Launch of the ACA’s controversial Independent Advisory Board– a panel charged with recommending ways to curb Medicare inflation — has been delayed until 2016. Does this means that the IPAB’s critics have won?
No. IPAB was, from the beginning, only meant to serve as a backstop. The law says that the board will be asked to recommend places where we could pare Medicare spending if—and only if—Medicare inflation begins to outstrip inflation in the rest of the consumer economy.
But over the past three years Medicare spending has decelerated; it is no longer growing faster than the economy as a whole. This is why Medicare’s chief actuary has decided to put IPAB on hold.
Some observers argue that as the economy recovers from the Great Recession, the nation’s health care bill is bound to climb. I disagree. Particularly in the case of Medicare, I don’t think that the economic downturn explains most of the slowdown.
I believe that reform is already having an effect on health care inflation: Four years of debate over the Affordable Care Act has made us more aware of the waste in our health care system. Patients are asking more questions, and providers know that they are going to be held accountable for that waste.
We Still Need IPAB as a Backstop
That said, in the future, spending could pick up–and we may need IPAB. This is why President Obama has made it clear that he will veto any attempt to eliminate the Board.
It is important to know that IPAB exists, as a reminder to drug companies, device makers, nursing homes and others that, one way or another, we can no longer afford a system that is wasting $1 out of $3 of our health care dollars on over-priced, unnecessary tests and treatments that, too often, put patients at risk without benefits.
If, and when, IPAB is asked to recommend cuts it will use medical evidence to decide where to trim. IPAB is likely to recommend lower payments for certain services and products that medical research tells us are now “overvalued”–based, not on cost-benefit analysis, but on patient outcomes. If patients who fit a particular medical profile are not helped, Medicare should not cover the treatment for those patients.
As I have explained in the past, IPAB is not the panel of bean counting bureaucrats that Obamacare’s opponents suggest. IPAB will not “ration” care; it is charged with making care more rational by letting Science–rather than lobbyists– decide what Medicare should cover. Moreover, Congress can veto IPAB’s recommendations, if legislators can agree on ways to achieve equal savings– without rationing care, or shifting costs to seniors.
Why We Don’t Need IPAB Now.
Medicare spending is no longer “out of control.” In fiscal year 2012 spending per Medicare beneficiary increased by only 0.4%. This followed slow growth in 2010, when spending rose by just 1.8% per beneficiary, and in 2011 when outlays increased by 3.6%. We cannot be absolutely certain that the trend will continue. But I see signs of changes in our medical culture that suggest we have reached a turning point in how we think about healthcare.
Why Has Medicare Spending Slowed? New Research
Some argue that the Great Recession has led seniors to consume less health care. But I’m not convinced.
It’s easy to see how high unemployment would cause Americans under 65 to use less health care. Even if you didn’t lose your job, your neighbor did, and virtually everyone has become more cautious. But it is much harder to argue that the economy explains slower growth for Medicare.
Most seniors have not been hit by a sudden job loss. They still have health insurance. Their income—much of which comes from Social Security—has remained relatively stable. In addition, the vast majority of seniors have supplemental insurance (Medicare Advantage or Medigap) that covers out of pocket costs. So why would they cancel a doctor’s visit, or postpone elective surgery?
Meanwhile new research published in this month’s Health Affairs looks at why total health care spending (including both the private sector and Medicare) grew at a record-slow pace of 3.9% in 2009, 2010 and 2011. According to the investigators, hard times, accounted for only about 1/3 (37 percent) of slower growth in the nation’s health care bill. My guess is that most of the effect was felt in the private sector.
A second paper published in the same issue of Health Affairs analyzes spending by 150 large employers from 2007 through 2011. They report that larger deductibles, more co-insurance and higher copayments accounted for about 20% of the slowdown.
But Michael Chernew, a Harvard health policy professor and co-author of the paper, told Modern Healthcare that slower growth was due to more than the weak economy or increases in out-of-pocket spending as employers shifted costs to employees. Instead, “the results appear to underscore a shift in culture among hospital officials and physicians who have grown more focused on greater efficiency in the last five years.”
If Chernew is right we are looking at more than a cyclical change that is tied economic cycles. Though as he stresses, we if we want to support a long-term structural change in our health care system “we need to build a system with the right incentives and information flow.”
Medicare’s currrent chief actuary, Paul Spitalnic, sees the recent past as prologue– at least to the near future. On April 30, he sent a letter to Marilyn Tavenner, acting Medicare administrator, saying that based on the most recent numbers, the projected 5-year average growth in Medicare per capita spending is 1.15 percent, and the 5-year average growth target is 3.03 percent.” As a result, he advised Tavenner that we won’t need the IPAB until 2016—at the earliest.
