CBO Assessment of Past Demonstrations to Reduce Expenditures

A former colleague of mine at CMS sent the following URL.  It  is a link to the blog of Doug Elmendorf, Director of the Congressional Budget Office, and in this recent post (which caused quite a stir at CMS) Elmendorf supports the statement in my previous post that past demonstrations have failed to show significant savings.  It is important to note that even the demonstrations that succeeded in reducing utilization did not really save money because the payments providers received for extra case management services exceeded the savings resulting from reduced utilization.

http://cboblog.cbo.gov/?p=3158#more-3158

Does the ACA Really Address the Spiraling Cost of Healthcare

The following is my response to a video on the Affordable Care Act (ACA) otherwise known as Obamacare.  The video can be found through a link on Tony Hausner's blog at:

http://tinyurl.com/7tcmuvh

Tony

The video does a good job of presenting the positives of the ACA.  But, as you have heard me say many times before, I find virtually no serious discussion of how we are going to deal with spiraling health care costs.  The video glosses over this and leaves the impression that the ACA will introduce changes that will somehow deal with this issue when, in fact, the only part of the ACA that has any chance of reducing health care costs is the section that calls for the elimination of over-payments to Medicare HMOs.  And these are not a done deal by any stretch of the imagination!  Moreover, the Republicans are busy misrepresenting these cuts by suggesting to beneficiaries that they would threaten their Medicare benefits. 

Unfortunately, all of the talk about improved payment systems that will incentivize quality and cost-effective is just wishful thinking.  CMS has been running demos on payment systems for at least two decades and has yet to come up with anything that works, and don't hold your breath waiting for the Center for Medicare and Medicaid Innovation to come up with anything better.  I continue to track the Center’s activities, and, based on publicly available information plus information gleaned from discussions with former colleagues at CMS, I see no reasons for optimism. 

In my humble opinion, the only way of truly controlling health care costs will require us to abandon our current fragmented health insurance system and replace it with something that looks more like the systems in Europe and Canada.  We presently have Medicare for the disabled and elderly, the VA system for veterans, Tricare for active military and their dependents, and 50 State Medicaid programs.  And that's just the public sector.  In the private sector, we have  the only for-profit insurance system in the world, with hundreds of individual companies and thousands of benefit packages, not to mention 20,000 insurance brokers acting as middle men.  We need to move to a national system with (1) uniform benefits,eligibility, and payment policies, (2) universal participation and pooling of risk, and (3) the ability to monitor utilization and quality at the national level. This does not necessarily mean that government has to run everything.  In Europe, there are lots of examples of systems where insurance is provided by private, non-profit companies.  The big difference is that the companies are not only non-profit, but are tightly regulated by government so that eligibility, benefits and payment policies are uniform.  To the obvious rejoinder that this would not be politically feasible in the US I would reply that Americans should then begin planning for a future in which health care costs take up 40% of GDP.