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What's next for Medicare spending?

Greenbeard

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Health Beat Blog looks at very recent trends in Medicare spending:

While our elected representatives wrangle over slicing entitlements, virtually no one seems to be paying attention to an eye-popping fact: Medicare reimbursements are no longer accelerating at a break neck-pace. The new numbers should be factored into any discussion about healthcare spending: From 2000 through 2009, MedicareÂ’s outlays climbed by an average of 9.7 percent a year. By contrast, since the beginning of 2010, Medicare spending has been rising by less than 4 percent a year. On this, both Standard PoorÂ’s Index Committee and the Congressional Budget Office (CBO) agree. (S&P tracks healthcare spending with the help of Milliman Inc., an independent actuarial and consulting firm.)

What explains the 18-month slow-down? No one is entirely certain. But at the end of July David Blitzer, the chairman of Standard &Poor’s Index Committee, told me: “I’m hesitant to say that this is a clear long-term trend. But it’s more than a blip on the screen."

One of the more interesting possibilities for this trend? Realignment of the health care system, particularly on the provider end (an example of which was posted in another thread at the end of last year).

Standard & Poor’s Blitzer was more forthcoming. In the S&P report on healthcare spending released on July 21, he wrote: “many participants [in the healthcare system] have indicated that providers are trying to address health care reform and are looking for ways to control costs. If true, this combination certainly would be a contributory factor to the moderation in cost we have witnessed since early 2010.”

Zeke Emanuel, an oncologist and former special adviser for health policy to White House Office of Management and Budget director Peter Orszag, is certain that this is what is happening. When I spoke to him last week, Emanuel, said: “This is not mere chance: this is directly related to the initiation of health care reform.” It is not the result of reform, Emmanuel emphasized. The reform measures that will rein in Medicare inflation have not yet been implemented. But, he explained, providers are “anticipating the Affordable Care Act kicking in.” They can’t wait until the end of 2013: “They have to act today. Everywhere I go,” Emanuel, added, “medical schools and hospitals are asking me, ‘How can we cut our costs by 10 to 15 percent?’

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The real trick will be to watch whether that curve continues to bend like that over the next few years. And, less passively, to continue rolling out cost control mechanisms (namely, payment and delivery system reforms) to try and ensure that it does.
 
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Greenbeard

Greenbeard

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Peter Orszag chipped in a bit of perspective last week as to a possible reason Medicare costs have been slowing down as of late in "Medicare Spending Slows as Hospitals Improve Care."

We don’t yet have enough data to tell for sure what’s causing the recent deceleration in Medicare spending -- or whether it will last. But some evidence suggests it may be a shift toward value in the health-care sector. Various hospital executives have told me they have already begun to prepare for less generous reimbursement from Medicare as the new federal health-care-reform law takes effect and there is a greater focus on value. They are therefore trying to become more efficient now. That’s the discussion taking place in the strategic planning process at Mount Sinai Medical Center in New York, where I recently joined the board of directors. [...]

The Mount Sinai experience may be instructive. From September 2010 to May 2011, the hospital’s Medicare revenue rose only 2 percent over the previous year -- in part because the number of inpatient cases fell. Why was that? One important reason was that the number of patients readmitted to the hospital within 30 days of discharge was 5 percent less than what it had been the previous year.

Reducing readmissions is one of the objectives of the federal health-care-reform law enacted last year. Historically, nearly 20 percent of Medicare patients have been readmitted to a hospital within 30 days of being discharged, in part because their doctors and other health-care providers have not managed patient handoffs very effectively. The Affordable Care Act included, among other remedies, a modest penalty for hospitals with high readmission rates.

At Mount Sinai, patients at risk of rehospitalization are now identified when they first come in and assigned to a special team of doctors and nurses that works to minimize that risk. Apparently, the effort is working. And as more hospital systems begin to use information-technology systems to measure and manage value, we could see progress in other areas of patient care as well.
 
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Greenbeard

Greenbeard

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Part 3 of this exciting saga is up over at health beat blog looking at how providers--hospitals in particular--are cutting the fat. There's a nice round-up of stories on hospitals saving money on preventing readmissions, forming accountable care organizations, using checklists to provide care, making full use of new IT systems, cutting down on medical errors, and supporting palliative care.

These are just a few examples of how some providers are rethinking value. Cumulatively, they appear to be having an effect. Just last week, OrszagÂ’s successor at OMB confirmed that this year, the bills that providers are sending to Medicare are lower than expected. As a result, the White House announced that according to OMBÂ’s newest estimates “Medicare and Medicaid expenditures are projected to grow less than expected over the next decade.” This year, “the government is expected to spend about $4 billion less on Medicare” than projected. 
That $4 billion was saved without slashing physiciansÂ’ fees or shifting costs to seniors. I have less faith in ten-year projections--about anything. There are too many variables involved in any ten year estimates. But the current baseline is lower than OMB and MedicareÂ’s trustees thought just a few months ago. This is good news.

Those in Washington who would kill Medicare in order to save it should take notice.
 

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