American Elephants

You Can’t Keep Medicare the Way it Is. That’s No Longer One of the Choices. by The Elephant's Child

A week ago the Medicare Trustees issued their annual report. It showed that Medicare is heading for insolvency even earlier than expected.  The Hospital Insurance Trust Fund (which funds Medicare Part A) will be insolvent in 2024, and the promised benefits that are not paid for will amount to $24.6 trillion.

Tacked on page 266 was a note from the Medicare Actuary.  An actuary is someone who is really good with math.  Specifically— a statistician who calculates insurance premiums, risks, dividends, and annuity rates. The Medicare Actuary said that the Trustees’ financial projections “do not represent a reasonable expectation for actual program operations.”

Late Friday, the Office of the Actuary released a separate analysis. He said: “the projections…should not be interpreted as our best expectation of actual Medicare operations in the future but rather as illustrations of the very favorable impact of permanently slower growth in health care costs, if such slower growth can be achieved.” (emphasis mine)

The big differences are rooted in the severe statutory cuts to Medicare provider reimbursement that are already in current law under ObamaCare. The Actuaries believe that ObamaCare’s cuts in payments to providers will harm seniors’ access to care if Congress allows them to go into effect.

The “Sustainable Growth Rate formula calls for scheduled reductions to physician payments, which would next year in 2012 cut the reimbursement to doctors by an astounding 30 percent.  The Trustees assume that the cuts will occur. The Actuaries say that if they did Medicare payment rates would fall to 57 percent of private insurance payment rates.  That’s similar to what is happening with Medicaid, the government’s biggest welfare program, where physicians are fleeing in droves. They just stop seeing Medicaid patients. Medicaid patients who can’t find a doctor go to emergency rooms. Costs skyrocket. Same thing will happen with Medicare.

Democrats, always uninterested in unintended consequences, assume that you can just pay doctors less than they require to cover their costs and they will spend a little less time with patients and all will be well. The real world doesn’t work that way. Doctors will just stop seeing Medicare patients. There is already a shortage of 45,000 primary care doctors nationwide, expected to grow to 150,000. Fewer bright students will go into medicine, Doctors will retire early.  If Congress delays the cuts, Medicare will just go broke faster.

ObamaCare also plans to reduce payment to hospitals and other providers.  This would cause 15 percent of hospitals, skilled nursing facilities and home health agencies to become unprofitable by 2019, and increasing to 40 percent by 2050. That means they go out of business.

Those fees are already well below what the private sector pays, however. For example, Medicare pays doctors almost 20 percent less than what private payers pay. It pays hospitals almost 30 percent less. In the future, that discrepancy will grow wider with each passing year.To achieve the necessary targets, the new law gives an Independent Payment Advisory Board the power to recommend cuts in reimbursement rates for providers of health care. Congress must either accept these cuts or propose its own plan to cut costs as much or more than the panel’s proposal. If Congress fails to substitute its own plan, the board’s cuts will become effective. In this way, the growth rate for Medicare spending is officially capped. Moreover, the advisory board is barred from considering just about any cost control idea other than cutting fees to doctors, hospitals and other suppliers.

Physicians and Hospitals can only do so much cost-shifting. Then there would be no more private rooms, but large wards, there would be reduced access to expensive technology. If some doctors and hospitals began offering concierge services to the more affluent, how long would that be legal? When would they nationalize physicians to force them to serve everyone? When would hospitals be nationalized? How soon will they force all private insurance companies out of business? The attention of doctors and hospitals would turn from patient care to the constant effort to get adequate repayment from government.  These are things that could well become unintended consequences of ObamaCare.

That’s what happens when you devise a bill based on ideas of “managed care.” The Accountable Care Organization rule book is already 200 pages long. They think that they can manage competition. The competition part is belied by words like mandate, control, consolidate, nonnegotiable, rules, regulations. The Obama administration’s deep unfamiliarity with the free market, and their contempt for the free market is notable.

Meanwhile, Democrats are in full-throated attack mode on Paul Ryan’s “Path to Prosperity.” Democrats have been claiming that Republicans are trying to starve Granny ever since Medicare was created as part of Lyndon Johnson’s failed Great Society.  They’re just taking the same old false accusations to new and disgusting lengths.

Pathetic. Really pathetic.

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