Proposal Would Not Increase Access to Health Care Services or Control Costs
The current Medicare payment system is financially unsustainable. Any plan to expand Medicare, which is the government’s largest public plan, beyond its current scope does not solve the nation’s health care crisis, but compounds it. We need to fix Medicare by moving it to a system that pays for value – quality health outcomes that are affordable over time – and ensure its success, before bringing more people into a broken system.
Expanding this system to persons 55 to 64 years old would ultimately hurt patients by accelerating the financial ruin of hospitals and doctors across the country. A majority of Medicare providers currently suffer great financial loss under the program. Mayo Clinic alone lost $840 million last year under Medicare. As a result of these types of losses, a growing number of providers have begun to limit the number of Medicare patients in their practices. Despite these provider losses, Medicare has not curbed overall spending, especially after adjusting for benefits covered and the cost shift from Medicare to private insurance. This is clearly an unsustainable model, and one that would be disastrous for our nation’s hospitals, doctors and eventually our patients if expanded to even more beneficiaries.
It’s also clear that an expansion of the price-controlled Medicare payment system will not control overall Medicare spending or curb costs. The Commonwealth Fund has reported this result for Medicare overall by looking at two time periods – one four-year period where Medicare physician fees increased and one four-year period where Medicare physician fees decreased. Overall cost per beneficiary increased at the same rate during each time period. This scenario follows the typical pattern for price controls – reduced access, compromised quality and increasing costs anyway. We need to address these problems – not perpetuate them – through health reform legislation.
We believe insurance coverage can be achieved without creating or expanding a government-run, price-controlled, Medicare-like insurance model.
Mayo Clinic supports the proposed insurance exchange model based on the Office of Personnel Management’s Federal Employees Health Benefit Plan (FEHBP). This system will improve access to insurance, make reforms to the current insurance system that eliminate pre-existing condition exclusions, and create an individual mandate where individuals can purchase private insurance in various ways:
- Through employers,
- On the individual market,
- Through co-operatives, or
- Through an exchange model like the FEHBP.
We also believe that the government should help people pay for insurance premiums through sliding scale subsidies as needed.
23 Comments
Seems like some of the GOP plan– interstate purchase options, to name only one, would be a beneficial element for many as it is with auto/home insurance. Is this doable?
I constantly hear pay for value. I would love to have someone explain to me how this would be enacted. I am an Industrial engineer and have worked in business for a long time and I need someone to put up more than the catch phrase “Pay for Value”. I Know that at least 70% of medical cost is do to the cost of employees and their benefits. If you reduce the cost of medical care you have to either reduce the pay for employees or eliminate employees. I do not see the value that insurance companies bring to Health Care. If I am going to pay for value Then explain the value that insurance companies provide.
“We need to fix Medicare by moving it to a system that pays for value.” I agree with this statement. If you don’t support the medicare plan for those under 65 years old, do you support the public option? It seems you do but I don’t see that written clearly above. Hypothetically we’ll say you do. Now look at the larger picture. Do you believe, based on other countries’ healthcare trends that this will in fact ultimately lead to fully government run healthcare? If no, then that may be a very competetive system that benefits every person. If yes, then eventually you, Mayo Clinic, and any other hospital will be looking at total dependence on government funds for patient care. Your thoughts on the bigger picture?
The debate continues to focus on how to insure everyone, without serious attention to how to fix the broken system. Adding bricks to the top will not stabilize the foundation – and our foundation is critically flawed. I believe we should focus our attention on liability reform first in an serious effort to get costs under control. Eliminate the practice of defensive medicine, intentional or unintentional, and provide some protection to medical equipment and consumables manufacturers so that they can lower their prices without impacting their ability to continue research and new product introductions.
My belief is that any product approved by the FDA should receive some degree of liability protection. If a device manufacturer presents all of their testing data to FDA and FDA approves the item, the manufacturer should not be subject to lawsuits arrising from side-effects or treatment/therapy failure UNLESS the manufacturer can be shown to be negligent in some aspect of relating to producing the item.
