A note on Medicare cuts

This is just a quick reminder. Medicare is big, it is complicated, and it has a very weird set of current procedures and incentives. Sometimes making some of those procedures less weird and screwy will result in spending less money while holding beneficiaries either harmless or making the beneficiaries slightly better off due to smaller co-insurance payments. A decent chunk of the $845 billion dollars in headline Medicare cuts are recurring, bipartisan, technocratic proposals to be less dumb in how we pay for things.

The place to honestly beat up on the budget is in MedicAID cuts. Yes, the $845 billion is a damn big club lying around on the floor but to use it is to say that the current system (which has some very stupid incentives) can’t be changed and that providers have an entitlement to the cash flow derived from dumbness.

(I don’t expect many if any of the “let’s eliminate a stupid incentive” payment cut proposal to get through Congress but that is another question for another day.)

10 replies
  1. 1
    Baud says:

    Obama didn’t promise not to cut Medicare in order to get elected.

    I trusted Obama a lot more than I trust Trump.

    The Medicare cuts Obama made went to expand health care in the ACA. Where do these savings go?

  2. 2
    Dr. Ronnie James, D.O. says:

    “For example: These 3 proposals, which add up to about $260 billion, all say the same thing: Broadly, if a doctor does a procedure, and a doctor who’s employed by a hospital does the same procedure, the doctor in the hospital doesn’t get paid more. This is an Obama-era idea.”

    That payment structure is clearly absurd! Why, it’s like these specialist rates are set by the specialists themselves. If only there was some kind of entity, maybe a board, an independent board, playing an advisory role on these payments…seems like such a good idea, I wonder why it hasn’t happened already.

  3. 3
    Barbara says:

    @Dr. Ronnie James, D.O.: MedPAC? This is called “level playing field” reimbursement and it has been gaining momentum over the cries of agony from hospitals for the last decade. I can’t say too much, but suffice it to say that all of those primary care and other specialty practices that have been swallowed by hospitals were financially justified by the notion that hospitals would receive more for services provided by those physicians than the physicians would have received by remaining in their current business structure. So level playing field reimbursement hurts hospitals directly, by lowering the fees, and then indirectly, because so much of the compensation they contractually committed to in purchasing practices and paying doctors was premised on those higher fees. The bottom line remains that it is not the responsibility of Medicare to enable this kind of financial arbitrage.

  4. 4
    Anonymous At Work says:

    @David Anderson,
    First, Magic Asterisk on post is “Assuming good faith by Trump, Azar, and Verma.” I have my doubts about such.

    Second, is the annual budget the place to be making these cuts? Wouldn’t separate legislation, if these are bipartisan technocratic cuts be the better vehicle?

  5. 5
    MomSense says:

    One of the things that was cut previously was the refraction eye exam. My poor mom requires quite a few of them so this has created significant new expenses for her. She also got screwed on her taxes due to the loss of the personal exemption.

  6. 6

    @Anonymous At Work: Yeah, the annual budget is a reasonable spot to include a major budgetary change. It might be enacted through separate legislation but this is not a crazypants place to put a number and a placeholder for a policy change.

  7. 7
    jl says:

    @Barbara: ” level playing field reimbursement hurts ” feelings of people in the profession who have invested so much effort in justifying the arbitrage with ‘value added’, ; ;just in time’ and ‘business case’ jargon, that seems to have wandered very far away from any grounding in reality. David has talked about the problem of local monopoly in the US health insurance and medical care provider system, as did the late Uwe Reinhardt. I think looking internationally, an important component of efficient systems that deliver good care equitably, is ensuring one price for the same good and service, and price transparency. Neither exist in the US health care system.

    So the elimination of price gouging and arbitrage is a good thing, and should proceed. Though whether it can in a climate in which the executive is drenched in bad faith, malice and incompetence is another question.

    And, IMHO, a lot of the complications and puzzles of the Medicare payment system is due to the fact that Medicare attempts to set some kind of rational fee structure in such an environment. The big puzzle is how to anchor the real value of services in such a setting where it is almost impossible to do so, given lack of transparency and price discrimination and gouging. In the past, the system has relied heavily on moving averages of historical costs, with attempts at regional and institutional adjustments for differential real costs of living, and burden of training costs, providing care for communities unable to pay. And, I need to go check, but IIRC, it still is driven largely by historical averages, even if hidden underneath jargon like ‘prospective payment’. The myriad adjustment factors, reliance on moving averages of historical costs, where somewhat arbitrary coding of services can determine reimbursement, leads to gaming by insurers and providers, which leads to more complications and bells and whistles.

  8. 8
    Anonymous At Work says:

    @David Anderson: So, it’s being included to help balance out a $750 billion increase in military spending? Is that why it’s included, even if a separate stand-alone bill could be marketed as “Reduce Government Over-payments to Rich Private Practice Doctors”? These guys could screw up a 0-car funeral if you spotted them the entire cremation.

  9. 9
    LongHairedWeirdo says:

    I agree that there are a lot of reasons why Medicare cuts might not be harmful or damaging, so I think we should treat the news of Trump’s cuts to Medicare with all the honor and honesty with which the Republicans dealt with Obama’s changes to Medicare.

    Let’s see: “Donald Trump slashes Medicare, Medicaid, betraying the elderly and disabled who trusted him!”

  10. 10
    Matt says:

    The place to honestly beat up on the budget is in MedicAID cuts.

    Maybe, but the Medicare cuts are going to be a lot more persuasive to the Trumpkins. You tell the average supporter – my Medicare-dependent parents, ferinstance – that Medicaid’s getting cut and their first response may be something like “good, I’m tired of keeping THOSE PEOPLE healthy”.

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