If Spitalnic’s projections prove true, over the next few years, Medicare won’t be growing faster than GDP. This means that it won’t be adding to the deficit. If the trend continues, over time, we won’t have to worry about Medicare “crowding out” spending on education, infrastructure or the environment.
Looking Ahead 30 Years
Nevertheless over the next three decades, as baby-boomers join the ranks of Medicare recipients, we will have to find new ways to squeeze the waste out of the system. Reining in spending “per beneficiary” will not be enough. There will be so many more beneficiaries.
But the boomers will not turn 65 all at once. We will have time to make the thoughtful adjustments needed to improve care while simultaneously reducing costs. This is something conservatives don’t seem to understand about healthcare: lower bills and better care go hand in hand. Inefficient care is expensive. We don’t have to inflict pain—or demand that seniors pay more – in order to make Medicare sustainable. There is plenty of waste in the system.
I am hopeful—not “confident,” but hopeful—that we can do this. First, some cuts already are baked into the ACA cake. Over the next decade, the Affordable Care Act restrains the rate of growth of payments to Medicare Advantage plans, shaves the rate of growth in unit payments to hospitals and nursing homes, cuts their annual updates by 1% a year for ten years, and promotes value-based payment systems while making major investments to reduce fraud and abuse. The Congressional Budget Office estimates that these provisions will reduce Medicare spending by 1 percent a year over the 10-year budget window. Rather than rising by 2% to 3% a year, Medicare’s outlays would inch up by 1% to 2%.
A Cultural Change
Moreover, like Chernew, I believe that we are beginning to see changes in our medical culture that could reap far greater savings. As we discuss reform, doctors, patients and hospitals have begun to look at healthcare in a new way.
For example, in the post below I describe how urologists have done an about-face on the question of PSA testing for prostate cancer. Rather that recommending widespread routine testing of asymptomatic patients, they are cautioning patients that they should ask their doctors about risks as well as benefits.
Urologists are leading the way in putting patients’ interests ahead of not just their own financial interests, but their understandable desire to believe that a test they have relied on for many years was indeed savings lives. Now they are taking a hard look at the medical evidence which suggests that potential benefits may not justify risking life-changing side effects. In other words, the urologists are doing just what IPAB is supposed to do—letting Science rather than custom shape their recommendations. (In 2010,the National Physicians’ Allilance asked a question: “Are Doctors Knights, Knaves or Pawns?” Urologists, at least, have stood up and identified themselves: they are knights.)
If fewer men are tested, fewer men will be diagnosed with “early-stage prostate cancer”—a slow-moving disease that may well never cause them problems. As a result, fewer will undergo treatments that can cost anywhere from $7,500 to $22,500 while savings few if any lives.
Patients, too, are becoming more aware that “more care is not always better care.” I was struck by the generally positive response to last week’s New York Times Magazine about mammograms. When I scanned “readers’ comments,” I fully expected to find dozens of outraged readers attacking the writer for questioning whether this annual ritual is best for all women at all ages. Instead, many thanked her for analyzing such a fraught issue in a thoughtful way.
Reformers have been trying get the message out for year:. We have two problems in this country: while many uninsured and underinsured Americans are undertreated, others, who are well-insured, are over-treated. Today, it seems that more patients are becoming wary. They understand that medicine is shot through with uncertainties, and that they need to be fully informed about side effects and risks when they make a medical decision.
Hospitals Adopt Better Systems
Even though the final phase of health care reform has not yet kicked in, hospitals have been anticipating the effect the ACA will have on them .They know that they will be held accountable for delivering better care at a lower price They are keenly aware, for example, that in the future, they will face financial penalties if too many Medicare patients bounce back into a hospital bed less than 30 days after discharge.
As a result, today, many hospitals are doing a better job of making sure that patients understand their medications before they leave. At Einstein Medical Center in Philadelphia, for instance, hospital pharmacists meet with patients in their room to discuss doses. Patients receive a 30 day supply of medications when they leave; and providers call patients to follow-up within three days of discharge and at the end of the month to answer questions about the drugs. Einstein has reduced readmissions for heart patients by 50%
Nationwide,hundreds of hospitals are experimenting with new systems designed not just to cut readmissions, but to reduce the preventable errors that haunt both providers and patients. For years, hospital CEOs have focused on growing revenues. Now, the ACA is sending a new message: the hospital’s mission should be to cut costs while delivering safer, more effective patient-centered care.