I am one of the moderators for this blog, responding to Keith. We agree with much in the proposed insurance exchange model as we believe it will improve access to insurance, make reforms to the current insurance system that eliminate pre-existing condition exclusions, and create an individual mandate where individuals can purchae private insurance in various ways: through employers; on the individual market; through co-operatives or through an exchange model like the Federal Employees Health Benefit Plan (FEHBP).
I am one of the moderators for this blog, responding to Michael Mcdonugh. When we talk about paying for value, we mean paying for achieving good patient outcomes, or doing preventive care that helps patients stay healthy and avoid serious health consequences or costly procedures later in life. This means having insurers and Medicare work with health care providers to think differently about what we are paying for when we buy health care services. When I am a patient, I don’t think about the fact that doctors and hospitals are generally paid more for doing more tests and procedures – whether or not I need it. Doctors and hospitals are usually paid more for doing more tests, visits, hospital admissions and surgeries rather than spending time with a patient and assessing an individual’s needs, wishes and preferences. For example, a payment system would be paying for value if it rewarded doctors and hospitals for spending time with patients, for doing a procedure successfully the first time, or for having a patient leave the hospital without acquiring a new infection or suffering a fall.
I am one of the moderators of this blog, responding to Josef Hodgkins. We believe that all Americans should have access to quality, affordable health care. Any public option must ultimately be good for the public, and we think the emphasis on this aspect of reform is out-sized relative to its impact on true reform. Achieving more access without also addressing delivery system and payment reform will not solve the entire scope of this very complex issue – it would be like fixing one out of three flat tires on your car. You still can’t get where you intend to go. Delivery and payment system reform are the areas where Congress can truly improve quality and bend the cost curve.
I am one of the moderators of this blog, responding to Randy. We agree that the practice of defensive medicine takes a toll on the health care dollar, not to mention the harm that it can potentially cause to patients. What remains to be seen, however, is whether or not utilization patterns are actually changed with tort reform. We have not seen definitive evidence to suggest that utilization has gone down in those states that have already enacted tort reform. We suspect that it will take a concurrent combination of efforts, i.e., tort reform plus deliberate practice modifications to reduce overutilization due to malpractice concerns to really impact defensive medicine.
I always appreciate your analysis of health care legislation, and your personal comments to bloggers. It really helps to hear from a provider that has been so successful in your own model of health care delivery. Thanks!
I have had a correspondence with Jane Jacobs of the Mayo Clinic on this topic. I will reproduce my last message to her so you may comment on it if you wish:
“Again, thank you for your long reply. Since I am a retired mathematician, I have a lot of time I can spend on this issue, but I would guess you may have other things to do. HOWEVER, I must complain that practically all of what you wrote is simply Mayo Clinic boilerplate and not at all responsive to my points.
You said in your first letter that Medicare did not cover your costs. I wanted to know if when computing these costs you assume compensation for physicians and hospital administrators that many of us would consider as exorbitant. It doesn’t matter if the expenses are salaries or fees for service. That is a separate issue. To be perfectly clear, how can we believe your statement that Medicare does not cover costs if we do not know what exactly goes into those cost computations?
As for the “toys” comment, I wanted to know if before you buy some fancy very expensive device do you make sure that there is a good medical reason for doing so. David Leonhardt had a recent article in the NY Times examining how hospitals are buying enormously expensive radiation devices without any studies showing these are better than the older methods of treatment.
My comment about the lack of correlation between Medicare payments in a given area and health costs again goes back to your claim that the reason there is overutiliztion is because Medicare pays too little. I think this is a very dubious claim because Medicare pays the same for most procedures in different areas, yet the utilization rates, as you point out, vary a lot. I do not know why physicians overutilize in some places, but I think we can be pretty sure it has nothing to do with Medicare rates.
Now as to what you did write about, I had always felt that the way Mayo practices and delivers health care has got to be better than most other plans, but unfortunately I have recently come to believe that the data simply does not support it. Japan, Germany, Canada, France, Australia, and New Zealand all have a fee for service system, and each gets better health care at much lower cost than than the US. I do not have figures relating Mayo’s cost to these countries, but you may not be large enough or have a random enough patient population to make your figures relevant.
