February 01, 2012
5 min read

Medicare and the health care debate: Fantasy may take on more realism in 2012

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Douglas W. Jackson, MD
Douglas W. Jackson

As in any market system with a limited resource, rationing or changed distribution patterns occur when supply does not keep up with the demand. This may be the situation for Medicare as funding has reached the limits of the financial resources required to provide the health care every citizen and politician wants. Funded by taxes, Medicare continues to provide medical care without any significant repercussions to costs. In addition, it appears the Patient Protection and Affordable Care Act (PPACA) will increase demands to an already under-funded system.

At The Wall Street Journal CEO Council 2009 Annual Meeting, Rahm Emmanuel said we “cannot control the deficit in this country without dealing with health care costs.” Three years later, the situation is worse. How we will pay for medical costs remains a major issue for the 2012 election. Citizens need to know where the additional Medicare money will come from and how it will be distributed. There needs to be an end to kicking the can down the road and “smoke and mirrors.”

‘It all depends on me’

Discuss in OrthoMind
Discuss in OrthoMind

Americans need to stand up and be more involved in their health care. Margaret Thatcher said it well in 1949, when she was a 23-year-old woman named Margaret Roberts and a Conservative parliamentary candidate for the first time. She said, “In wartime, there was a slogan ‘It all depends on me.’ People seem to have forgotten that, and they think it all depends on the other person.”

Given the way U.S. health care planning is headed, it may all depend on whether citizens will get more involved in the debate and upcoming election. Presidential and Congressional leaders are going to have to implement some sort of rationing, and, unfortunately, it will be a political matter. For example, already in the implementation of the PPACA, the Secretary of Health and Human Services has granted some entities special political exemptions from costly programs. The public needs to be educated and understand the dilemmas that rationing will present to their health care and how future care will need to limit some individual choices.

Medicare funding will be increasingly challenged to provide coverage to an increasing number of older and sicker Americans. Politicians to date have not shown the leadership or done anything meaningful to control the escalating costs. There have been previous reasonable bipartisan proposals, such as President Obama’s Debt Commission chaired by Erskine Bowles and former Sen. Alan Simpson. These recommendations have not produced any significant legislation, bipartisan wrangling has held up any meaningful progress as no one is willing to pay the price at this time.

Where is the reality?

Although it is unlikely that we will see a repeal or even significant reversal of the PPACA, some changes occurred in 2011. A reality check occurred when the Obama Administration dropped its proposed Community Living Assistance Services and Support Act (CLASS Act), which was an expanded entitlement for long-term care. The Administration realized the real costs to subsidize long-term care because Sen. Judd Gregg of New Hampshire inserted a requirement into the legislation for actuarial evidence of its solvency for a 75-year period to avoid the CLASS Act’s financial shortcomings.

As a result of the numbers brought forward, not even people with political fantasies for this program could justify the additional costs. The proposed long-term care would not reduce the deficit as promised, but it would have imposed staggering costs for current and future workforces. With people living longer today, long-term care will be a pressing fiscal challenge for the United States; however, the CLASS Act was not the solution at this time.

There is a great deal of public ambivalence and differing opinions when politicians promise to reverse the health care reform during the 2012 elections. Many people want to keep different aspects of the PPACA, particularly if they do not personally pay for it. These inclusions taken individually are reasonable changes; however, someone will need to pay more to implement them. The changes include closing the doughnut hole in the Medicare prescription program, which is grossly underfunded already, prohibiting the denial of coverage and rate setting by insurance companies based on pre-existing conditions, increasing taxes on upper income Americans, offering tax credits for small businesses providing coverage, and offering increased subsidies to low- and no-income individuals.

Overuse and fraud

The Government Accountability Office released a report in 2011, which found that the Centers for Medicare & Medicaid Services made more than $70 billion in improper payments in fiscal year 2010. Many health policy experts believe this to be a low estimate. Large, organized Medicare scamming operations continue to be exposed, but this only represents a small percentage of the actual problem.

Criminals, abusers and overutilizers are attracted to the current system that uses a “pay promptly and pursue fraud later” approach. In some instances, the same people have been shown to fold one fraudulent enterprise and then relocate to start again. The thousands of pages of regulations for reimbursements results in individuals and entities challenging and bending the rules to evade punishment. The tendency to overuse medical services is built into the current system. It must be addressed in a new and more practical way. Patients and physicians need to have incentives to limit over use. Does anyone seriously believe the newly appointed advisory board will lower utilization without patient and physician involvement? Will the new 15-member board of political appointees, named the Independent Payment Advisory Board, solve the cost-inefficiency of Medicare? Their approach will be to cut, deny and limit reimbursements as well as continue the use of price controls.

Price controls have not worked

In 1983, Congress imposed price controls to try to limit the Medicare cost growth. They started with inpatient hospital expenses and then, in 1992, physician services. There have been further cuts since then, and the reductions have stimulated physicians and hospitals to find alternatives for the reduced reimbursements. Price controls have not worked in other industries and health care has been the same to date.

Medicare reimbursement reductions are programmed to occur and, if or when implemented, the rates will eventually drop below Medicaid rates. Every time we have approached larger reimbursement cuts since 2002, Congress has passed a temporary “doc fix.” At some point, will it move beyond another delay in implementation or postponement of the physician payments reductions?

Deal with the problem realistically

Health care funding in 2012 will see ongoing political gyrations if we do not see ideological compromise soon. Politicians are reluctant to deal with the problem realistically. If they continue to modify existing programs, the choices include capping costs for Medicare, rationing care, increasing use of means testing, increased age for inclusion into the program, increased taxation to cover costs for underfunded individual, and eventually moving to a single-payer model. If fees are further reduced and many physicians refuse to treat patients with the proposed coverage, then we could even see nationalizing physicians who would then be required to accept governmental fees.

In the meantime, more of the same means citizens will struggle with higher deductible policies, narrower access to physicians and hospitals, continued price controls and reimbursements reductions. Until we deal with the escalating costs for Medicare and overall health care, the further consequences on the national deficit will be even more devastating.

  • Douglas W. Jackson, MD, is the Chief Medical Editor of Orthopedics Today. He can be reached at Orthopedics Today, 6900 Grove Rd., Thorofare, NJ 08086; email: OT@slackinc.com.