Medicare…
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Medicare — the biggest player in the world in health care finance and the most important player in the health care system in the United States — has a big problem. As health care costs continue to rise and as Baby Boomers age into the program, its future funding requirements become very problematic. The Trustees of the Medicare and Social Security Trust Funds have pointed out that Medicare is already taking in fewer dollars in premiums each year than it pays out for services, and they project that the fund that pays for hospital bills will literally run out of money in about ten years (2019, actually). The Medicare premium increases that would be required to properly fund — on a sustainable basis going forward — the hospital and physician services funds are huge — politically impossible, in my opinion.
This is exacerbated by the fee for service methodology Medicare uses to pay hospitals and doctors for services. It’s procedure driven, doesn’t support team-based care, and presumes health care these days is a transactional activity — not an ongoing care delivery process. This is, of course, not really the case. Care is more ongoing and multi-disciplinary than it’s ever been, and Medicare has no way of recognizing this new fact, or aligning with it financially. This disconnect was brilliantly described in an article in the 6/21/07 Wall Street Journal by Dr. Peter B. Bach, who works at Sloan Kettering in New York City. He referenced his own experiences, as well as published research in the New England Journal of Medicine, to point out that, “The typical Medicare patient in one year sees seven different doctors, including five different specialists, working in four different practices. For vulnerable patients with multiple chronic conditions, care is even more fragmented and involves more doctors. Forty percent of the patients in our study had seven or more chronic conditions and they saw on average 11 doctors in seven practices, the upper quartile of this group saw 16 or more different doctors in nine or more different practices.” He goes on to note that this is very expensive, inflationary even, and has tremendous potential to compromise quality and continuity.
He says Medicare Fee For Service needs to change — to adapt to the times — and support team-based approaches to care delivery. He’s right, but I fear that for the time being, the changes in Medicare payments will be far more blunt. For example, anticipate that Medicare will require hospitals to report on “hospital acquired infections,” and stop paying for care rendered to beneficiaries who incur an infection during their hospital stay. In addition, expect to Medicare to start requiring hospitals to report on “Never Events” the 27 things that should never happen during a hospital stay (leaving sponges in the patient during and after surgery, removing the wrong lesion/body part, etc.), and to stop paying for procedures associated with these mistakes.
In addition, Medicare is now expecting hospitals to report on thirty day re-admissions for certain services. I expect that paying for the second service within that thirty day window will soon be up for discussion.
In other words, Fee For Service is probably not going anywhere, but the federal government will work within its methodologies to dramatically step up its oversight and measurement activities around physician and hospital performance, and take very significant action based on its findings. This is why cost and quality — despite the inadequacies of the Medicare Fee For Service system — need to be the focus of our collective activities for the foreseeable future. The Big Dog has a big financial problem coming, and will be using all of the tools in its arsenal to deal with it.
Charlie, on the previous post, ‘br’ made reference to the need for a “Steve Jobs-like visionary” to lead, or at least aid in, the transition to an electronic medical records system. Do you think this is also the case in regards to a Medicare reconfiguration? I don’t necessarily mean a singular visionary changing the entire face of Medicare, but rather, do you think that the focus of a Medicare overhaul will be technology based? Is there an infrastructure already in place to handle such a shift in data collection and reporting? It seems to me that if any large-scale move is to be made in that direction, and maintain success, there would need to be a very streamlined process in place to gather, store, translate and implement the massive amounts of data that our national health care system generates. I would assume that to make such a database universally accessible would be an enormous undertaking. Is it safe to assume that every provider in the country (or at least the vast majority) will need to be compliant with these new procedures in order for them to be effective? If so, it seems like the very daunting task of ‘getting everybody on the same page’ lies ahead.
Charlie, you raise some very important concerns about the inadequacies of fee-for-service financing of medical services and the limitations that Medicare apparently has in making more than incremental improvements to improve quality and reduce costs. I’d like to hear your thoughts on the alternatives offered through Managed Care Organizations, particularly the advantages of Medicare Advantage plans that can capitate systems and align providers in the “old-fashioned” way to pay for integrated and truly managed care delivery. I know way back when you were heading up the staff model part of Harvard Pilgrim (now Harvard Vanguard), you no doubt were a big believer in the benefits of a truly integrated delivery system that was aligned around system improvement. Personally, I saw the benefits of having my aged and sick parents treated at the old staff model delivery system. While it took pulling strings to get them into a particular practice of a gerontologist PCP, I found that their care was finally being coordinated from top to bottom, complete with electronic medical records that reached across multiple sites. So, where am I going with this? Two points really – One, I agree that Medicare has to have realigned incentives with providers to promote coordinated care, particularly for the older, sicker population. Secondly, I believe private health plans can do more than the government can do directly - through innovative payment systems that recognize local market variations within the provider communities, and by taking advantage of their relative flexibility to build relationships that recognize that and one size doesn’t fit all.