Furthermore few other countries have coordinated systems like Mayo, and yet still they do very well. Perhaps they would do better with your system, but it appears that there are other factors that are much more important in other countries’ higher quality and greater efficiency. My belief which I think is supported by data (cf http://www.pnhp.org) is that the most important factor is to have a government run universal system as all these other industrialized countries enjoy. Once you get such a system, you can gather data, make good decisions based on that data, and then enforce these decisions. I would have greater faith in Mayo’s statements on health care if you supported such a system.”
JudyS thanks for your comments but I still have more questions.
My wife was just a patient at Mayo and St Mary’s Hospital. She had back spasms. She spent half of the night in the emergency room and then 3 days in the hospital. I have been trying to figure out if she has had a good outcome. They tried at least three or more medicines to stop the spasms before they found one that seemed to work. She spent most of the time drugged up and went home with lots of drugs. They did CAT scans, ultrasound and an MRI. She went home in lots of pain. She went to see a PT twice as out patient. I was there and she spent very little time with a Doctor. She did not get an infection or suffer a fall. The final opinion is she has an aging back. They surely did not get the right medicine the first try. Who in the world and how are they going to determine if this is a good out come?
It is very difficult to understand if preventative care is helping as you won’t know if it is helping for years to come. Who would determine what is good preventative care?
How to balance the number of test is a real tight rope. I have had colon polyps removed.
They started out saying I had to have a colonoscopy every year and then 2 years and eventually they changed the rules to 5 years. It is really hard to accept that it could change that much. I have seen what happened when it was proposed that mammograms frequency be changed.
I really like the idea of having Doctors spend more time with their patients. But how much more time is the correct amount? If we doubled the time they spent with patients we probably would increase the number of Drs. By at least 25-50%. That surely would be hard to do very quickly.
I as Industrial Engineer have worked in an incentive shop where people get paid for there production. To do this in industry you need a set people to determine the standards. You need to have a system to track the results. You need a grievance procedure to settle the disputes that arise. Your need a good quality control system to make that you are not paying for scrape part. This takes lots of people to make this happen. It is not free.
To all of the responders, thank you for continuing the conversation.
1) Regarding Tort Reform- I live in a state which has had some medical liability reform and it has had a significant impact on our medical liability premium. That said, out tort reform has merely been a limit on settlements and not any type of restriction on exposure to liability. Without PROTECTION from lawsuits you will likely never elicit significant change in defensive behavior by providers, therefore not achieving truly significant changes in how we use our superb medical system.
The post from Michael M, above, may serve to support the need for tort reform. Mr. M. states that his wife had, “…CAT scans, ultrasound and an MRI…” for back spasms. Admittedly, I have no knowledge of her condition but it sounds as if they were unable to diagnose the cause of her condition and threw every test her way. While the tests may or may not have been warranted, especially in light of the dependence of some physicians upon technology rather than their own diagnostic abilities, is not for me to judge. I can say that Mr. M.’s wife had a very expensive hospital stay with, according to Mr. M., a questionable outcome. On the positive side, they now have several nice images to support what is not wrong with her.
2) Any governement mandate which forces people to purchase any type of good or service should be fought vigorously. An affordable option is certainly desireable, but not at the cost of personal liberty. If we are going for a mandate which addresses the health of our nation, how about starting with an obesity tax with an excpetion for those with proven genetic/disease states which prevent them from maintaining a reasonable weight? Add a mandated program to provide, and exclusively require, healthy and palatable meals for all of our school age children. Those two steps alone would have a far greater on the health of our nation. Why do we lag behind so many other developed nations in our healthcare ratings? I don’t believe it is because of the quality of care- I believe it is because of the quality of the patients coming in to the system. Make the “healthy” people healthy and they are much easier to treat when something does go wrong.
I’ll step down from my soap box now…
Thank you for providing a place for me to express my thoughts.
I notice that Randy omits mention of my data that shows that tort reform does NOT reduce costs or the frequency of tests and treatment. If there is “defensive medicine”, tort reform does not reduce it.
