The next big health story

What’s going to be the big health story of 2012 – health care reform? The impact of state and federal health spending cuts?

Nope. The next attention-grabbing story could well be about the future of Medicare, the federal program that covers millions of older Americans. This is the assessment of Trudy Lieberman, a contributing editor at the Columbia Journalism Review, who recently blogged about Medicare’s ascendancy as an issue of critical importance.

I’m inclined to agree.

Medicare is headed for a crossroads. Given the size of the federal budget deficit, cuts to the Medicare program are almost inevitable and will likely hit both providers and enrollees – the former in the form of less pay for caring for these patients and the latter in more out-of-pocket costs. The millions of baby boomers poised to become eligible for Medicare over the next couple of decades will only add to the pressure.

Lieberman writes that the outcome of the policy debate about Medicare “will determine whether nearly 50 million older and disabled people will be able to afford health care at all and what kind it will be.”

Most people’s eyes tend to glaze over when the conversation turns to Medicare. It’s not an exciting topic. I’d argue we should make a better effort to pay attention, however, because as with any policy discussion of this magnitude, decisions ultimately will trickle down to the local level.

Imagine, for instance, the hard decisions some doctors might have to make between turning away Medicare patients vs. losing money by continuing to see them.

To be clear, there’s no evidence this will become a widespread trend. But physicians are talking about it and some of them have already taken the step – for instance, a family practice clinic in Raleigh, N.C., that stopped seeing new Medicare patients three years ago. One of the partners told WRAL TV, “Our job is to take care of patients, which is what we love, but if we can’t run our business, we can’t take care of any patients.”

A potentially even larger issue is what might happen if seniors have to start paying more out of pocket for their care.

Lieberman points out, “When you consider that the median income for older women receiving Social Security is only about $15,000 a year and for men about $26,000, you can see why they get upset when there’s talk of cutting benefits or ending the program. Without it, they would get no health care.”

I’d hate to think of this happening to my parents or, for that matter, to any of us as we get older. While it’s true that health decisions made in our younger years can help make or break our health in later years, there’s no escaping the fact that age is an overall risk factor for health issues, period. The social cost of creating an entire future generation of aging adults unable to afford health care hardly even bears thinking about.

What’s the solution for Medicare? I wish I knew. In the meantime, I plan to stay tuned to the debate.

The cost of chronic disease

A timely new study confirms what many observers have seen all along: Medicare is now spending more on the outpatient management of chronic diseases than on acute hospital care.

The study appeared last week in the Health Affairs journal. The authors tracked Medicare spending trends across two decades, specifically looking at data from 1987, 1997 and 2006. They estimated the prevalence of chronic disease in each of those years and further analyzed how much was spent on the 10 most expensive chronic conditions, a category that included heart disease, diabetes, cancer, arthritis, high blood pressure and elevated cholesterol.

Among their conclusions: The 10 most expensive conditions accounted for about half of the inflation-adjusted increase in Medicare spending from 1987 to 2006. As chronic disease management shifts towards the outpatient setting, hospital inpatient care has fallen as a percentage of total Medicare spending, while spending on physician office visits and prescription drugs has grown.

To anyone who’s been paying attention, none of this should come as any surprise. What’s especially interesting about this particular study is what it reveals about trends in chronic disease and chronic disease management.

Twenty years ago, hospital care for heart disease was the largest and fastest growing area of Medicare expenditures. But by 2006, heart disease had fallen to the bottom of the list of the 10 most expensive chronic conditions among the Medicare-age population. The study’s authors found this wasn’t because heart disease is becoming less common; in fact the prevalence remained the same. What apparently changed is the management of heart disease, which has evolved away from hospital inpatient care to outpatient office care, prescription drugs and home health care. And although overall Medicare spending on heart disease is still rising, the increase isn’t nearly as steep and most of the growth is concentrated in physician care, prescription drugs and home health.

Where the spending really rose was for the management of other chronic conditions, such as hypertension, diabetes and cancer. Some of this, as in the case of high blood pressure and elevated cholesterol, wasn’t necessarily because the U.S. is having an epidemic of these chronic conditions. Instead, the study’s authors explain, the prevalence of hypertension and elevated cholesterol has increased because the threshold has been lowered for treating these two conditions, a move that automatically increases the number of patients eligible for treatment.

