Medicare

In Which We Learn That the Government's Innovative Health Policy Reforms Don't Always Work

|

Today we learned that when the government tries to make America's health care system perform better, it doesn't work very well. It also tends to cost a lot of money. 

Let's start with a new Congressional Budget Office report on Medicare demonstration programs designed to improve both the quality and efficiency of health care delivery. CBO looked at the results of 34 different disease management and care coordination programs, but found that most did not reduce Medicare spending. "On average, the 34 programs had little or no effect on hospital admissions," the budget office explains. "In nearly every program, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating organizations were considered." 

The CBO also looked at four "value-based" payment reforms designed to reduce spending through bundled payments and quality bonuses. The results there were a little better; one of the four programs reduced spending on services related to heart bypass surgeries by about 10 percent. The other three, however, "appear to have resulted in little or no savings for Medicare."

The Congressional Budget Office isn't the only one with bad news for health wonks today. Kaiser Health News reports that in Alaska, the new high-risk pool set up under ObamaCare will end up costing about $10 million to cover just 50 people, or about $200,000 per person—far more than expected. Because ObamaCare's major insurance reforms don't kick in until 2014, the law created a network of state-based pre-existing condition insurance plans (PCIP) to help cover the difficult-to-insure.

Those programs were initially expected to be flooded with entrants and over budget as a result. But as I've noted before, it turns out that expectation was only half right: Enrollment is dramatically lower than expected. Many states, however, are still running far over budget. In California, high-risk pool claims came in three time higher than projected. New Hampshire only managed to enroll about 80 members by December of 2010, but simultaneously managed to spend almost twice the $650,000 in federal money that had been set aside to fund the program. Montana's program covers 296 people, but can't make the program work on the $16 million budget it was given. As in California, the per-member costs turned out to be far higher than expected. All told, nine states have requested additional funding to keep their programs propped up. 

Finally, Politico Pulse notes that hopes for a permanent fix to Medicare' physician fee schedule are being dashed against the rocks of legislative reality once again:

This isn't the way it's supposed to work. Many House lawmakers spent last year hoping to craft a long-term solution for Medicare's buggy SGR formula. What started out as a 10-year roadmap to repeal was shortened to a five-year blueprint with some caveats, and then finally pared down to a two-year patch. Now the bar could be considerably lower. 

Wait a minute: After decades of failed Medicare payment games meant to control spending, including years of failure to permanently fix the "doc fix," it turns out that this won't be the year that legislators and technocrats finally figure out how to make things work? 

Don't worry too much, though. Thanks to Medicare, Medicaid, and ObamaCare, those legislators and bureaucrats will have plenty of opportunity to keep trying. Eventually they'll get it right. Right? 

Read "Medicare Whac-a-Mole," my history of Medicare's many failed attempts to control costs through payment reform