The total of ALL malpractice insurence premiums amounts to 0.56% of health costs (CBO again). Furthermore Randy did not mention his state, but in most states tort reform did not lower premiums which correlate with interst rates, not malpractice settlements. The state of CA is a good example. After a doctors strike, the state imposed caps on punitive damages. After a 10 year period in which their premiums were no lower than states without caps, they imposed direct controls on the malpractice insurance industry. After this, their premiums were lower. Here is the reason. If you took all the money paid out in punitive damages over $250,000 in a typical year in NJ (my state, a state with no caps) and gave it back to the doctors of the state each physicians would get $15.
This is yet another nail in the coffin for private health insurance in this country and the forcing of all Americans into a single payer system. Once Medicare is opened up to those 55-64, employers will have an incentive to stop providing health coverage once workers reach 55. This will mean private insurance providers will lose as their customers get sucked away into the Medicare system and eventually they will go under.
Another thing is that at least some of those who are 55 or over will also be qualified for Medicaid. Whenever someone is qualified for both Medicare and Medicaid at the same time they are automatically placed in Medicaid. Medicaid expenses are shared with the states and many states are already overburdened by Medicaid costs. States will be forced to raise taxes to cover the portion of Medicaid not covered by the federal government.
How do they expect to expand Medicare to more patients yet they are taking money away from Medicare? It doesn’t take a rocket scientist to do the math. More people + less money=rationing of care. Medicare and Medicaid already pay the lowest reimbursement to doctors and hospitals and now they want to cut it again? What we are going to see is doctors and hospitals refusing to accept Medicare or Medicaid as payment which will mean even more rationing.
Another side effect of all this is when young people are choosing their career path, they will see all the time and expense that goes into becoming a doctor and the lack of fair reimbursement for their efforts and decide to choose some other career path which will mean we will have fewer doctors in the future which means….more rationing of care!
No matter how you look at it, Obamacare in any form will be a disaster for this country.
Good discussion.
I simply have to call BS on the figure of how much money Mayo loses to Medicare. We know Mayo is one of the high performing providers and so should be doing far better.
From Ezra Klein:
“On March 17th, Glenn Hackbarth, the chairman of MedPAC, testified before the House Ways and Means Committee on this very issue. Hospitals, Hackbarth argued, are inefficient. Their costs are too high. And this was backed up in the data. “MedPAC analysis has identified a set of low-cost hospitals that consistently out-perform other hospitals on a series of quality measures, including mortality and readmissions,” Hackbarth explained. “Among this set of hospitals, we found that Medicare payments on average roughly equaled the hospitals’ costs.” In less “efficient” hospitals, Medicare’s payments were below costs. You can see this in the following table: http://voices.washingtonpost.com/ezra-klein/assets_c/2009/07/efficienthospitals.html
The full article is here:
http://voices.washingtonpost.com/ezra-klein/2009/07/does_medicare_pay_below_cost_w.html
And, regardless of what Mayo “believes” about governement run entities, they consistenlty outperform the US system in France, Germany in many other places. The ACP Policy Committee has recognized this for years and has advocated for a single payer system like France or a hybrid system like Germany’s for many years.
And one more thing, wouldn’t you rather get paid by those expensive 55-65 year olds who don’t have insurance instead of eating it. I realize the Mayo’s cachement area has few uninsured, but consider the rest of the country in making pronouncements! You’ve been picked up by Fox News for goodness sake!
http://www.foxnews.com/politics/2009/12/11/expanding-medicare-punish-health-care-providers-raise-taxes-critics-say/
Joe, the people added to Medicare will pay premiums so there will be MORE money, not less money. Right now there are 6 qualified applicants for each place in medical schools. I think if we reduce the income of cardiologists, say, to $250,000 from $450,000, there will not be a shortage. This is a complete red herring.
Two Facts:
Other countries with government run universal health care get better care as measured by all 16 bottom line public health statistics and they do it at HALF the cost per person.
Because of the high overhead (low Medical Loss Ratios) and vast patient and physician compliance costs of private for profit insurance, we could give an improved Medicare to every man, woman and child in America, and it would not cost us a penny more than we are already spending, probably less.