In the case of diabetes, however, there appears to be a true increase in the incidence of the disease – not just better identification and diagnosis of these patients, the authors wrote.

Why would these trends matter? Policymakers are focusing a great deal of attention right now on how to slow the growth in health care spending, but their efforts might be misguided if they only consider the big picture. From the study:

Many Medicare reform proposals designed to slow the growth in spending would redirect costs from the government to others, such as enrollees and participating providers. The slowdown would be accomplished by reducing provider payments, increasing the age of Medicare eligibility, implementing means testing for Medicare, restricting coverage as with the Part D “doughnut hole,” and increasing copays and deductibles. These approaches are unlikely to produce long-term reductions because they fail to address the key factors driving the rise in health care spending overall and in Medicare spending, particularly for chronic diseases. Understanding these facts is essential to reaching the right policy solutions.

Kenneth Thorpe, the lead author of the study published in Health Affairs, has made a rather distinguished name for himself as an advocate for new models of health care delivery that emphasize chronic disease prevention and management. Thorpe, who’s a professor and chairman of the Department of Health Policy and Management at Emory University, has frequently spoken on the need to find better, less expensive ways to deal with chronic disease.

It would be hard for anyone to argue that Medicare spending isn’t growing at a pace that’s becoming unsustainable. The real implications of this latest study, it seems, lie not within the dollars and cents but in where the money is actually going and what it means for cost containment.

Left in the Medicare lurch

Got Medicare? If you do, there’s an increasing likelihood in some parts of the United States that you might have to look long and hard to find a doctor who will see you.

Anecdotal evidence has been mounting over the past several months that growing numbers of physicians are opting out of Medicare. One of the latest, and more high-profile, cases: the Mayo Clinic, which stopped accepting Medicare patients at its Glendale, Ariz., clinic as of Jan. 1. Patients who want to continue seeing their doctor can do so, but they’ll have to pay cash, plus they’ll be assessed an annual $250 administrative fee.

Bloomberg News explains the reason for Mayo’s decision:

The Mayo organization  had 3,700 staff physicians and scientists and treated 526,000 patients in 2008. It lost $840 million last year on Medicare, the government’s health program for the disabled and those 65 and older, Mayo spokeswoman Lynn Closway said.

Mayo’s hospital and four clinics in Arizona, including the Glendale facility, lost $120 million on Medicare patients last year, [Mayo spokesman Michael] Yardley said.

There’s some concern this might be only the beginning:

Mayo’s decision may herald similar moves by other Phoenix-area doctors who cite inadequate Medicare fees as a reason to curtail treatment of the elderly, said John Rivers, chief executive of the Phoenix-based Arizona Hospital and Healthcare Association.

“We’ve got doctors who are saying we are not going to deal with Medicare patients in the hospital” because they consider the fees too low, Rivers said. “Or they are saying we are not going to take new ones in our practice.”

Just to be clear, I’ve heard no hints or suggestions that medical providers here in west central Minnesota plan to follow suit. And the trend might not be particularly widespread; research by the Center for Studying Health System Change found that 74 percent of the physicians who were surveyed were still accepting most or all new Medicare patients in 2008.

Still, it’s troubling. These survey numbers are a year old, and the rumblings of dissatisfaction by physicians are getting louder. On many levels it’s hard to blame them. Medicare has tended to respond to escalating costs by simply paying less to the doctors and hospitals who provide the care (a practice, it should be noted, that isn’t necessarily confined to Medicare or Medicaid). This kind of math can’t and won’t work, not in the long term. It’s especially onerous for smaller medical practices – and indeed, larger practices and practices with a higher patient volume appear to be the most likely to continue accepting Medicare, an analysis by the U.S. Census Bureau found last fall.

