Health care spending solutions, part two

Yesterday we discussed the perception by patients that health care costs are increasing exorbitantly. While that may not be true overall, it certainly is true when it comes to out of pocket dollars. Regardless of whether and how much health care costs are increasing, we need to do everything we can to bring these costs under control. All sectors of health care must participate in bringing these costs into line.

First, with the increase of deductibles and co-pays, consumers are paying more for medical care out of their own pockets. If a free market system is to truly work, consumers must be able to make proper economic decisions about what they purchase. Thus, there must be price transparency for the provision of medical services. Price transparency can have some effect on the costs of health care. For example, price transparency already is at work in elective medical care, such a Lasik surgery, eyeglasses, some dental care, some cosmetic surgery. In non-catastrophic care, this model likely can have some influence: do I really need—and want to pay for—an MRI to diagnose tennis elbow? In catastrophic and emergency care, price will not be influential. There will not be time to make economic decisions in emergency care; in catastrophic circumstances, the deductible will be used whether the price of care is $100,000 or $1,000,000.

Second, the vehicles for providing medical services need to change. Dr. Molly Cooke, President of the American College of Physicians recommended the following changes to the Medicare reimbursement formula:

  • Development of evidence based clinical guidelines to prevent over use of ineffective and harmful care
  • Payments based on usefulness of care, rather than fee for service
  • Creation of new, patient based methods of health care delivery
  • Measurement of physician results based on clinical success
  • Reducing federal spending based on realistic rather than arbitrary budget cuts (sequester)

Of course, an ounce of prevention is worth a pound of cure.

Next, drug costs under Medicare Part D must be brought under control. In 2011, 47 percent of Medicare spending on Part D was co According to Joe Baker, President of the Medicare Rights Center, there are some straightforward solutions to the prescription drug excesses now faced by Medicare:

  • Require the same drug manufacturer discounts be paid to Medicare as paid to Medicaid and private health insurers. This could save $141 billion over ten years.
  • Create a Medicare drug formulary, again similar to private health insurance, which allows Medicare to control drug pricing

Finally, focus on the health care payment system. There are frequent reports of fraud in the Medicare system. One study suggests that the rate of fraud in Medicare is between 3% and 10%. Others have estimated the amount at $50 billion to $90 billion. There is already law on the books called the Medicare Secondary Payer Act which includes a provision permitting a “private cause of action” for recovery on behalf of Medicare. However, Courts have construed this provision narrowly, to the point where such claims cannot be brought. Congress should fix this problem, and turn the lawyers loose on behalf of Medicare, and bring back all those fraudulently obtained payments.

It is probably true that each of these components of the health care system must participate in bringing down overall health care costs. And each has a variety of vested interests that would likely oppose change. It would take a truly bipartisan, thoughtful Congress to make these solutions happen. Can we elect one in 2014?

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    Comments

    Fraud?

    No question whatever about fraud. CNBC documented some flagrant cases in Florida.  So far, it seems that Medicare thinks sending mailings to patients is a rigorous response. Well, the fact is that some patients may be in some sense complicity.  Insurance and Medicare needs a far better system for regulating this.  Sometimes billions can slip through and be paid before the control system kicks in.  There ought to be code in the billing process that raises red flags about sudden increases in any particular claim.  In fact, to me this is like the tax audit system.  Through experience, the IRS has learned to recognize patterns suggesting possible fraud.  I think the mechanisms for recognizing and dealing with fraud schemes should be much, much faster.  The cheats must expect to be summoned for a thorough audit within weeks of undertaking any fraud scheme.  No area of the country should have sharp increases in any type of bill.  Aging, sickness, migration patterns are pretty evolutionary.  Statistics should be equally evolutionary.  I'm not sure what objection a costly function like healthcare should have to locking up the cash drawer.