Relevant and even prescient commentary on news, politics and the economy.

A New IOM Report Reveals Why Medicare Costs So Much (Hint–It’s Not Just the Prices)

by Maggie Mahar

A New IOM Report Reveals Why Medicare Costs So Much (Hint–It’s Not Just the Prices)

(reposted with authors permission)

George WBush is 67. Chances are Medicare paid for the stent operation that I describe in the post above. For years, medical researchers have been telling us that this procedure will provide no lasting benefit for a patient who fits Bush’s medical profile.   Nevertheless, in some hospitals, and in some parts of the country, stenting has become as commonplace as tonsillectomies were in the 1950s.

Location matters. Last month, a new report from the Institute of Medicine confirmed what Dartmouth’s researchers have been telling us for more than three decades: health care spending varies  across regions. More recently, as Dartmouth’s investigators have drilled down into othe data,, they have shown that even within a region, Medicare spends far more per beneficiary in some hospitals than in others.

In a recent Bloomberg column, former CBO director Peter Orszag notes that “Because this variation doesn’t appear to be reliably correlated with differences in quality, the value [that we are getting for our health care dollars] seems to be much higher in some settings than in others.” He asks the logical question: “What is causing this and what might we do about it?”

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After selling the election

In a previous post Fiscal cliff and the frenzy  I pointed to the rush of reporting the day after the election. Some of these articles should be in the op-ed section instead of reporting.

Lori Montgomery

“Avoiding hard decisions could have grave consequences, analysts say…”


Few expect Washington to replicate the scope of the Bowles-Simpson plan. Though it is widely praised, its $4 trillion in 10-year savings includes major changes to Social Security opposed by liberals and an aggressive new tax code that would generate far more revenue than most conservatives could stomach.


About half the new savings would come from reversing part of the massive tax cuts that, along with the collapse of tax collections during the recent recession, are a major cause of current budget problems. The rest would come from lower spending, including on Social Security and Medicare, forecast to be the biggest drivers of future borrowing.

Zachary Goldfarb

Much of the public dispute over the fiscal cliff has centered on the president’s demand that taxes rise for the wealthy. But entitlements are an essential element of the discussion because they are the main drivers of the nation’s borrowing problem over the years to come.

from The Root

After four years of sheer obstructionism — behavior that was called out during the presidential campaign season — most Americans are pointedly aware of who is willing to further wreck the nation’s economy and who would like to rescue it.

Fifty-three percent of the nation believes that if a fiscal agreement isn’t reached by New Year’s Eve, Republicans in Congress are the ones to blame, reports a new Washington Post-Pew Research Center poll. It also reports that only 38 percent believe that the president and the Republican Congress will reach a deal.

If those pessimists are right, then in an effort to assure a long-term deficit reduction, a series of mandatory and draconian spending cuts will jump off in less than seven weeks, coupled with the expiration of a slew of tax cuts.

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The Elephants are Still Thirsty

by Run 75411

The Elephants are Still Thirsty

In my earlier post on Carrying Water for Elephants I explained how the $716 billion in planned reductions to Medicare was calculated, who it impacted, and from where it originated.

The $716 billion is far larger than the initial $449 billion first reported. In 2010, the CBO arrived at an estimate of savings of ~$449 billion starting from 2012 onwards and covered 6- 7 years from when the bill takes full effect in 2014 to 2019. The second estimate of savings was the result of John Boehner’s request for a review of the costs and gains realized from the repeal the ACA in its entirety. The second review covered the period from 2014 to 2022 and resulted in the $716 billion. “Medicare Cuts: What is the Fight About?” Brookings Institute

Above the explanation of how the $716 billion calculated; I presented Ezra Klein’s pie chart explaining where the reductions were made. Not one of the reductions comes from reductions in Medicare benefits to recipients which as I also explained is denied the PPACA. In last night’s Republican Convention Paul Ryan again claimed the reductions to providers are actually cuts in benefits to Medicare recipients and the reductions are being used to fund the PPACA. Neither statement is true; but then, Paul Ryan is a Republican VP candidate who hopes to confuse the voters with supposition and conjecture. Paul should be made to explain what he will do with the reductions achieved from similar reductions he has proposed for Medicare . . . maybe more tax breaks for the 1 percenters???

There is no amount of water Paul Ryan or Mitt Romney can carry to quench the thirst of this elephant of misrepresentation.

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Healthcare reform op-ed

The current uptick in ‘medical inflation’ in private sector health industry is worth a separate post. The Standard and Poor Healthcare Economic Indices can be found here.
Lifted from a note from Run 75441 on the link I sent on healthcare reform.

Recently, Matt Stoller claimed Obama had a 61 vote majority in the Senate and enough to secure either Universal or Single Payer Healthcare. We all forget the one Senator from Aetna stand which killed any other options an Medicare for those starting at 55. President Obama did not have a filibuter proof 61 votes in the Senate for any other healthcare options muchless the ACA. The Blue Dogs (Nelson(s), Bacus, Bayh, Cantwell, Feinstein, Lincoln, Pryor, Widen, Conrad, etc) wouldn’t move for any healthcare plan unless they brought home the bacon as Nelson attempted to do for Nebraska. Just plain ordinary obstructionism to block whatever this President would attempt to do. Senator Lieberman killed anything beyond the ACA. 

Former Editor of the New England Journal of Medicine and others should be sorry if the entire ACA is struck down or dismembered as we will go another decade before a President and a Congress take up the issue again and heathcare costs (for which healthacre insurance is a reflection) will again rise faster than inflation. Because of the power of Medicare, it has been able to rein in rising healthcare costs so far at less than 3% than that of the commercial market at about 9% %. Standard and Poors Healthcare Economic Indices .

