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The Health Reform Ruling: A Mixed Bag

I know I’ve been absent from posting for a while now and you may have thought I was dead. Actually it was much worse, I was studying for Step 1, but that’s behind me now and what good timing that my first post back is about health reform. This is a complex issue, so this post may be a bit long and a bit rambling, but I’ll do my best to remain coherent.

As anyone who isn’t living totally off the grid knows, the Supreme Court upheld the individual mandate of the PPACA (or as the media calls it, Obamacare) yesterday. Before I dive into what that really means, it’s worth considering there were only three ways this ruling could have really gone. They could have: 1) Thrown out the entire PPACA after determining that it could not stand alone without the individual mandate and was too flawed to remain as law. 2) Thrown out the individual mandate but allowed the rest of the PPACA to stand independently. 3) Upheld the whole thing.

Most people with strong knowledge on the subject and the court I talked to were expecting option 2, but instead we got option 3 (for the most part). To be honest, I’m a little surprised. I never expected them to throw out the whole thing, but considering the piss-poor job the defense did of explaining how the mandate and the penalty for violating it was constitutional (hint: they never explained how it was constitutional, argued it wasn’t a tax but later called it a tax, etc.) and the pointed questions and dissatisfaction with the answers coming from the bench… Well, I was in the group expecting them to throw out the mandate due to its potential infringement on the constitution and lack of good explanations as to why it wouldn’t be an infringement. For whatever reasons, the court saw things in a different way than they appeared to during the arguments and yesterday’s decision could have some pretty serious implications for the future when it comes to allowing the government to force its citizens to buy a commercial product for some broader purpose. I won’t even touch any of that now because honestly, what’s done is done and it’s silly to even try and predict what kind of effects this could have so early in the game. What I will do is try to mention what today’s ruling really means to you.

Since the bill is being upheld almost completely intact, the time table for implementation will remain. So the good things, the things the administration actually likes to talk about, are still on track. The pre-existing consideration exclusion, the expansion of medicaid, the ability to stay on family insurance until 26, and the individual mandate are all still here. The problems are all still here too, namely that a huge chunk (possibly the majority) of cost savings from the law that were supposed to lower our deficit and reduce healthcare costs is all smoke and mirrors and won’t be allowed to happen. Make no mistake, the Medicare savings that the President said would cover half the cost of this legislation will not, and should not, occur, and as a result this will not be the quick fix to healthcare costs or Medicare spending that they have tried to lead you to believe it is. One problem has changed though, and that is the expansion of Medicaid. For those unaware of the issue, the law required a massive expansion of Medicaid, which means a massive increase in Medicaid costs. Half of that money comes from the federal government (I’ll say it again, this is an expensive law) and the other portion is the responsibility of individual states. This is a large part of why states were suing to overturn the law. The federal government was forcing the states to spend billions more, billions they clearly do not have, on an expansion of a program they didn’t agree to expand and can’t really afford at its current size, let alone larger. The Supreme Court apparently agreed that this was a bit off, and they stripped that requirement of its punishment power. As it stands now, the requirement is still there but the states would not be punished for disobeying it, which is a problem for the current administration as well as Medicaid itself, and I won’t be surprised if a lot of states running on shoestring budgets tell the feds they simply can’t afford the expansion.

