Skip to content
  • About
  • Contact
  • Contribute
  • Book
  • Careers
  • Podcast
  • Recommended
  • Speaking
  • All
  • Physician
  • Practice
  • Policy
  • Finance
  • Conditions
  • .edu
  • Patient
  • Meds
  • Tech
  • Social
  • Video
    • All
    • Physician
    • Practice
    • Policy
    • Finance
    • Conditions
    • .edu
    • Patient
    • Meds
    • Tech
    • Social
    • Video
    • About
    • Contact
    • Contribute
    • Book
    • Careers
    • Podcast
    • Recommended
    • Speaking

Curbing Medicare costs: Are seniors or the government responsible?

Merrill Goozner
Policy
August 23, 2012
359 Shares
Share
Tweet
Share

Medicare has moved to the center of this year’s presidential campaign for a single overriding reason: shrinking the nation’s long-term government deficit demands dealing with health care costs. No one – left, center or right – disagrees with that analysis.

What they also agree on is that limiting health care’s inexorable growth will require cutting future payments to those who deliver care – the doctors and hospitals, the nursing homes and walk-in clinics and the medical device and drug companies. Each group will have to adapt to a new era when their growth doesn’t automatically exceed the growth in the overall economy.

Health care economists point out that the problem is not just government programs like Medicare and Medicaid. In most years, they grow at rates that are slightly below the privately-insured market.

But the debate is now focused on the government side of the ledger because Republican candidate Mitt Romney chose Rep. Paul Ryan, R-Wis., who has championed Medicare privatization, as his running mate. They are offering voters a stark choice on Medicare from President Obama and the Democrats. It can be distilled down to a single, simple question: Who will be on the hook if the health care delivery system fails to limit health care cost growth – individual seniors or the government?

In the long run failing to curb the costs of the health care system will hurt everyone as tax revenue and future wage increases are siphoned to pay for it. Under the Republican plan, dubbed premium support,  the onus for cutting costs is placed primarily on individuals. Newly retired seniors, sometime early in the next decade, will be offered a fixed voucher to pay for either a private insurance plan or to cover the cost of traditional Medicare, which will remain as a public option to compete with private plans.

The voucher’s value will rise at a rate half a percentage point faster than the gross domestic product or GDP. If the price of those plans grows faster than GDP + 0.5 percent, future seniors will have to pay for the rest of its total cost out of their own pockets. The plan requires well-off seniors to pick up a greater share of that tab, a form of means testing.

Many of these sick, older Americans are in no position to challenge what their physicians order.

The theory backing this approach says that when health care consumers have their own money at risk, they will choose more carefully. Those acts of self-limitation will hold down health care spending.

Critics argue that approach ignores certain realities. Five percent of patients with serious illnesses account for half of all health care spending. The bulk of any individual’s lifetime health care expenditures come during the last year or two of life. Many of these sick, older Americans are in no position to challenge what their physicians order.

Moreover, many may rebel when they discover they have been put in a position where the intersection of costs and individual wherewithal are driving end-of-life decision-making. It also has the potential to be extremely unfair: people of means will be able to pay extra to get Cadillac care; an increasing share of people living only on Social Security — nearly half of all seniors — will go without, an increasingly common situation already.

And it’s not as if people make good choices when they self-ration. Studies have shown that even for the majority of seniors who are in relatively good health, having “more skin in the game” just as often leads to eschewing cost-effective and potentially life-saving measures as it does to eliminating wasteful tests and procedures.

The Obama administration has also targeted limiting the growth of Medicare spending to GDP + 0.5 percent. But under its plan, embodied in the Affordable Care Act, the limits will be enforced by cutting payments to providers like hospitals and physicians and by eliminating the extra payments given to insurance companies under the existing Medicare Advantage program, which is the government’s initial foray into Medicare privatization. That effort, enacted under President George W. Bush, wound up costing more than traditional fee-for-service Medicare.

In his interview with CBS’ “60 Minutes” (in a portion that wasn’t part of the broadcast), Romney said that the president “robbed Medicare $716 billion to pay for a new risky program of his own that we call Obamacare.” Yet according to the Congressional Budget Office, no services will be eliminated to achieve those savings.

Voters subjected to the sound bites of campaign ads will never learn that the dirty little secret of both approaches is that they embody a form of rationing.

Rather, $415 billion comes from “reductions in annual updates to fee-for-service payment rates” and $156 billion comes from reducing Medicare Advantage payment rates. The law also cuts $56 billion from so-called disproportionate share payments to hospitals that serve the uninsured, since it is expected that under the ACA more people will have insurance.

