Monday, August 9, 2010

Guess what? CMS' actuary agrees health reform improves Medicare's outlook

Critics of the Medicare trustees' report on the positive impact of the Affordable Care Act (ACA) on Medicare's solvency, the subject of last Thursday's blog, have seized on an analysis by CMS's chief actuary, Mr. Richard Foster. It is true that Mr. Foster offers a more pessimistic "alternative scenario" of the impact of the ACA than the trustees used. But you know what? Mr. Foster agrees that that the ACA makes a "marked improvement" in Medicare's fiscal outlook.

Let me explain. Both the trustees and Mr. Foster agree that most of the improvement in Medicare's long-term fiscal outlook is due to changes in payments to hospitals and other non-physician providers under Medicare Part A. This improvement is unaffected by the Medicare SGR formula, which affects only payments to physicians. (I'll get back to the SGR later.)

According to the Congressional Research Service, Congress' decision to adjust Medicare payments to hospitals to reflect productivity gains is based on an analysis by the expert Medicare Payment Advisory Commission:

"Medicare's payment systems should encourage efficiency and Medicare providers can achieve efficiency gains similar to the economy at large. This policy target links Medicare's expectations for efficiency improvements to the productivity gains achieved by firms and workers who pay taxes that fund Medicare."

Where do trustees and Mr. Foster disagree? Mr. Foster doubts that hospitals and other non-physician providers will be able to achieve the required productivity gains, and he expects that Congress eventually will over-ride them. The trustees assume they will remain in place.

However, as Robert Greenstein from the Center on Budget and Policy Priorities points out, even if one accepts Mr. Foster's more guarded view of the ability of the health care sector to improve its productivity, the Medicare program is still better off.

"... even under the trustees' 'illustrative alternative' projection, which assumes that only 60 percent of the ACA’s savings are achieved in the long run (the scenario that Medicare actuary Richard Foster prefers), half of the long-term shortfall has been closed by this one piece of legislation."

On this, Mr. Foster agrees. He writes that, "In the likely event that the productivity adjustments are eventually overridden, the cost rate would be significantly higher than under current law. Even so, the alternative scenario projections would represent a marked improvement over the estimates in the 2009 report."

Now, let's get back to the SGR. I have covered this ground before, but the SGR cuts are not the result of the ACA. They were enacted by Congress and signed into law in 1997. The trustees' report only deals with the changes created by the ACA itself, not the inherited legacy of a law passed 13 years ago. The ACA didn't solve the SGR problem, but it sure as heck didn't create it or make it worse.

I've said it before, and I'll continue to say it until the cows come home. The SGR formula has to go. ACP will not rest until it does. And Congress and CMS will need to accurately account for the increased spending that will result.

But I stand by my view that the trustees' report - and Mr. Foster's "alternative scenario" - demonstrate that Medicare's fiscal outlook is markedly better because of the ACA. The only disagreement is over how much better.

Today's question: Do you disagree with the notion that the health care sector should "achieve the same kind of productivity gains by firms and workers who pay taxes to fund Medicare?"


ryanjo said...

Did you even read any of the thoughtful comments posted about your last blog entry on this issue? Your contorted logic that "if pigs fly, then Medicare is better off" won't work this time either. Face it and 'fess up, support for the PPACA was a huge mistake by ACP leadership. Massaging the numbers in the Trustees Report won't help.

Steve Lucas said...

I had this debate about the concept of a craft decades ago in a production planning course as part of my graduate program (business). At its core medicine is a craft; medicine is not about producing widgets. Much like any craft that is why doctors practice medicine, they do not make medicine.

Like any craft tools will come along that will improve the craft. The fountain pen was an improvement over the quill or pencil. This would allow for clearer, longer lasting notes that would be fast to scribe. Ultimately the fountain pen is a tool. The basic art of medicine stays the same. A very nice pen does not make for a better doctor.

The problem arises when someone feels that in buying a very nice set of tools and setting a very aggressive production schedule they can transform a craft. Recently Bob Centor has explored this concept and the comments on his bog have been revealing.

One commentator outlined a 70 person a day practice. Three to five minutes per patient, no eye contact, with a focus on paper work and checking all the right boxes to maximize income. Interestingly, in another thread, young doctors complained about the lack of patient interaction and the focus on paperwork and patient turns. Why examine a patient when a test, which generates revenue, will give you enough information to make a decision. Maybe not the right decision, but a decision you can justify.

Medicine will benefit with advances in technology. I have questions regarding the fitness of some of these advances in their current form, but like the fountain pen, they will speed up the process. This does not change the basic craft nature of medicine. That is a doctor and patient sitting in a room where the doctor applies their knowledge and experience to the story the patient is telling.

When patients become widgets you are no longer practicing medicine. You may be delivering health care, but you are not practicing medicine.

That is the nature of a craft. It is personal, always changing, and full of nuisance. This is the part you cannot manage, with the result that medicine will never reflect the production gains found in our factories, or call centers, or other businesses.

Steve Lucas