Thread: How health care costs are being brought down

This thread is a bit of a companion to the "How to bring health care costs down?" thread that's currently active. However, while that thread is focused on hypotheticals, I think it's worth noting an (apparent) recent trend that's actually occurring. But first I want to point out that the goal generally isn't to lower health care costs per se, but rather to lower the rate at which they're growing (hence the popular catchphrase about "bending the cost curve"). If health costs grow at rates more in line with the rest of the economy, then they won't eat up ever larger chunks of our national (and personal) income. That's generally the goal, as opposed to introducing some kind of deflationary epoch into the health sector. So in that sense, both thread titles are misnomers (though eye-catching!).

The wonderful Health Beat Blog has been following a fascinating recent trend: Medicare cost growth has slowed significantly over the past year and a half.

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, Medicare’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 Poor’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."

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?’

An opinion piece out from Peter Orszag last month chimed in some more perspective:

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.

In part 2 of the series over a Health Beat Blog, the author zeroes in even further on increasing value as a primary factor in the recent slowdown in Medicare cost growth:

What is striking about the recent dip to 4 percent, is that this time around, there have been no major policy changes in Washington. Over the past 18 months, neither benefits nor payments to providers have been reduced in any significant way. The Affordable Care Act does call for cutting overpayments to Medicare Advantage insurers, while shaving annual increases in payments to hospitals, nursing homes and other institutional providers by 1 percent a year over ten years. But these changes have not yet taken effect. [...]

In the past, Medicare has rewarded providers for “Volume,” by paying them fee-for-service. But the Affordable Care Act contains financial carrots and sticks that reward doctors and hospitals for “Value”-- better outcomes at a lower price--while penalizing those that “do more” without improving patient outcomes. “Either we get volume under control, or prices paid both by private insurers and by Medicare will drop,” says Emanuel. “Hospitals know this. This is why they want to make their systems more efficient.”

And in Part 3 of the series, published just a few days ago, there's a focus on some more concrete examples: a round-up of stories on hospitals saving money by 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.

The whole series of blog posts is well worth reading. But the point is, slowing cost growth doesn't have to just be viewed as something theoretical to be done later on, it may well already be starting to happen.

Note to you: your piece says that "nobody knows why" but then quotes Zeke Emmanuel. Now, ol' Zeke happens to be related to Rahm, who was in Barack Hussein's administration until recently. And ol' Zeke says that it's "directly related" to the initiation of health care reform. Except ol' Zeke then states that Obamacare hasn't started yet AND Barack Hussein has handed out literally thousands of exemptions. So clearly ol' Zeke doesn't know what "directly related" means.

Also, those are pretty graphs, but I have no idea what they mean.

Originally Posted by C-B-M

And ol' Zeke says that it's "directly related" to the initiation of health care reform. Except ol' Zeke then states that Obamacare hasn't started yet AND Barack Hussein has handed out literally thousands of exemptions. So clearly ol' Zeke doesn't know what "directly related" means.

What's being discussed here are the payment and delivery system reforms in the law: there are no "exemptions" to those. And the connection of those impending reforms to the current delivery system changes is summed up by the quote from the S&P report: "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." In other words, providers are already starting to move on the cost control mechanisms favored in the ACA: namely, things like 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. I'm sure part of that is that these are good ideas. But the answer to the question of "why now" is fairly obvious: they no longer have the luxury of putting it off.

We know in many individual instances that major providers have already responded to the reforms. For example, here's a big story that came out of Massachusetts late last year:

The state’s largest health care system says it will redesign care for thousands of patients and reduce administrative costs as part of a major new initiative intended in part to make treatment at its teaching hospitals more affordable.

Partners HealthCare, a physician and hospital organization that includes Massachusetts General and Brigham and Women’s hospitals, also plans to launch a “public education campaign’’ early next year to improve its image, which has taken a pounding this year in the debate over soaring health care costs.[...]

