From a reader reacting to yesterday's post on Medicare:
I'm afraid you have missed the boat re Medicare.
1. Politicians have made a promise to the elderly that cannot be fulfilled, mainly "You are entitled to obtain care anywhere in the US, provided by any MD (or licensed provider, including chiropractors, optometrists, podiatrists, etc) with no real limit to the volume or type (and 'necessity') of service provided." Politicians are finally starting to say that this is a promise that cannot be continued.
2. There is no "alignment" between hospitals, MDs and insurers about Medicare goals and operations. They play "win-lose" and fight over who gets paid for services and procedures performed. The more hospitals get paid, the less remains for MDs and vice versa. Without alignment, there is no force for cost containment. Patients are "oblivious to cost" since they are coming from the realm of "entitlement"---"I have my Medicare card & the government will pay for it all."
3. System is "volume driven"---the more tests, procedures, or services performed, the more the provider gets paid. Public incorrectly believes "more is better" (since that is what system has taught them) and "my insurance will pay for it anyway"---taking away their usual function of "vigilance over the price of the service".
4. In healthcare generally, "supply creates demand" (the more cardiologists in a community the more cardiac catheterizations get done, the more CT scanners in a community the more CTs get done) etc. This defies typical "supply/demand" economic theory and feeds into the "volume driven" problem of #3 above.
5. "New procedures" (from improved medical technology--one of the few current growth industries in the US) have had major impact on Medicare costs. Twenty years ago, "open heart surgery" was rarely performed on people over 70, "stents" did not exist, nor did robotic surgery for prostate cancer, and "total joint replacement" surgery was rare (if done at all) — new technology gets "rolled out" across the US and drives up the total cost.
Therefore a "2% reduction" will accomplish nothing. "The system" will find ways to continue to support its financial needs (more volume or "unbundling" of services or other creative billing). Fundamental change needs to occur (this will take time) — including "alignment," giving patients a financial stake in their own care (aka "skin in the game"), and public education that "more is not necessarily better." Health care system leaders, politicians, and public policy makers need to assert that "cost is a major factor" when analyzing outcomes and quality indicators for a population's health.