in Congress for entitlement spending reductions. Such cuts will create enormous new problems by failing to address the underlying, real problem of health costs and inflation.
Cutting just Medicare and Medicaid without addressing the whole problem is like squeezing a balloon—the balloon starts looking very strange very fast. While it is difficult to tell how much cost-shifting may occur and it will vary from market-to-market, some Medicare and Medicaid cuts probably get passed through in higher costs to the private sector—hardly a helpful action. (Congressional Budget Office, December 2008, Key Issues in Analyzing Major Health Insurance Proposals, p. 116) Cuts that are too deep in Medicare will also end up causing providers to be reluctant to see seniors and people with disabilities—as happens all too often today in Medicaid. In time, quality may be threatened.
And Medicare and Medicaid are not particularly driving the problem of soaring health care costs. As various studies have shown, over the long haul, Medicare has probably inflated slightly less rapidly for a comparable package of services than the private sector has. Recent reports by the Medicare Payment Advisory Commission (MedPAC) show that high quality, efficient hospitals have made a little money on Medicare, while private insurers have often failed to control costs, and have paid less effective hospitals 132 percent of the costs of running an efficient hospital. (See, for example, MedPAC’s March 2009 Report to Congress, Section 2A.)
A Comprehensive Approach To Health Care Cost Containment
It is past time for a comprehensive solution to ensure the affordability of a fundamental need: access to health care. We should say that access to reasonably affordable health care is a basic national need, like access to clean water and air, and treat it like a regulated utility—like your water–where cost growth is kept within a reasonable range and where a reasonable quality service is widely available (but if you want to go buy Perrier, you can).
Instead of squeezing one part of the health care cost balloon (Medicare and Medicaid), we need an “all saver” system. Under this system, any provider in the health care sector which inflates its billings faster than the growth in the CPI plus, say, one percent (adjusted for changes in population, new technologies, increased productivity, and changes in the severity of the cases that provider treats) would owe a rebate of the excess amount to its customers—both private and public. If the rebate were not provided, that excess income would face a 100 percent tax. The Federal government could do this under the Commerce clause, or, to enable providers and patients to opt out, could require participation by those accepting payment from Medicare, Medicaid, and payers claiming tax-deductible medical expenses.
How would the plan work? Complicated? Yes, but soon very doable with today’s health information technology systems and the coding systems developed by Medicare and others. It would take several years to set the system up, but it would work like this. Let’s say a hospital in a base year of 2013 had $100 million worth of billings. If consumer inflation were 4 percent and if the system allowed another 1 percent (just because we do highly value health care and some extra growth is a reasonable choice), then in 2014, the hospital could bill $105 million. (Let’s assume that an expensive new technology is available that costs an extra $1 million, but let’s also assume that increase is coincidentally offset by a national increase in productivity of 1 percent that saves about $1 million.)
If the hospital bills its customers $110 million in 2014, yet those customers are no sicker or more complicated to treat than in 2013 (as proven by the audited billing codes or adjusted for coding creep), the hospital will owe its customers $5 million in rebates. If Medicare paid 40 percent of the bills ($44 million), it would receive back 40 percent of the $5 million excessive inflation ($2 million). If a large employer’s health plan paid 20 percent of the provider’s bills, it would get $1 million back, and so forth.
If a provider did not want to participate, they could insist on only after-tax cash customers, and individuals would be free to use such doctors and hospitals.
Changing The Debate
Instead of focusing on Medicare/Medicaid cuts, Congress should be debating ideas of how to moderate all health care spending while minimizing interference in the practice of medicine. The plan I’ve described is just one option, and of course it would have to be adjusted to deal with many complexities. For example:
- How could the plan be made fair to new doctors and facilities with one-time extra start-up costs and no history of billings?
- How could the plan use quarterly payments or rolling averages to avoid many providers shutting down in December?
- How could society encourage further innovation, perhaps by offering more inflation for drugs certified as breakthroughs by the Food and Drug Administration?
- What cosmetic-type services could or should be exempt?
- What MedPAC-like advice and constitutional governance would be best?
Of course, if over the next decade reforms such as electronic medical records, comparative effectiveness research, and new bundling of the way we pay for services sufficiently ‘bends’ the spending curve downward, this system could be suspended. But it is doubtful those changes will do enough, and it is time to act on a comprehensive solution.
Incidentally, slowing all health care inflation would not only save enormous amounts in Medicare and Medicaid; over time it should achieve huge extra CBO/Joint Tax scorable savings, because the private sector and individuals will claim less in tax-deductible expenses for health care.
Budget reform that gets a handle on all health care inflation will solve most—or at least the toughest–of the ‘entitlement and future debt problems facing the nation. The entitlement problem is overwhelmingly a Medicare problem, driven not so much by more seniors or an aging population as by constantly soaring per capita costs of care. If we try to solve the entitlement problem just by cutting Medicare and Medicaid, we will destroy those programs. We need a total solution, because soaring health care costs are distorting the economy and our future as a successful nation.
Now is the time for this debate.
By: William Vaughan, Health Affairs Blog, Originally published March 3, 2011
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