Doctors and hospitals may grumble about Medicare's lower reimbursement, but as Brill notes, most still treat Medicare patients. "Hospitals don't lose money when they treat Medicare patients," says Jonathan Blum, Medicare's deputy administrator, whom Brill interviewed for his piece. (Take a look at all the billboard and TV advertising--often focused on the elderly--that hospitals spend a fortune on, partly to attract Medicare patients.)
Another major theme of Brill's piece
is that Medicare could do way more to control medical costs if only Congress
would let them is a point he made on ABC's This Week in late
February, where he talked about the legal prohibition on negotiating prices
with pharmaceutical companies. In many other countries drug prices are
regulated; America could save some $94 billion a year if we paid what other
countries pay for the same products, he reported. (It's worth noting too that
drugs in England are free to people age 60 and older. In the US, thousands of
seniors pay hundreds of dollars each month, even with Medicare's drug benefit,
because the prices are so high, and because insurers, which provide the drug
coverage, make them pay huge amounts of coinsurance and copays--cost-shifting
arrangements that Congress allows.)
Yet drug makers have won over public opinion by arguing that their high profit
margins in the US are justified because they subsidize R & D needed for
trailblazing drugs. Brill writes:
Apart from the question of whether a country with a health-care spending crisis should subsidize the rest of the developed world--not to mention the question of who signed Americans up for that mission--there's the fact that the companies' math doesn't add up.
Using the case of Flebogamma, a sterile solution to boost the immune system, and its maker, Grifols, he lays bare some of that fuzzy math.
Congress has placed other kinds of handcuffs on Medicare, too. Brill's discussion of how the program is prohibited from considering whether drugs and medical devices are both cost effective and clinically effective in making payment decisions is illuminating, and one the press almost completely missed during the debate on Obamacare and afterward. The law did set up a Patient-Centered Outcomes Research Institute to do comparative effectiveness research.
But so what? "Medicare could see the research and say, Ah, this drug works better and costs the same, or is even cheaper," says John Gunn, the chief operating officer at Sloan-Kettering. "But they are not allowed to do anything about it." (In England and in other countries, government or quasi-government agencies use both cost and clinical effectiveness in recommending which drugs should be used. Maybe that helps explain why seniors in the UK get free medications. The National Health Service usually doesn't pay for stuff that doesn't work, and if there's a cheaper and just-as-effective alternative, that's what docs prescribe.)
The influence of drug and device makers: Brill makes clear that these two very profitable business sectors have a stranglehold on Congress. From the prohibition on Medicare to use competitive bidding for what's called durable medical equipment--like wheelchairs, syringes for diabetics, hospital beds, and canes--to the high price of cancer drugs, Brill demonstrates how they manage to keep Congress on their side, to the detriment of the public purse.
Medicare spends about $15 billion a year on medical equipment, and it has been conducting a pilot program to see if those costs can come down. This pilot, which embraces competitive bidding, has resulted in a 40 percent savings. However, it covers only about three percent of the medical equipment that beneficiaries use. If the program went nationwide, Brill estimates Medicare could save some $6 billion annually.
The lobbying campaign of device makers such as the Minneapolis-based Medtronic, whose practices Brill carefully dissects, shows what healthcare sellers do when they don't like some rule or regulation or tax. Time's piece describes how device makers are trying to rid themselves of a 2.39 percent excise tax on medical devices called for by Obamacare. Their arguments are the usual ones--the tax would reduce sales so much that the industry would lose some 400,000 jobs, they say. The press, for the most part, has passed along the gloom and doom scenarios from device makers, who Brill calls " superstar performers in a booming medical economy," without questioning their numbers.
Brill did question them, and found the Affordable Care Act, which imposed the tax to help fund subsidies for the uninsured, would barely hurt the industry. He cited a 2011 McKinsey report, showing that Medtronic "delivered an amazing compounded annual return of 14.95 percent to shareholders from 1990 to 2010." If the tax were so disruptive that it would kill sales, why, Brill asks "would the industry pass it along to consumers as a price increase? It hardly has to given its profit margins."
Flaws in Obamacare: "With Obamacare we've changed the rules related to who pays for what, but we haven't done much to change the prices we pay," Brill asserts. That's an important observation, and one that was brushed aside by many policymakers in the haste to pass health reform. As CJR has pointed out , the media, too, may have helped oversell what the law is to accomplish.
Brill analyzes what the law does this way: Obamacare, he says, tinkers at the edges of the system but does not address the core problem. It does improve the claims appeal process, for example, and makes some insurance terms available in plain English. While such changes are positive, he writes, "none of it is a path to bending the healthcare cost curve." That gets to the heart of the debate over the affordability (which CJR recently addressed in an Exchange Watch piece about the efforts to set up Connecticut's Obamacare health exchange).
Brill observed the "exchanges could raise costs, not lower them." Indeed, three of Obamacare's best provisions--prohibiting exclusions for preexisting conditions, ending annual and lifetime caps on coverage, and restrictions on copays for preventive care, will most likely raise insurance premiums, Brill tells readers.
Unfortunately, Brill doesn't fully explore the affordability conundrum. Many of the people whose misery he described owned "limited benefits policies," which don't cover much if someone has a catastrophic illness. Obamacare eliminates such restrictions.
Yet patients could still find themselves in the same financial boat when series illness strikes. Because insurance in the state insurance exchanges, as Brill argues, may well still be expensive, consumers faced with the mandate to buy coverage are likely to choose the cheapest policies--and those are designed to cover only 60 percent of the costs. Families might still struggle to pay the remaining 40 percent. Medical bills that seem like monsters from outer space will not disappear for many Americans--even with Obamacare.
An official of a firm who helps people untangle their medical bills and negotiate with providers tells Brill that most of the firm's clients are middle or upper-middle people with insurance. That tracks with studies by CUNY professors Steffie Woolhandler and David Himmelstein and Elizabeth Warren (now a US Senator from Massachusetts), who found it was mostly middle class people with insurance who declared medical bankruptcy. Brill's predictions about rising premiums and rising medical costs may not change this picture.
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