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Verifying Logical Conclusions: Medicare Part D and Good Health

July 28, 2011
8:52 am

It’s intuitive that giving seniors more affordable access to prescription drugs would lead to an overall improvement in their health and well-being.

That logical conclusion has now been supported by a study published in the Journal of the American Medical Association.

Researchers have found that, for seniors receiving Medicare Part D prescription drug coverage, non-drug related healthcare costs have decreased – by nearly four percent, or a little over $300 for every three-month period.  Most of these cost savings result from reductions in inpatient and skilled nursing facility care spending.  This is the first academic study that looks at prescription drug coverage’s impact on non-drug related healthcare spending.

This new evidence certainly reinforces the notion that Washington shouldn’t mess with a program that’s clearly not broken. 

As Tomas Philipson, a professor of public policy at the University of Chicago, points out in a Wall Street Journal op-ed this week, the push to impose Medicaid-type price rebates on the Part D program will have severe ramifications.   Forcing pharmaceutical manufacturers to provide substantial rebates to the federal government will be tantamount to government price controls and will result in both higher costs for Medicare and non-Medicare consumers and will also undermine pharmaceutical research and development.

Or, as Philipson explains, “Venture capital funding for the biotechs that kick-off research for new drugs is completely contingent on strong signs of profitability in terms of intellectual property, disease prevalence and reimbursement. The government’s proposed price controls will ultimately cause some of this funding to dry up entirely.”

Given the savings we’re seeing in overall healthcare costs from more affordable prescription drugs, imposing price controls wouldn’t be prudent from either a financial or a societal well-being perspective.

Government Efficiency and the Price of Bread

July 20, 2011
2:40 pm

Last week, I had the opportunity to testify before the House Energy and Commerce health subcommittee on the subject of IPAB (the Independent Payment Advisory Board) and the impact it may have on Medicare beneficiaries.  In the course of that day’s hearing, discussion turned to the relative efficiency of the Medicare program versus private health coverage.

It always amuses me when spokespersons adhere religiously to their talking points that Medicare is far more efficient than private plans, as if it’s a genuine apples-to-apples comparison.  Of course it’s not.  Private health plans pay taxes, while Medicare doesn’t.  Private insurers have to spend considerable money to comply with the regulations Medicare issues.  Medicare predominantly treats seniors, who have a higher frequency of illness, so therefore the proportion of the Medicare budget devoted to patient care would naturally be higher.

And the list of dissimilarities goes on.

I mention this, though, because you hear the argument quite a bit these days, particularly from those who continue to insist that the Medicare Part D program would be even more efficient if the federal government, instead of private plans, had the power to ‘negotiate’ prescription drug prices. 

Before we ever go down that road, it might be instructive to pay attention to the price of bread in Great Britain.

According to The Telegraph, Great Britain’s National Health Service, ostensibly a model of government purchasing power, is paying 10 times more for a gluten-free loaf of bread than the price consumers pay in the supermarket.  The NHS is paying about six times more for a package of gluten free pasta than average grocery store prices.

A government representative said the price differential is due to bureaucratic supply chains in the NHS.

The Welsh health minister, though, had a ready solution to the problem.  Work is already underway not to improve government purchasing, but rather to reduce costs by prescribing fewer gluten-free products for patients.

Medicare and the Deathly Hollows: An Actuarial View

July 14, 2011
2:24 pm

Pardon the Harry Potter reference, but it seems somewhat appropriate given the dire point of view that permeated the House Budget Committee hearing yesterday on the future of the Medicare program.  Centers for Medicare and Medicaid Services (CMS) chief actuary Rick Foster testified that the program’s finances may be worsening at a more rapid rate than the Medicare trustees report.

He also pointed out that one of the possible remedies for Medicare’s fiscal challenges, provider payment cuts, will likely do more harm than good in terms of limiting patient access to healthcare.  Foster testified, “If at some point our payment rates to providers become significantly less than their cost of providing services, they either will be unable or unwilling to provide continued services.”

Foster’s testimony is particularly timely, given provisions in the Affordable Care Act that call for gradual reductions in provider reimbursement as well as the planned Independent Payment Advisory Board (IPAB) that is structured, as I pointed out in my testimony to the House Energy and Commerce health subcommittee yesterday, to focus on payment cuts to physicians.  Foster’s testimony underscores what is intuitive, that if the government continues to reduce Medicare’s already low provider payment rates, the number of physicians refusing to see new Medicare patients will increase.  Already, according to the American Medical Association, one in every three primary care physicians is restricting the number of Medicare patients in their practice.

Chief actuary Foster did, however, breathe new life into the concept of premium support – enabling Medicare beneficiaries to choose from a selection of private health plans competing on the basis of price , quality and value – saying “We’ve estimated for many years that competition among plans in a premium support setting like this could have advantages and lead to somewhat lower costs for Medicare. It can get you to the lowest cost consistent with good quality of care.”