The last time healthcare reform was attempted was under Clinton and costs have increased multiple times. A failure to allow the ACA to go forward will allow the overall Healthcare Industry to again implement inflationary costs in a market which has no restraints. Certainly, I can not conjur up what SCOTUS will do. The kings in black robes will decide what is best for us as Congress lacks the will power to represent those who placed them there with the exception of ALEC, Koch(s), and Norquist.

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The Medicare Sky is Falling.. Accepting Medicare

by run 75441

The Medicare Sky is Falling

Part of the Medicare Sky Falling story is a claim that doctors are refusing to accept new Medicare patients because of low payments. It is common for politicians and pundits to pontificate declaring Medicare is broken. A doctor himself, Wyoming Senator Barrasso made the claim to CNN’s Candy Crowley recently.

Sen. John Barrasso mistakenly claimed that “57 percent of doctors don’t want new Medicare patients,” which isn’t true. His own spokeswoman admits he got it wrong.

National surveys have put the number who don’t take new Medicare patients as low as 14 percent, and a big American Medical Association survey last year showed only 17percent of all physicians said they were ‘restrictin’ Medicare patients (either taking none, or just some).”Senator’s Barrasso’s Medicare Mistake

See also Part 1, Part 2, and Medicare Breaks medical inflation curve

The claim is related to the implementation of the Sustainable Growth Rate formula which adjusts physician payments whenever the aggregate cost of Medicare exceeds the calculated growth rate. The Sustainable Growth Rate is outside of the ACA and since its inception has only been applied once in 2002. Congress has repeatedly delayed the decreases by applying short term fixes canceling out the planned SGR adjustments in reimbursements. The proposed 2012 budget also contained delays in implementation. The SGR was passed as a method to control the increasing aggregate cost of Medicare without consideration for the number of services provided.

On the other hand, 62% of Primary Care doctors said they would stop taking new Medicare patients if the SGR formula reimbursement cuts were implemented. To increase reimbursements for primary care, the ACA has in it provisions to increase primary care doctors reimbursements and at the same time reduce reimbursements for specialists.

Another claim by pundits and politicians is Medicare has been outstripping inflation. This has been true for a number of years; but, a more recent trend shows quite the opposite. Here again pundits and politicians have been claiming the reduction in doctors accepting Medicare patients has been the cause of such a decrease in Medicare cost. I believe we have debunked that claim earlier.

Given that rising healthcare costs drive the cost of Medicare, Medicaid, and even commercial insurance; it is outrageous that people would consider cuts in Medicare and Medicaid as a means to control overall healthcare costs or just give up the fight on rising healthcare costs and sacrifice the poor, the children, and the elderly to vouchers and buyer beware.

How has Medicare been performing recently? Maggie Mahar at Health Beat Blog Deadlock Over The Debt: What It Means to You . . . touches upon the planned cuts in Medicare John Boehner proposes and lesser cuts offered by President Obama as a compromise to break the stalemate in Washington between the Democrats, the Republicans, and the Tea baggers. Wrongly identifying Medicare and Medicaid as the leading cause of rising healthcare costs, the House under John Boehner has sought to impose severe cuts in the programs which will in effect balance the deficit and budget on the backs of the poor, the elderly, and the children who depend upon Medicare and Medicaid heavily. Medicare and Medicaid are still on the chopping block for cuts under the recent compromise.

In an update to its S&P Healthcare Indices (12 month moving average), Standard and Poor’s reports Medicare cost trends decreased with costs growing at a rate of 2.64% annually in May. So, why attack a program whose costs are decreasing and out-performing the Commercial Index (private healthcare) which showed a 7.35% annual cost?

While both the Commercial and Medicare Indexes showed a slight uptick in May of .25 and .16, Medicare has consistently outperformed commercial healthcare insurance in controlling cost. Medicare’s performance comes in light of increased healthcare industry costs and a growing baby boomer population.

As Taken from, “US Healthcare Costs Rose 5.8% Over the 12 Months Ending May 11 According to the
S & P Healthcare Economic Indices

The Commercial Index (private healthcare) mirrors the growing costs of healthcare in the US. From the May 2010 levels, the Commercial Index reflects a 7.35% increase, Medicare 2.64%, and the composite of both 5.35%. The Medicare Index shows a widening gap between it and the Commercial Index which appears to be occurring from its control of costs. In effect, Medicare is dragging down the cost of commercial insurance and acting as a control on overall healthcare costs.

As Taken from, “US Healthcare Costs Rose 5.8% Over the 12 Months Ending May 11” S & P Healthcare Economic Indices

While hesitant to declare an outright victory and a long term trend in Medicare cost controls, David Blitzer of the S & P Indices in a conversation with Maggie Mahar indicated this is more than just a blip on the screen. He went on to add:

We tend to get data from the Centers for Medicare and Medicare about 1 to 1 1/2 years after the fact; this is why there is a widespread perception that Medicare spending is still rising 2% faster than GDP. S&P is giving us more current numbers, and while the S&P index is ‘is not perfect,’ Blitzer says, ‘it’s good.

While there is waste in Medicare, it is conceivable Medicare costs could be reined in even further through the ACA and enough such so as to match GDP growth and no more. To squeeze cost the ACA will look to the Advantage Programs Insurers, overpayments to Advantage insurers, payments for some preventable errors, annual increases in reimbursements to hospitals, nursing homes and other institutional providers, and with systematic changes to the today’s healthcare model which rewards providers for doing more than for better outcomes.

Interesting that S&P downgrades US Credit Rating while at the same time shows proof of entitlement programs driven by the cost of the healthcare industry are decreasing at a faster rate than their commercial counterparts.

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