What does it mean for patients? Dr. Marc Siegel, a New York internist, writes about what he has been experiencing:

More and more of my fellow doctors are turning away Medicare patients because of the diminished reimbursements and the growing delay in payments. I’ve had several new Medicare patients come to my office in the last few months with multiple diseases and long lists of medications simply because their longtime provider – who they liked – abruptly stopped taking Medicare. One of the top mammographers in New York City works in my office building, but she no longer accepts Medicare and charges patients more than $300 cash for each procedure. I continue to send my elderly women patients downstairs for the test because she is so good, but no one is happy about paying.

Would it be so bad if more and more physicians decided to stop accepting Medicare? Physician/blogger Val Jones speculates it wouldn’t be the worst thing in the world – and that it perhaps might even save money. She writes that her own physician runs a cash-only practice and that most of his patients spend around $300 a year on their care – less than a low-deductible health plan.

I think that people need to begin to accept that health care costs money. Primary care should be budgeted for (the way we budget for our utilities) and that “health insurance” should be “sickness insurance” with a high deductible for emergency coverage. The majority of Americans can afford $300/year in primary care fees, and the service they’ll receive is far superior to what they have now. Government-run initiatives should focus on the very poor and inpatient services. Everyone else should enjoy the wonderful experience of having a personal physician available without long waiting lines or administrative and insurance hassles – all for the cost of less than we pay for TV.

Well, maybe. But even Dr. Jones notes this kind of arrangement seems to be best suited to people who are willing to pay cash for their care and who don’t require hospitalization. I’m not sure how many Medicare-aged patients would fit this description.

Should Medicare patients just have to pay out of pocket to see a doctor who no longer accepts Medicare? Will these patients migrate to other doctors and possibly overburden the practices that still participate in Medicare? I’m not sure of the answers, and an overhaul of the Medicare program doesn’t seem likely to happen any time soon. In the meantime, we can expect to hear about more seniors around the U.S. being left in the Medicare lurch.

A brief history of government health

A whole generation has grown up and reached old age since the federal Medicare program was signed into law 44 years ago. This health care program for those 65 and older has been around for so long that it almost seems part of the permanent landscape – maybe too permanent and way too hidebound, according to the critics.

There was a time, though, when Medicare was seen as a radical social experiment, much like the public insurance option is viewed today. In fact it took 20 years from the time the concept was first proposed until the Medicare bill was finally signed into law.

It was fascinating to page recently through dusty back issues of the West Central Tribune and see the unfolding of the Medicare saga. We tend to forget where we’ve been, and many Americans nowadays might wonder why on earth the government would ever get involved in a cumbersome national health program that’s threatening to go broke.

But back in the 1950s and 1960s, times were different. There was no financial safety net for the old. The elder generation, especially women who were widowed, often spent their last years in poverty. When President Lyndon B. Johnson created his agenda for a "Great Society," one of the aims was to provide financial security and needed health care for Americans as they aged.

The Medicare bill was signed into law on July 30, 1965, during a ceremony at the Truman Library in Independence, Mo. Former president Harry Truman, who first proposed a national health program in 1945, was the first American to receive a Medicare card.

The Medicare bill contained 133 pages. During the first year of the Medicare program, 19 million eligible Americans enrolled, paying a Part B premium of $3 a month.

We might debate the wisdom and merits of government involvement in providing health care coverage. For millions of Americans, however, the Medicare program has worked, as this Kaiser Health News story describes:

… Many of the nation’s most satisfied health care consumers are recipients of an existing government health care plan: Medicare.

Audrey Bernfield is one of those very happy customers. "I feel very grateful," says Bernfield, 71, who lives in New York City. "I have wonderful coverage, and the few times that I’ve had to pay I’ve been reimbursed adequately," she says.

More recently and closer to home, we have the example of MinnesotaCare, the state’s subsidized health insurance program for working-age adults and families who might otherwise be uninsured. I remember the furor that accompanied this legislation when it was finalized in 1992. Critics saw the program as costly and of little long-term benefit to the people who would be eligible for enrollment. In a play on the program’s original name, HealthRight, the critics dubbed it "HealthWrong."

But there’s no arguing the program has helped hold down the number of uninsured in Minnesota. In a retrospective this weekend with former Gov. Arne Carlson, the Minneapolis Star Tribune points to it as "a social good."

