CMS Actuary Weighs In

The newspapers of record in New York and Washington yesterday had different takes on health care reform. 

The New York Times had a long, thoughtful editorial pointing out that taken together the House and Senate health care reform bills really do have some cost containment, including
- Lowering future increases assuming that health care can benefit from productivity improvements like other industries
- Limiting tax deductibility for “Cadillac” health plans
- Administrative simplification
- Implementation of heath information technology
- Pilots to replace fee for service
- Comparative effectiveness research with an independent commission to use this information to make recommendations on coverage
- Public option
- Health insurance exchanges
- Negotiated drug prices
The Times notes that there is no malpractice reform. The Times also goes pretty easy on the current bills  - as there is good reason to believe that health care IT will improve care without  big cost savings, payment reform is only pilots, most believe that comparative effectiveness research will only lead to small decreases in costs, the public option has had much of its leverage removed (and that’s before Joe Lieberman’s threatened filibuster), and the drug prices will not go down as much as if PhARMA had not been first to the table. 

The Washington Post web front page highlighted an analysis by the Chief Actuary of CMS suggesting that many of the cost savings promised by health care reform are likely not to be realized.   The full report is here. 

Richard Foster, the chief actuary for the government agency that runs Medicare and Medicaid, presents data suggesting that the cuts in Medicare are likely to cause substantial angst (and financial shortfalls) at many hospitals, including some hospitals that are critical to their service areas.  He reasons that Congress is likely to overturn cuts that would endanger their local hospitals.  This certainly seems likely – remembering that hospitals are one of the top employers almost everywhere where there are hospitals.

Other important notes on the CMS Actuary report
* Estimates that while the public plan will be 4% less expensive to administer, it will suffer adverse selection (sicker patients) so will have 5% higher premiums.
* Estimates that Medicare Advantage enrollment will drop by almost 2/3.  I am worried that for many integrated groups this is a major source of non-fee-for-service revenue that covers infrastructure. Without this revenue, these groups might start resembling the rest of American high-volume medicine.
* Suggests that the voluntary long-term care program is likely to suffer from adverse selection and be unviable.
* Notes that the out of pocket expenditures would decrease under this plan (a reversal of attempts to have patients have greater “skin in the game,” but a relief for sick patients and their families.
* Notes that many providers would be likely to refuse to deliver care to an increased number of Medicaid patients given very low rates.

The action is now at the Senate, where apparently Harry Reid is holding up release of the health care reform bill awaiting Congressional Budget Office valuation (and hoping for under $900 billion over ten years). 

More to come.