Critics of the Obama approach say that the government will never enforce those limitations, just as it has never enforced the physician pay cuts enacted more than a decade ago. They have little faith that pilot projects like medical homes, accountable care organizations and bundled payments will miraculously transform the majority of providers into deliverers of higher quality and more cost-effective care.

Voters subjected to the sound bites of campaign ads will never learn that the dirty little secret of both approaches is that they embody a form of rationing. Alan Cohen, executive director of the Boston University Health Policy Institute, differentiated the two approaches in a recent article by describing the Republican approach as “first-dollar rationing.”

“Both public and private payers limit access to basic services and primary care – either by denying coverage or by imposing high deductibles and coinsurance – even as they pay for more expensive tertiary care, often at the end of life,” he wrote. “First-dollar rationing makes little sense if we want to obtain the highest value for a long-term investment in health care. First-dollar coverage of primary care and evidence-based preventive services should be norm.”

However, the ACA will lead to more “last-dollar rationing,” he suggested. In his view, that “makes more sense because of diminishing marginal returns on expensive tertiary care, especially in end-of- life situations.” But as the president and his congressional allies learned to their great regret in 2010, it also leads to more placards decrying “death panels” and the absurd admonishment that Obama “keep the government’s hands off my Medicare.”

Merrill Goozner is the senior correspondent for The Fiscal Times who blogs at Gooznews on Health.

Prev

Will physicians be caught in the ACO web?

August 23, 2012 Kevin 6
…
Next

What the Romney-Ryan and Obama Medicare plans have in common

August 23, 2012 Kevin 5
…

Tagged as: Medicare, Primary Care, Public Health & Policy

Post navigation

< Previous Post
Will physicians be caught in the ACO web?
Next Post >
What the Romney-Ryan and Obama Medicare plans have in common

More by Merrill Goozner

  • a desk with keyboard and ipad with the kevinmd logo

    Will health reform survive the Supreme Court?

    Merrill Goozner
  • a desk with keyboard and ipad with the kevinmd logo

    A look behind the growing cost of cancer drugs

    Merrill Goozner
  • a desk with keyboard and ipad with the kevinmd logo

    Should the elderly with dementia be given anti-psychotic drugs?

    Merrill Goozner

More in Policy

  • The realities of immigrant health care served hot from America’s melting pot

    Stella Cho
  • Healing the damaged nurse-physician dynamic

    Angel J. Mena, MD and Ali Morin, MSN, RN
  • Deaths of despair: an urgent call for a collective response to the crisis in U.S. life expectancy

    Mohammed Umer Waris, MD
  • Breaking down the barriers to effective bar-code medication administration

    Amy Dang Craft
  • The locums industry has a beef problem

    Aaron Morgenstein, MD
  • Canada’s health workers are sounding the alarm. We must act, now.

    Ivy Lynn Bourgeault, PhD
  • Most Popular

  • Past Week

    • The real cause of America’s opioid crisis: Doctors are not to blame

      Richard A. Lawhern, PhD | Meds
    • Healing the damaged nurse-physician dynamic

      Angel J. Mena, MD and Ali Morin, MSN, RN | Policy
    • The struggle to fill emergency medicine residency spots: Exploring the factors behind the unfilled match

      Katrina Gipson, MD, MPH | Physician
    • Breaking the stigma: Addressing the struggles of physicians

      Jean Antonucci, MD | Physician
    • Beyond the disease: the power of empathy in health care

      Nana Dadzie Ghansah, MD | Physician
    • Deaths of despair: an urgent call for a collective response to the crisis in U.S. life expectancy

      Mohammed Umer Waris, MD | Policy
  • Past 6 Months

    • The hidden dangers of the Nebraska Heartbeat Act

      Meghan Sheehan, MD | Policy
    • The real cause of America’s opioid crisis: Doctors are not to blame

      Richard A. Lawhern, PhD | Meds
    • Nobody wants this job. Should physicians stick around?

      Katie Klingberg, MD | Physician
    • The fight for reproductive health: Why medication abortion matters

      Catherine Hennessey, MD | Physician
    • The vital importance of climate change education in medical schools

      Helen Kim, MD | Policy
    • Resetting the doctor-patient relationship: Navigating the challenges of modern primary care

      Jeffrey H. Millstein, MD | Physician
  • Recent Posts

    • Why it’s time to question medical traditions [PODCAST]

      The Podcast by KevinMD | Podcast
    • The hidden gems of health care: Unlocking the potential of narrative medicine

      Dr. Najat Fadlallah | Physician
    • The realities of immigrant health care served hot from America’s melting pot

      Stella Cho | Policy
    • The dark side of immortality: What if we could live forever?