Ian - I think the “Steve Jobs/Bill Gates” savior scenario in health care, which I’ve heard off and on for about ten years, is a non-starter. Unfortunately, health care is a market driven in large part by federal government policy, not by true market forces. The mind-bogglingly successful Jobs/Gates scenarios in technology and consumer devices benefited enormously from the double-barreled impact of creative, inquisitive, forward-looking suppliers (Steve and Bill), and similarly minded purchasers (everyone else). There is no entity less capable of truly out-of-the-box, “let’s imagine what could be instead of what is and go there” thinking than the federal government. It is fundamentally incapable of anything other than incremental change - and its greatest changes are usually driven by something else, not led by them. Expecting the feds to truly “lead” on this issue is simply unimagineable to me. They have a budget problem, and within the parameters of their existing Medicare operating model - which hasn’t changed, mind you, for forty years - they will be forced to solve it.
Bill and Mike - or someone like them - isn’t going to solve the health care cost and quality problem. And frankly, if you’d made either one of them a major official in the federal government twenty years ago and said, “fix health care,” I have no doubt they would not have been able to do it.
Charlie,
I think your predictions are spot on and inherent in the nature of government. Don’t expect fundamental change in the care delivery system. Instead, expect specific, easily measurable penalties for the items you list. They have the political appeal of being punitive to providers for things where the public will say, “Of course, a doctor or hospital should never do that” and therefore shouldn’t get paid.
As you recognize, though, even these apparently clear examples are not clear at all. We know, for example, that hospital acquired infections can actually originate outside the hospital, but then be detected in the hospital. Likewise, readmissions within 30 days can be related to something other than the procedure actually undertaken, particularly for frail elders who are a main cause of Medicare cost increases.
So, this kind of standard and approach will generate more defensive medicine and squabbling over the cause of the problems encountered. It may also cause a greater divide between providers in the health care continuum, rather than cooperation. I can already imagine a hospital blaming a hospital acquired infection on the nursing home from which the patient originated.
It’s interesting to step back once in a while and think about the basic framework for this discussion. Medicare was originally set up to pay for care and, as you highlight, Charlie, it’s on the road to breaking the bank. All this other cool stuff we want Medicare to do (i.e., shifting the manner in whcih care is delivered by tweaking financial incentives and otherwise), though, really goes beyond its original statutory mandate. I’m not suggesting that CMS shouldn’t tinker with incentives, but I noticed a conservative website recently hammering this point home by simply quoting the original enabling legislation for Medicare:
“Nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided, or over the selection, tenure, or compensation of any officer or employee of any institution, agency, or person providing health services; or to exercise any supervision or control over the administration or operation of any such institution, agency, or person.”
So the conservatives down there in DC who we thought were thinking “government off our backs” are apparently thinking more along the lines of “government in our business” and statutory authority be damned.
As Paul points out, there are a lot of really neat metrics to look at, but applying them in the real world is never very neat.
So, what to do? I say, let the regulators have at it, if they can come up with a plan (or plans) that put more than marginal dollars at risk and can produce more than marginal results — and by results I mean results greater than hitting a semi-arbitrary target. Payment systems that can encourage collaborative care should be encouraged. Punitive is probably not the way to go, though that seems to be the federales’ first instinct.
To Charlie’s point about the unimaginative mind of the federale, some of the approaches CMS is now rolling out have already been rolled out among commercial payors, and it would be interesting to learn something about the perpsectives of both the payor community and the provider community on these matters.
Charlie, does HPHC pay for readmits within 30 days? If no, has that approach been in place long enough to be abel to track a response? Paul? What other good ideas would you like to share with CMS to get them on the right track? They’re taking baby steps right now, and without a paradigm shift the discussion will continue to be all about, gee, how do we get around that 10% mandated cut in physician reimbursement next year while not breaking the bank, etc.
Finally, for the insomniac wonks out there, the statutory cite is 42 USC 1395.
– David Harlow, HealthBlawg
All - For years, Medicare has set up “demonstration” projects to test new and innovative concepts concerning paying for and delivering health care. These demos are often based on private plan ideas that appear interesting or different, and usually involve providers, payors and sometimes, state governments. Unfortunately, the demos that do, in fact, work never become part of the Standard Way of Doing Business. In many cases, they don’t end - they just keep doing what they’re doing (cuz its “works”) - but they don’t find their way into the larger platform that the baseline program operates on. This makes me wonder if the only way to go at this would be a statewide demonstration (I can’t believe I’m saying this - MA had something kind of like this back in the late 1980s when the state set all hospital rates, including Medicare rates). Might be worth considering - as a way to get everyone in MA on the same page.
And the answer, David, is “no.” We don’t not pay for hospital readmits within the 30 day period, although we do have a nurse who works for us call everyone who gets discharged from a hospital to see how they’re doing - our way of trying to prevent 30 day readmissions. Sound like a chance to “align incentives”?
Thanks for the response re: 30-day readmits. Please see HealthBlawg for followup.
Maryland is the only state in the union to still set rates for
hospitals. If you asked the CEO’s what they thought of it, they hate it. They have been trying stealthily and unsuccessfully to abolish the State Cost Review Commission for some years.
While working as a lab medical director in that system, I found it immeasurably confusing because all the usual market incentives were turned upside down - if the hospital made too much money in a given year, their rates were cut the next time! Ugh!!