Medicare, Cost Shifting and Universal Coverage. MCV’s “M-3 Workshop Week” April 27, 2005 Rick Mayes, Ph.D. Assistant Professor of Public Policy. Overview. This presentation examines : Larger trends in the U.S. health care system and in Medicare
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Medicare, Cost Shifting and Universal Coverage
MCV’s “M-3 Workshop Week”
April 27, 2005
Rick Mayes, Ph.D.
Assistant Professor of Public Policy
This presentation examines:
Sources: Census Bureau, Kaiser Foundation, CMS, 2004.
Since 2001, on average . . .
(versus 10-12% in wages & general inflation)
by 57% for single coverage (total of $3,695 annually, 2004)
by 49% for family coverage (total of $9,950 annually, 2004)
avg. premium for family coverage ($14,565 projected, 2006)
- A growing proportion of the overall increase in premiums for employers has been “shared” with employees, particularly those in small businesses.
Source: Henry J. Kaiser Family Foundation/Health Research and Education Trust Survey of Employer Health Benefits, Health Affairs Sept./Oct. 2004.
Underlying Medical Inflation Affects Medicare Population
Source: CMS Office of the Actuary, 2004.
Source: Medicare Board of Trustees, 2003.
Source: Medicare Board of Trustees, 2003, 2004.
“I hate this whole G--damn system. I’d blow it up if I could, but I’m stuck with it. If it were up to me, I’d buy everybody private insurance and forget about it. Obviously that’s what the Republican view is.
We ought to do the same thing we do for federal employees: go out and buy every senior citizen a community-rated, structured, regulated private insurance plan. Let them buy an Aetna product, or Blue Cross products. That’s the Republican philosophy.
Why should Tom Scully and his staff fix prices for every doctor and hospital in America? Which is what we do.
- Personal interview with Tom Scully, Administrator, Ctrs. for Medicare & Medicaid Services, 2001-2003
Sources: New England Journal of Medicine and AMA, 2003.
Issues of Concern for Physicians: Growing Practice Expenses
Source: CMS, Office of the Actuary, 2004.
B =C + MarginContribution
Above Cost Payers
Below Cost Payers
Percentage of Market Share
- government (Medicare, Medicaid)
- providers (hospitals, physicians) and
- private payers (insurance companies,
Source: Stuart Guterman (CMS)
Source: The Lewin Group, “The American College of Emergency Physicians (ACEP) Practice Expense Study,” for the
American College of Emergency Physicians, September 15, 1998.
Source: American Hospital Association’s Annual Survey of Hospitals (n=6,800 hospitals), 2005. Pearson’s correlation coefficients:1984-1997: Medicare and Private ratios: r = -.861980-2003: Medicare and Private ratios: r = -.73 1984-1997: Medicaid and Private ratios: r = -.391980-2003: Medicaid and Private ratios: r = -.56
The correlation coefficient between
Private Payer Payment-to-Cost Ratio and
Medicare, Medicaid & Uncompensated
Care cost shift burden is 0.753
Private Payer Payment-to-Cost Ratio
Medicare, Medicaid & Uncompensated Care Cost Shift Burden (in %) by State
Source:The Lewin Group analysis of data contained in AHA TrendWatch Chartbook: Trends Affecting Hospitals and Health Systems, 2001.
Source: Glenn Melnick, “Uninsured Americans,” Hearing Before the Subcommittee on Health of the Ways and Means, U.S. House of Representatives, 108th Cong., 2nd Sess. (9 March 2004); Professor Melnick’s testimony from the Center for Health Financing, Policy and Management, School of Policy, Planning and Development, University of Southern California.Technical Note: Data are derived from the Medicare Prospective Payment System’s Impact File, Centers for Medicare and Medicaid Services (CMS, 2004), available at http://www.cms.hhs.gov/providers/hipps/ippspufs.asp, last visited October 1, 2004).
Segmentation of U.S. Health Care System Increasing
Segmentation of U.S. Health Care System Increasing
POLICY implications of the significant rise in physician-owned: ambulatory surgery centers, specialty hospitals, and diagnostic imaging centers:
1.) prospects for improved quality, lower costs, and more professional autonomy
- not a new phenomenon (e.g., heart hospitals in London 1857, psychiatry clinics, ear
and eye hospitals, obstetrics & gynecology hospitals)
- Adam Smith and the advantages of specialization (e.g., pins and “focused factories”)
2.) financial impact on community hospitals: fair or unfair competition?
- “cherry picking” the best-insured private patients by, largely, for-profit entities
- “skimming” lower-cost, healthier Medicare cases within individual DRGs
- cardiac, orthopedic, radiological services: huge proportion of hospitals’ net revenues
3.) impact on communities’ overall access to care
- declining volume & smaller patient populations make charity care harder to provide
- vulnerability of emergency services, burn units, psychiatric facilities
- complicates doctor-hospital relationships (e.g. staff privileges, economic credentialing)
- can easily exacerbate the development of a multi-tiered health care system
- higher monthly wage deductions and/or increased co-payments,
deductibles, out-of-pocket costs (especially for employees’ dependents)
- (15% of the U.S. population is uninsured; 45 million individuals or the
aggregate population of 24 states, Census 2003)
TOM SCULLY: “My frustration is that you’re trying to be a government contractor. Hospitals usually get about 50% of their revenues from Medicare & Medicaid; doctors, on average, generally come into practice getting roughly 30% or so from Medicare & Medicaid.
So if you’re a doctor or if you’re a hospital, fundamentally a big chunk of your business is as a government contractor. And your expectation, I think, when dealing with the government—whether you’re in the Pentagon or in health care—is boring consistency, decent operating margins that don’t flop around. If you’re Boeing, you don’t want to have a 25% margin one year and a negative 2% the next year, right?”
- Interview with Tom Scully, Administrator, Ctrs. for Medicare & Medicaid Services, 2001-2003
(1.) What do providers do (or have to do)
when each payer only wants to pay the marginal cost?
(2.) Who is ultimately responsible for the common good in a competitive market?