On the individual level, there isn’t a lot that is going to change… yet. If you have insurance, great, but expect wait times at doctors’ offices to increase gradually over the next several years. With increased coverage comes increased utilization, and millions more people will likely be seeing the doctor that weren’t before. This is great for the health of the people, but potentially bad for healthcare costs and bad for how long it may take to get in to see your doctor considering the existing physician shortage. If you don’t have insurance, the government is going to require you to get some. The promises of affordable insurance for all are completely hollow; health insurance is an expensive product and this one law did very little to fix the intrinsic problems in health spending, so don’t expect insurance prices to plummet. There may be a temporary slide as the risk pool on private plans grows a bit, but if you couldn’t afford it before, you’re still going to have trouble affording it now. Hospitals love the ruling because it means they should have less uncompensated care, and really no other reason. Their passionate support for this mandate was due to their finances, not altruism or politics. For doctors it’s a mixed bag. More insured patients could be a good thing and reduce the cost and stress of dealing with uninsured patients, and for primary care doctors it could even mean a small salary bump since people are more willing to see the doctor if they have insurance. However, the potential downsides are currently pretty big. If President Obama gets his way and the huge Medicare payment cuts to doctors are allowed to hit, many of them will be faced with a grave choice: Continue accepting elderly patients and risk your livelihood and business, or opt out of Medicare and hope the insurance companies don’t try to follow Medicare’s example and aim your business towards bankruptcy too. It really can come down to that, and recent CNN articles have cited specific examples of private practice docs that couldn’t afford to keep their doors open anymore. If the cuts hit, it will be much worse, and the patients will ultimately pay the price. If the cuts that the president promised to help pay for this law happen, make no mistake, Medicare patients will be in serious trouble and many doctors will stand up and tell people what is really going on. I don’t know what the outcome of that showdown would be, but given the current political climate and the ease with which our voting public gives up rights and blames others for our bad choices, I have to think it would be a negative one for doctors and as a result a negative one for their patients (AKA everyone).

The bottom line of all of this is quite simple: You have to have health insurance. The government can make you pay a penalty if you don’t. Beyond those two statements, it’s very difficult to predict where this all is headed. There are very valid reasons to be concerned, and there are some reasons to be optimistic, but it is all going to come down to how this mandate and this law are implemented and which ridiculously bad ideas proposed to pay for this law will be allowed to occur. We can’t afford the law right now, regardless of what the administration has promised. We can’t afford a lot of what we were doing before adding this to the stack, so there is going to be a breaking point, probably soon, where we have to figure out how to really pay for things we need and cut things we don’t. I tend to be cynical so I have grave concerns over what faces our elderly, our healthcare providers, and our spending in the next few years. I hope I’m wrong, but if I’m not the idealistic notion of a United States with appropriately compensated professionals, cheap insurance, and good quality healthcare for all won’t last long and the “I told you so”s won’t even want to say it.

As always, your thoughts, comments, rants, and questions are welcome.

-M

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Why YOU Should Care About the SGR

Everyone knows what Medicare is. Everyone knows our seniors currently rely on it to provide health coverage for them. Most have heard a lot of talk in the past couple years about Medicare reform, our out of control spending on healthcare and the pressing need to fix it before Medicare becomes insolvent. But apparently very few people actually know what the SGR is, or why it’s so key to this issue, and that scares me a little.

Before your eyes roll back in your head of boredom, let me point out the SGR affects everyone. If you or your loved ones are on Medicare or Tricare (the military healthcare program), or you know anyone that works for a hospital, doctor, or any aspect of the healthcare system, SGR affects you. So what the heck is it? The SGR is the Medicare Sustainable Growth Rate, and it was created in the Balanced Budget Act of 1997. The idea sounded brilliant: a formula to control Medicare spending by ensuring that the per patient cost did not increase faster than the GDP over time. The mechanism used to “enforce” this would be annual updates to physician payments. If a year came in under budget, doctors got paid more the next year for their services. If a year was over budget, they took a cut the next year. Sounds good right? Well, let’s say that the patients start spending a lot more each year than they paid into the system through increased utilization of services. Say Medicare starts expanding services covered that patients can now take advantage of. Say the economy goes to crap and the growth of GDP comes to a grinding halt. Sounds like that formula isn’t going to work out if any of those things happen, right? Well, what if they all happen at once?