I am one of the moderators of this blog, responding to the comment by “cmhmd.” Concerning the amount Mayo Clinic lost to Medicare, note that this figure includes losses across all of Mayo Clinic, including clinics and hospitals. The information is reported on page 43 of the 2008 Annual Report. The information referenced by Glenn Hackbarth relates only to Medicare payment to hospitals.
Mayo Clinic’s model of care emphasizes more time spent with patients by teams of physicians so that the problems are truly understood before invasive testing is done. This ensures that a patient receives the tests and procedures they truly need to achieve the best outcome for that individual. As a percentage of true cost, Medicare reimbursement for tests and procedures varies widely; some tests lose money, others are profitable. However, Medicare reimburses a small fraction of the cost for nearly all physician visits (typically reimbursement covers roughly 30% – 40% of the true cost of the visit). This emphasizes the need for reform.
JudyS – “However, Medicare reimburses a small fraction of the cost for nearly all physician visits (typically reimbursement covers roughly 30% – 40% of the true cost of the visit).”
Could you please tell us what compensation levels for the physician these costs figures assume?
Hi, Jane,
I cannot find the section in the Annual reprot you refer to. I scrolled through all the financial stuff. Found reference ot Medicaid and charity care, couldn’t find Medicare.
And were does your figure on reimbursement only covering 30-40% of the cost of the visit come from? Docs around here (I admit as an intensivist I have no significant overhead) seem to get by on largely Medicare populations.
Here we have a tip of the iceberg. Mayo is saying that if it loses patients ages 55-64 to Medicare it will no longer be able to charge these folks what it wants for procedures. It will, instead, have to accept what the government says is fair payment for the procedure. O.K., so Medicare for those age 55-64 was not a good idea at this time, but doesn’t this bring into play the “true” costs of services and procedures at hospitals?
How are we going to bend the cost curve in the future if Mayo and others tell us that we must pay what the market will bare or more?
Again, this is a tip of the iceberg. This is NOT a “government” problem. This is a private enterprise problem, with an entity that up to now has not been challenged to get paid for “outcomes.” That is the future, and, hopefully, Mayo and other large providers will get with help with the process, not resist it.
One study found that Medicare patients in Dade County, Fl, saw a physican more than 120 times, I think it was, in the last two years of their lives. And Medicare paid for all of it. The other side of the coin is having/letting Medicare patients be seen TOO much by physicians and having too many procedures done. This is NOT the future of Medicare.
George, you say, “One study found that Medicare patients in Dade County, Fl, saw a physican more than 120 times..”. Could you please give a reference for that study?
There is so much nonsense about Medicare floating around such as the sentence that begins this thread. Here is Uwe Reinhardt on the sustainability of Medcare:
“If “economic sustainability,” then exactly what do people have in mind with that phrase? During the past 4 decades or so, the long-run, smoothed average annual growth rate in real (inflation-adjusted) GDP per capita has been about 2%. Suppose that fell to only 1.5% for the next four decades. The current average real GDP per capita of about $40,000 would then grow to about $72,500 by 2050 in constant-dollar terms. Medicare now absorbs about 3% of GDP, leaving a non-Medicare real per capita GDP of $38,800. It was estimated by the CBO about a year ago that Medicare will absorb about 9% of GDP by 2050. Let’s make that 10%. At these numbers, the non-Medicare real GDP per capita available to today’s little critters who will run America in 2050 will still be close to 70% larger than is our current non-Medicare GDP per capita.”
Here is Paul Krugman on whether Medicare has controlled costs as well as private insurance:
“Here’s the raw fact, from the National Health Expenditure data: since 1970 Medicare costs per beneficiary have risen at an annual rate of 8.8% — but insurance premiums have risen at an annual rate of 9.9%. The rise in Medicare costs is just part of the overall rise in health care spending. And in fact Medicare spending has lagged private spending: if insurance premiums had risen “only” as much as Medicare spending, they’d be 1/3 lower than they are.”
One has to constantly be on guard with “facts” from the Medical Industrial Complex.
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