The editors of the Washington Post come out in favor of a number of reforms intended to reduce Medicare costs. After noting that the structural reforms that might actually be effective are presently politically impossible, the reforms they endorse include raising the premiums paid by beneficiaries to cover 35% of costs, introducing a copay for home health care, reducing reimbursements to providers for patients’ unpaid deductibles, reducing the overcompensation of teaching hospitals for treating Medicare patients, and replacing administered pricing for durable medical equipemnt and, perhaps, testing with competitive bidding. The total savings: $460 billion over ten years, quite a bit less than 10% of Medicare’s total budget. Is that all there is? (remembering Patti Page) The editors conclude:
We’re loath to let Washington off the hook for a more permanent, fundamental Medicare fix. But given the uncertainties, political and economic, of that endeavor, pursuing specific incremental reforms is a plausible second-best solution. It won’t be painless, but neither is inaction.
One of the things perennially omitted from the discussion of saving money on Medicare is that one man’s spending is another man’s revenue. When you propose incremental non-structural approaches to healthcare reform, as the WP editors do or as are embodied in the PPACA, you must believe one of two things (or some combination): a) that providers will willingly take a pay cut or b) that they won’t make the billing up in some other way, either negating the savings you’ve projected or pushing them into some other component of the healthcare system, e.g. Medicaid or private insurance.
Rising Medicare expenses may be a disaster looming for the federal government but Medicaid is bankrupting the states and rising healthcare insurance costs is wreaking havoc with the budgets of businesses, individuals, and local governments alike. As I’ve published here before, absent healthcare spending costs Cook County doesn’t have a budget problem at all. With healthcare spending, it’s approaching insolvency with no clear way to solve its problems.
There is no incremental non-structural solution to the problems with our healthcare system. We don’t just have a Medicare problem. We have a healthcare system problem. Every solution that anybody proposes, whether it be a single payer system, a full-on national health system along the lines of BNH, or a more market-based system presupposes reducing providers’ incomes, either their height or their breadth or both.
That will require basic, structural changes.
For those of you who believe that over-utilization is the sole source of healthcare cost increases, let me propose a straightforward five-year pilot program. Change Medicare from a first-dollar program as it is now. Make seniors pay the first $5,000 of their healthcare spending each year. Over the $5,000 leave the system as it is now. Create a new category, seniors with incomes of less than $50,000 per year. For them reimburse a portion of the five grand on a sliding scale, i.e. 100% for those in the lowest income brackets, less for those higher up. I predict that such a program will incentivize seniors to reduce utilization, i.e. defer treatment, and that over the five year period it will, if anything, increase Medicare spending.