So far, Partners has decided to redesign care for patients with colon cancer, strokes, cardiovascular disease, and diabetes, aiming to lower the cost and improve the quality of treatment. Teams of doctors and executives are analyzing current care for these patients, including which steps are associated with the best results, and the extent of wasteful care, such as duplicative imaging tests, preventable readmissions to the hospital, and medical errors that lead to more care. The teams must develop plans by January.

Why now?

As are other providers, Partners is under pressure to prepare for a new payment system that will essentially put doctors and hospitals on a budget, said Dr. Thomas Lee, head of Partners’ physician organization.

Over the next few years, insurers and government programs are expected to start paying providers a flat fee for treating a patient for a particular episode, or for caring for a patient during a particular time period — rather than paying for each test, procedure, and appointment.

In other words, exactly what S&P, Orszag, Emmanuel, and others are suggesting about (and hearing from) providers: they're changing the way they do business in anticipation of the coming payment reforms.

The interesting suggestion here isn't that change is afoot among certain industry leaders gearing up for reform--we already know that to be the case. The interesting suggestion is that these changes have become widespread enough to start making a dent in Medicare spending already. And that's an exciting prospect.

Also, those are pretty graphs, but I have no idea what they mean.

They mean exactly what the text says: Medicare spending has slowed since the beginning of 2010.

first you state that it is medical expenses but it is not it is just medicaid expenses. that is only a small part of medical expenses and of couse the article doesnt bother to see if the reason is that the gov is not paying for hte sevices and many dr are no longer taking medicaid thus those expenses will drop. if people to take it then you cant spend it.
so this entire article is nothing but the typical liebral drival no facts but a lot of bs

Originally Posted by sailorman126

the article doesnt bother to see if the reason is that the gov is not paying for hte sevices and many dr are no longer taking medicaid thus those expenses will drop.

Yes, it does address that. The excerpts I've included in this thread are meant to whet your appetite, not substitute for a full read of the great reporting and analysis over at Health Beat Blog. The third part of their multi-part series addresses this by noting that 1) these results are centered on hospital expenditures so far (and hospitals don't generally withdraw from Medicare participation the way a small physician practice might), and 2) on the physician services side, MedPAC's latest patient access surveys haven't found anything to be alarmed about:

Other skeptics suggest that the growth of Medicare outlays is declining because physicians have begun to shun Medicare patients. But research published by the non-partisan MedPAC in its March 2011 report reveals that “Overall, beneficiary access to physician services is good and better than that reported by privately insured patients age 50 to 64.”

Originally Posted by Greenbeard

They mean exactly what the text says: Medicare spending has slowed since the beginning of 2010.

I know why... Medicare is spending less. To wit:

In 2009 my Mother got a knee replaced. Medicare paid for 5 days in the hospital, 3 weeks of in-home care, and 3 weeks of additional physical therapy.

This past January she got the second knee replaced. Medicare paid for 4 days in the hospital, 2 weeks of in-home care, and 2 weeks of additional physical therapy.

And her supplemental coverage (that she pays for) paid a higher percentage of each of the bills on the second knee.

"Death panels" denial of care are already starting.

Originally Posted by tsquare

I know why... Medicare is spending less. To wit:

In 2009 my Mother got a knee replaced. Medicare paid for 5 days in the hospital, 3 weeks of in-home care, and 3 weeks of additional physical therapy.

This past January she got the second knee replaced. Medicare paid for 4 days in the hospital, 2 weeks of in-home care, and 2 weeks of additional physical therapy.

And her supplemental coverage (that she pays for) paid a higher percentage of each of the bills on the second knee.

"Death panels" denial of care are already starting.

My grandmother had similar knee surgery several years ago. Obama Care wasn't even a glimmer in the Pelosi's eyes and the doctors and medicare still informed my grandmother she would be unlikely to receive the surgery if she chose to wait and deal with the pain for a few more years as the benefits to her and the ability to a speedy therapy phase were reducing as she aged.
Medical decisions that limit care and coverage based on age of the recipient are not new to O-Care.