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Slicing the health reform plan

Armen Hareyan's picture

I doubt anyone would disagree with the statement that America’s health care costs are too high, continue to grow at an unsustainable rate, and reform is critical to control costs, get everyone covered, and improve quality.

In the wake of the election, I see one positive and magnanimous press release after another coming from the health care special interests. The press is full of daily stories touting the coming health care reform efforts as different this time. The stakeholders understand things are different, know we have to do something, and are ready to cooperate, goes the reasoning. Really?

This week, a group of insurers and hospitals released a report by Milliman, Inc. saying that government Medicare and Medicaid underpayments to providers are leading to the shifting of $88.8 billion a year onto private payers in what amounts to a “hidden tax.”

According to the study, hospitals earned 23.1 percent of revenue for privately insured patients, compared with a negative 10.8 percent for Medicare and Medicaid patients in 2006.

The unmistakable conclusion—the government has to pay more—level the playing field—for Medicare and Medicaid in order to eliminate this “hidden tax” on private payers.

The study calculates that Congress could correct the problem by increasing funding to Medicare and Medicaid by $90 billion annually. However, the hospital and health insurance industry seems to understand getting payment equalization is unlikely. "Our first major objective is to make sure there aren't major cuts in these programs," AHA President Richard Umbdenstock said.

The Milliman study is probably right. Cost shifting by doctors and hospitals to private payers to offset government underpayments has been an age-long problem.

But add this one to a long list of health care providers that argue they deserve more money—or at least can’t be the ones to sacrifice in order to bring America’s health care costs under control.

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The Medicare physicians are due for a 21% physician fee cut on January 1, 2010 because their costs have been increasing by at least 5% more a year than the Sustainable Growth Rate Formula, designed to keep Medicare physician costs under control, says they should. A permanent fix would cost about $200 billion over ten years. Primary care physicians have been adamant in their arguments that primary care, in particular, is underpaid by both public and private payers while the specialties argue they are also under unsustainable financial stress.

Everyone is calling for “pay-for-performance”—whatever that is. Whatever that is it won’t do any good unless we end up paying out less cash to health care providers in the aggregate than we do today.

Last year, the durable medical equipment providers were targeted for a competitive bidding program to control their costs but were successful in getting it put off.

The Medicare Advantage HMOs have fought hard to keep their private Medicare payments estimated to average 13% more than traditional Medicare gets for the same risk—undoubtedly now getting ready to use this data to call for their payments not to be cut in 2009 because they have higher physician and hospital costs than Medicare does. So much for the market controlling Medicare costs.

There is no provider of health care or health care services that I know of that doesn’t strongly believe they are underpaid for the work they do.

The past few weeks have been filled with one press release after another from the health care stakeholders telling us they are ready for health reform and want to work with the new Congress and President to get it done.

But they all want more.

How do we accomplish health care reform by giving everyone more?

Reprinted from http://www.thehealthcareblog.com