The short answer is it becomes a total mess where Medicare spending increases drastically and doctors are told well, this increased spending is no good, so we’re going to have to cut what we pay you drastically. Doctors then point out that Medicare payments over the last decade have been flat while the cost of practicing medicine continues to increase (ironically, some of that increased cost has been directly caused by new Medicare requirements) and they can’t take any cut and still make enough to keep the doors of their practice open. (See graph below, note the effect the 2012 cut could have):

Medicare reimbursment

Too bad, Medicare says, this is the formula and that’s how we control our costs. Congress then steps in and says “this won’t work, if we let that happen then doctors will just quit accepting Medicare and our seniors won’t have healthcare”, and they’re right. Doctors do quit accepting Medicare because of looming cuts, even though most of the serious cuts were never implemented, being avoided at the last minute by congressional action that delayed the cuts for short periods of time. That’s not the point though, the point is the instability this creates for healthcare providers and how it motivates them to just leave the unstable system for smoother waters. Congress sees this happening. But in their infinite wisdom, Congress never decides to try to fix the formula, so each delay simply increases the size of the next cut. The payment cut we were just facing was 27.4%, up from 21.3% last year, and projected to hit over 30% shortly. These cuts have been averted just weeks before the cuts were scheduled to take place, leaving doctors and hospitals not knowing if they will be able to make their budget for the next month or not. No sane person would choose to accept a payment system that threatens to cut their income by over 20% next month, maybe, if Congress doesn’t figure out how to fix it. But that’s exactly what doctors, hospitals, and other clinics are expected to do. Add in that the SGR also directs the Tricare reimbursement rate, which covers all our military families, and private insurers seem to be using Medicare rates as an excuse to cut their own payments, and you’ve got a real mess.

So why doesn’t Congress fix the SGR so that doctors and hospitals aren’t held hostage by the whims of a dysfunctional political body and can do their jobs without worrying if they’ll be able to afford to care for America’s seniors and military families next month? Well… see my previous post. Some people are trying to yell at Congress to fix it, primarily the AMA and other physicians’ and hospital groups. The bulk of what we were asked to do this weekend in D.C. was to ask our congressmen and senators to consider a permanent repeal of the SGR. Naturally, with the financial mess our country is in, a $300 billion+ measure isn’t going to be popular. So the AMA says, why not “pay” for this with the OCO funds (money “saved” by not still being in Iraq and drawing down troops in Afghanistan) and put this issue to bed while Medicare and Congress figure out realistic ways to lower healthcare costs? That’s the question/suggestion I was asked to take to my elected officials, and I did discuss it with them as one of the proposed mechanisms for repealing SGR, but our discussions always came around to the one weakness of both the SGR and the OCO funds: they’re really stupid.

The SGR is a budgetary construct. It says because we spent more than we planned in one year we’ll make it up in the next, but we don’t let that happen because “making it up” would gut Medicare as we know it and the whole thing would collapse. So then we claim the money we didn’t save that year is now “debt” and gets added on to the amount we have to “save” next year, making it even more impossible to ever make it up with “savings” in future years. So you have an endlessly growing pile of somewhat imaginary “debt” because our seniors are using more healthcare services and the GDP isn’t growing. But since we don’t want to appear to be rationing care or telling our seniors “You’re spending more than you ever paid in, this was supposed to be an insurance program not welfare and you’ll have to play by fiscally responsible rules.”, we keep letting this formula float and keep holding healthcare providers hostage. The OCO funds are equally, if not more so, stupid. The “money” in OCO funds is supposedly the savings from not still being in Iraq, etc. So basically our government is saying because we aren’t spending as much as we thought we would, we’re now saving money! Never mind that trillion dollar plus deficit, we’ve got these savings to spend since we didn’t spend as much on war as planned. That’s like me saying that I planned to spend $50,000 I have to borrow on a new car, but I decided not to buy the car so I have an extra $50,000 lying around to spend! And you wonder why our government is a mess?

The point is, the SGR is just as ridiculous as the OCO funds but with the serious side effect of discouraging doctors and hospitals from treating our seniors, military, and anyone else affected by changes in the SGR payment formula. It’s time to stop letting Congress and the Center for Medicare and Medicaid Services play fast and loose with the future of our healthcare. They need to stop pretending this formula works and get serious about fixing the actual problems driving the increased costs in Medicare. The fixes won’t be politically popular, but the longer we put them off the worse the problem gets and the less likely it is that our seniors and military will be able to have their choice of doctors. You should care about this issue, and you should demand more from the people you elect to represent you. Tell them to fix this and tell them you’ll be watching to make sure they do.

-M

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