Video from Foster’s testimony is shown below.

Grasping at Thin Straws: That Kaiser IPAB Poll

July 05, 2011
10:18 am

Before we delve into this, let’s start with some basic, but essential, information.  A CBS News/New York Times poll conducted in late June established Congress’s approval-disapproval rating at 20-70.  That’s actually a high water mark compared to a December 2010 Gallup poll that said only 13 percent of the country approved of Congress’s job performance, compared to 83 percent disapproving.

Keep those numbers in mind as we discuss the Kaiser Family Foundation’s June tracking survey, a poll that proponents of the Independent Payment Advisory Board (IPAB) are touting as evidence that Americans are rejecting criticisms of IPAB.

Or, as Washington Post blogger Greg Sargent put it, “we now have our first poll that shows pretty clearly that the public isn’t buying the attacks.”

But is the Kaiser survey really so clear regarding public sentiment toward IPAB?   In the Kaiser tracking poll, there is only one question dedicated to the issue.  It was phrased as follows:  “How much would you trust an independent panel of full time experts appointed by the President and confirmed by the Senate to make proposals about ways to reduce Medicare spending and keep the program sustainable in the future?  A great deal, a fair amount, just a little, or not at all?”  Other iterations of the question substitute “Congress”, “private insurance companies” and “the federal agency that now runs Medicare” for the independent panel.

The results that made headlines show that 50 percent of the public trusts IPAB a great deal or a fair amount, compared to 34 percent trusting Congress.

Some observations:

1)      Remember those congressional approval ratings I mentioned in the first paragraph?  Essentially the public is being asked to choose between an institution they adamantly dislike and what’s behind the mystery box?  Given such high public disapproval of the legislative branch, the only wonder is that the mystery box didn’t win by a bigger margin.

2)      Only 15 percent of those surveyed, or less than one of every six Americans, said they support the “independent board” a great deal.  That’s not exactly a rousing vote of confidence.  The 34 percent who said they support IPAB “a fair amount” is probably as much an indication of the favorable description given the board in the survey question as it is genuine approval of the concept.

3)      Speaking of that description, one can’t help but wonder how the public would respond if told that the implementation of IPAB recommendations would not be subject to judicial review, or that the statute makes it extremely difficult for Congress to overturn those recommendations, or that the way IPAB is structured means that its budget-cutting ax will almost certainly fall upon provider payments?  If the public knew that this “independent board” would likely compel more physicians to see fewer Medicare patients, where would that approval rating be?

4)      Voters elect members of Congress to make decisions on issues like the future of Medicare.  Since when is a monthly tracking poll justification for shifting that constitutional responsibility over to a non-elected board?

Let’s be clear.  This post is not intended to be a criticism of the excellent work the Kaiser Family Foundation does on its monthly healthcare tracking surveys.  Rather, I’m amused that some of the same people and organizations who dismiss negative polls about the Affordable Care Act are so quick to grab hold of this rather thin straw.

Middle-Aged Medicare

July 01, 2011
12:55 pm

Medicare turns 45 years old today.

It’s an opportune time to reflect upon how many families have been helped by the program, how many seniors have gained a sense of security that being hospitalized wouldn’t leave them impoverished.  And, with the creation of the Part D prescription drug program, millions more are able to afford the medications that can keep them healthy.

But this birthday is also a time to ask questions about what lies ahead for future Medicare beneficiaries.  The political rhetoric is not reassuring.  If you get on the computer and Google “Happy Birthday Medicare,” you find a host of interest group sites blasting away at proposals aimed at reforming Medicare to achieve long-term solvency.  Instead of a meaningful and thoughtful dialogue, it’s all about the need to gain political advantage. Look at the press statements issued on this occasion by dozens of members of Congress and you see the same thing, a harsh condemnation of reform ideas and a pledge to preserve Medicare as it is.

Drawing that line in the sand, however, does a disservice to the Medicare program and to those who count on it being there for them.  The Medicare trustees report has made it clear that the program’s window of solvency is shrinking.  And, even those who say they want to preserve the status quo, aren’t actually doing so.  The Affordable Care Act includes billions of dollars in Medicare cuts as well as the creation of the Independent Payment Advisory Board, which will be charged with slashing Medicare spending.

When we reach the middle-aged stage of our lives, it’s a time to reassess and to make the lifestyle changes necessary to assure we enjoy many more birthdays.  We have to stop kidding ourselves that we can continue along the same path we traveled in our youth.  Isn’t it time for the political class to stop kidding the American people that Medicare can enjoy 45 more birthdays without undergoing meaningful reform?