It means more people have the preventive care and early treatment that make for healthier, more productive, more taxpaying lives. Many of the 125,000 low-income Minnesotans who buy state-discounted MinnesotaCare insurance would need to leave the workforce without it. In that way, MinnesotaCare has reduced welfare costs.

Nothing is perfect, of course. The architects of the Medicare bill could not have foreseen how the costs would balloon as medicine leaped forward and life expectancies climbed. Medicare has attempted to rein in the growing expense not by being innovative but by paying less to the people and the organizations who provide the service. MinnesotaCare reimbursement for dental care is so woefully low that many dentists don’t even see clients who are on the program.

If you want to criticize government-run health programs, you don’t have to look hard to find something bad to say about them. We could say the same thing, however, about the private-sector insurance industry.

There’s a saying that one of the functions of government is to provide services the private sector can’t or won’t provide. It would be interesting to speculate on what our society would look like without Medicare, without Medicaid, without the Children’s Health Insurance Program, without MinnesotaCare – in short, without any government health programs of any kind. Would the private insurance industry be clamoring to cover elderly and low-income Americans? Or would they be deemed too expensive or not worth the underwriting risk?

This is not necessarily meant as an endorsement of a public option. But it’s worth keeping in mind that Medicare and MinnesotaCare were initially considered radical – yet they’ve managed to meet a need and to do so fairly adequately. And somehow the sky hasn’t fallen in and the sun continues to rise and set every single day.

 Photo: President Lyndon Johnson, right; HEW Secretary John Gardner, second from left; and Society Security Administration Commissioner John Ball, left; with Tony Palcaorolla of Baltimore, Md., the first member of the general public to apply for Medicare Part B. Photo courtesy of the United States Social Security Administration archive.

A gulf of disparity

Geographic disparities in Medicare payment rates have long been talked about - and complained about – among the nation’s rural health care organizations and practitioners, especially in the rural Midwest. But it took an eye-opening article in The New Yorker, and the looming prospect of health care reform, to finally get policymakers to sit up and really take notice.

In his now-famous article, Dr. Atul Gawande uses McAllen, Texas, as an illustration of the wide regional differences in how much Medicare spends per person:

It is one of the most expensive health-care markets in the country. Only Miami – which has much higher labor and living costs – spends more per person on health care. In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average.

There have always been geographic variations in health care spending, physician practice patterns and health care consumption patterns. The rural Midwest, for instance, tends to be more conservative, both in its use of high-dollar health care services and its overall spending on health care.

Even so, most people are taken aback when they see these patterns visually represented on a map:

The map was developed by the Dartmouth Atlas of Health Care, which has been tracking this data for more than two decades. The darkest areas on the map show where Medicare reimbursements per enrollee are highest. You’ll notice the lightest areas, where Medicare spending is lowest, include almost the entire state of Minnesota.

If you were to go back in time to 1965, when the federal Medicare program was established, the map likely would look very similar. In fact, Medicare payment rates were originally established using a formula based on prevailing costs in a given geographic area. Over the years, these regional variations have become more or less cemented into place, and in many cases the gap has widened even further.

The Dartmouth Atlas Project notes, for instance, that between 1992 and 2006, inflation-adjusted spending on Medicare rose 3.5 percent each year. In Miami, however, it grew faster, at the rate of 5 percent a year. In San Francisco it grew a slower 2.4 percent annually. If Medicare spending in all other regions in the U.S. grew at the same rate as that in San Francisco, a cumulative savings of $1.42 trillion could be achieved by 2023, the Dartmouth analysts estimate.

What’s especially intriguing is that the quality of care doesn’t appear to be any better in high-cost regions of the U.S. than it is in the regions that spend less on health care. In fact, the lower-cost regions usually score better on quality measures.

There can be many reasons why health care spending is higher in certain communities. Perhaps the population is older or sicker or has a higher incidence of chronic disease. Maybe there’s a higher concentration of medical services or medical specialties. In areas that spend less, poverty may be more prevalent.

