Another ObamaCare Medicare Gimmick

Today in you have to pass it to find out what's in it: a provision in ObamaCare that allows Massachusetts hospitals to get hundreds of millions a year in higher Medicare payments at the expense of every other state — inserted by John Kerry, who until this afternoon was the Democratic Senator from Massachusetts.

The specific trick involves an obscure Medicare payment rule setting the floor for urban hospital reimbursements at the same level paid by rural hospitals. In most states, rural hospital wages are lower than their urban counterparts. But Massachusetts has just one rural hospital, a 19-bed facility in Nantucket, a difficult to access, well-to-do area with high Medicare reimbursements. After being purchased by a large hospital group, the Nantucket facility specifically switched into the rural payment scheme in order to goose payments for the rest of the system. As a result, hospitals in Massachusetts are expected to get about about $3.5 billion in extra funding over the next decade.

At least, that is, if the provision isn't altered or removed. A group of rural hospital associations have requested that the provision be removed from the law. And earlier today, Sen. Tom Coburn (R-Oklahoma) and Sen. Clair McCaskill (D-Missouri) introduced revenue neutral legislation to end the Bay State-friendly gimmick. 

In the grand scheme of things, fixing a relatively small provision like this doesn't go very far. But the existence of the provision does tell you something about the nightmare of the Medicare payment system. 

ObamaCare supporters sometimes like to talk about the legislation's "delivery system reforms," which are supposed to change the way health care services are organized in ways that make health care less costly and more efficient. The bulk of these delivery system reforms are essentially payment reforms — restructuring the way medical providers are reimbursed in hopes of changing their incentives. But the sheer complexity of the way Medicare pays providers means that these sorts of payment games are not only commonplace, but key drivers of administrative decisions in medical facilities. Medicare's size also means that its decisions often have ripple effects throughout the medical payment ecosystem.

That has consequences for care. Rather than optimize their practices to patients and their illnesses, providers end up letting coding systems and payment rules drive their decisions. ObamaCare rearranges some of these incentives, but it leaves the complexity in place, and in some cases adds to it. Which means we're likely to see these sorts of payment games and gimmicks throughout the health care system for years to come.