      Ketan Desai, MD, PhD | Physician
    • Lazarus: the dead man brought back to life

      William Lynes, MD | Conditions
    • Revolutionizing COPD management with virtual care solutions [PODCAST]

      The Podcast by KevinMD | Podcast

Subscribe to KevinMD and never miss a story!

Get free updates delivered free to your inbox.


Find jobs at
Careers by KevinMD.com

Search thousands of physician, PA, NP, and CRNA jobs now.

Learn more

View 10 Comments >

Founded in 2004 by Kevin Pho, MD, KevinMD.com is the web’s leading platform where physicians, advanced practitioners, nurses, medical students, and patients share their insight and tell their stories.

Social

  • Like on Facebook
  • Follow on Twitter
  • Connect on Linkedin
  • Subscribe on Youtube
  • Instagram

CME Spotlights

From MedPage Today

Latest News

  • Doc Moms, Mind the Gap -- $3M Earning Difference by Sex
  • Clinical Note Writing App Powered by GPT-4 Set to Debut This Year
  • Helping Patients Get Fit -- One Walk at a Time
  • TB Cases Rebound to Near Pre-Pandemic Levels, CDC Data Show
  • Marginalized Groups May Benefit More From Decreasing Air Pollution

Meeting Coverage

  • Switch to IL-23 Blocker Yields Deep Responses in Recalcitrant Plaque Psoriasis
  • Biomarkers of Response With Enfortumab Vedotin in Advanced Urothelial Cancer
  • At-Home Topical Therapy for Molluscum Contagiosum Gets High Marks
  • Outlook for Itchy Prurigo Nodularis Continues to Improve With IL-31 Antagonist
  • AAAAI President Shares Highlights From the 2023 Meeting
  • Most Popular

  • Past Week

    • The real cause of America’s opioid crisis: Doctors are not to blame

      Richard A. Lawhern, PhD | Meds
    • Healing the damaged nurse-physician dynamic

      Angel J. Mena, MD and Ali Morin, MSN, RN | Policy
    • The struggle to fill emergency medicine residency spots: Exploring the factors behind the unfilled match

      Katrina Gipson, MD, MPH | Physician
    • Breaking the stigma: Addressing the struggles of physicians

      Jean Antonucci, MD | Physician
    • Beyond the disease: the power of empathy in health care

      Nana Dadzie Ghansah, MD | Physician
    • Deaths of despair: an urgent call for a collective response to the crisis in U.S. life expectancy

      Mohammed Umer Waris, MD | Policy
  • Past 6 Months

    • The hidden dangers of the Nebraska Heartbeat Act

      Meghan Sheehan, MD | Policy
    • The real cause of America’s opioid crisis: Doctors are not to blame

      Richard A. Lawhern, PhD | Meds
    • Nobody wants this job. Should physicians stick around?

      Katie Klingberg, MD | Physician
    • The fight for reproductive health: Why medication abortion matters

      Catherine Hennessey, MD | Physician
    • The vital importance of climate change education in medical schools

      Helen Kim, MD | Policy
    • Resetting the doctor-patient relationship: Navigating the challenges of modern primary care

      Jeffrey H. Millstein, MD | Physician
  • Recent Posts

    • Why it’s time to question medical traditions [PODCAST]

      The Podcast by KevinMD | Podcast
    • The hidden gems of health care: Unlocking the potential of narrative medicine

      Dr. Najat Fadlallah | Physician
    • The realities of immigrant health care served hot from America’s melting pot

      Stella Cho | Policy
    • The dark side of immortality: What if we could live forever?

      Ketan Desai, MD, PhD | Physician
    • Lazarus: the dead man brought back to life

      William Lynes, MD | Conditions
    • Revolutionizing COPD management with virtual care solutions [PODCAST]

      The Podcast by KevinMD | Podcast

MedPage Today Professional

An Everyday Health Property Medpage Today iMedicalApps
  • Terms of Use | Disclaimer
  • Privacy Policy
  • DMCA Policy
All Content © KevinMD, LLC
Site by Outthink Group

Curbing Medicare costs: Are seniors or the government responsible?
10 comments

Comments are moderated before they are published. Please read the comment policy.

Loading Comments...