The Dartmouth researchers believe there’s an overriding reason, however, for the geographic variation in health care spending. They sum it up in two words: local context. It’s in how local physicians run their practices and the types of interventions they provide for their patients. It’s in how local hospitals and health care organizations make strategic decisions, such as acquiring new technology or adding new services. It’s hard to imagine that patient expectations – surgery, for instance, vs. trying more conservative treatment first – don’t contribute as well.

Put another way, it’s about local culture – the values, attitudes and behaviors that often are so ingrained, we rarely notice or question them.

So here’s the really big question: If some states, such as Minnesota, can spend below the national average yet still provide good care, why can’t all states do this? If all states did this, could costs be lowered without sacrificing quality?

One of the fears being voiced at town halls and in online forums is that if we reduce health care spending, someone will have to go without. But if the Dartmouth Atlas data is any indication, many states are already doing this and managing to preserve some quality besides.

Changing local culture can be incredibly hard, especially when so many Americans have been conditioned to think that more health care is invariably better. And when all is said and done, the culture of local health care communities is still a single small slice of an enormous, complicated system. Achieving genuine change will take far more than realigning local or regional habits and expectations of how health care should be provided.

The point, though, is that we often overlook the local. We tend to search instead for outside explanations and solutions, when all along we could be looking a lot closer to home.

Paying for sickness, penalizing for prevention

In case you missed it, the Minneapolis Star Tribune ran a thought-provoking commentary Sunday on how out of whack the Medicare payment system has become.

An excerpt:

Simply put, Medicare pays for putting patients in the hospital but not for keeping them out. So for every (congestive heart failure) patient in the program who avoids a hospital stay, Park Nicollet loses about $4,600.

Talk about rewarding success with punishment. What medical center grappling with this economy can afford to add a program further weakening its institutional bottom line?

Providers call this the "perverse incentive" issue. The goal should be to keep patients healthy. Yet providers are only rewarded when patients get sick enough to come into a clinic or need hospital admission.

The Willmar community received a painful lesson about perverse incentives last year when Rice Memorial Hospital eliminated two outpatient chronic disease management programs, one for diabetes education and the other for congestive heart failure. Both were long-standing programs; the diabetes program had been around since the 1980s. Willmar providers recognized a long time ago that if diabetes and congestive heart failure could be managed more intensively, patients would fare better and would be less likely to experience costly complications or an expensive hospital stay. By all accounts, these were excellent programs that provided a valuable service to patients. More importantly, they resulted in better outcomes.

But they also were money-losers for the hospital. The diabetes program alone lost more than $1 million last year before it was terminated in mid-September. And Medicare isn’t the only culprit here. Many of the private-sector health plans for the younger, working-age population are unwilling to pay for the level of clinical management and patient education it often takes for someone to live well with a chronic disease.

Rice Hospital’s image took a hit for making the tough decision to eliminate services. Patients and the public were upset and unhappy. As harsh as it sounds, however, the financial reality is that a 99-bed community hospital like Rice can’t indefinitely absorb this kind of loss without jeopardizing other services.

Luckily for local patients, Willmar medical providers stepped in to save both programs. The congestive heart failure program is now being offered by Family Practice Medical Center. The diabetes program, now known as the Willmar Diabetes Center, has been taken over by Willmar Medical Services, a joint venture between Affiliated Community Medical Centers and Rice Hospital.

Given how the payment system is misaligned, it frankly took a leap of faith, along with a strong dose of community-mindedness, for these organizations to accept the risk, knowing they might lose money by doing so.

It’s to be hoped that in a different setting, with economies of scale, the diabetes and congestive heart failure programs can keep going. The payment disincentives haven’t gone away, after all. They’ve just been transferred to other organizations who now have the challenge of trying to provide good care for patients – and save money for the health care system overall – without hurting their own bottom  line.

Does any of this make sense? It’s not fair that providers get financially punished for keeping their patients well, yet are rewarded for using costly services when people become sick. It’s not better for patients either, who are paying for this too in the form of higher insurance premiums and higher out-of-pocket expenses.

But until it gets fixed, this is the system we have, perverse incentives and all.