Squeezing Doctors vs Squeezing Hospitals II

Robert Waldmann

Some time ago, I noted the difference between the provision of the Affordable Care Act (ACA) which reduces the scheduled generosity of payments to hospitals, nursing homes and home health care agencies and the formula in a 1997 bill which was supposed to reduce the generosity of payments to doctors and which is waived once each year by the now traditional annual doc fix. The difference is that many doctors with office practices refuse to treat Medicare patients and, as far as I could tell with a half hour of googling, no hospitals refuse to tread Medicare patients. My view is that the new provision will actually be applied, because institutional care providers just can’t afford to say no to the CMS.

Now Jonathan Chait notes that Jeffrey H. Anderson deals with this important difference by lying. Chait doesn’t explain why the difference is important, but his catch is amazing.

First note Anderson is not an obscure hack. Chait wrote “Jeffrey H. Anderson, who has been writing about health care for National Review, the Weekly Standard, the Washington Times, the American Spectator, and Investor’s Business Daily.”
Now note that he most definitely is a hack. Chait wrote

Anderson proceeds to cite the Congressional Budget Office …. He writes:

The CBO begs to differ: “The provisions that would result in the largest budget savings include these: permanent reductions in the annual updates to Medicare’s payment rates for most services in the fee-for-service sector . . . yielding budgetary savings of $186 billion over 10 years.” That’s the physician pay cut.

Anderson provided no link or citation for this quote. It turns out to come from a December 19 CBO letter (page 10) to Harry Reid, assessing the cost of the Senate health care bill, which is not actually the final version. But never mind that. Anderson, if you noticed, inserts an ellipses into the quote from the CBO. Here is the entire quote. I’ve bold-faced the part omitted by Anderson:

Permanent reductions in the annual updates to Medicare’s payment rates for most services in the fee-for-service sector (other than physicians’ services), yielding budgetary savings of $186 billion over 10 years.

Oh my. Notice that the elided text proves that Anderson’s claim is a lie.

By the way, the figure $ 186 billion over 10 years is lower than I thought. Consider the expansion of medicaid enrollment predicted to be about 16 million. If the CMS will send $ 1,200 per medicaid enrollee per year to hospitals etc then the bill will increase the flow of money from the CMS to hospitals etc. Medicaid spending is roughly $ 2,000 per enrollee now in Illinois now. This is lower than in most states and, you know, health care spending is growing quickly.
I don’t know what fraction of medicaid spending goes to hospitals nursing homes and home health care agencies, but, it seems to me that the ruthless cut will amount to the same money going from the same CMS to the same institutional care providers and the only change is that the CMS will pay bills for more patients and pay less for each bill. I don’t think that hospitals etc are currently getting much from the people who will get medicaid coverage who are poor.

Also the individual mandate and subsidies will cause an increase in money flowing from private health insurance companies to hospitals. I see no economic problem at all with actually imposing the $ 186 billion in compensation cuts. Of couirse that doesn’t mean I confidently predict that congress won’t waive them — hospitals have a lobby.