Donald Berwick Rations the Facts With His Eyes Open

Former Medicare chief Dr. Donald Berwick published an op-ed in today’s Boston Globe in which he endorses Professor Elizabeth Warren for her support of Obamacare.  Unfortunately, however, the column reveals that Dr. Berwick must not have learned much about the Medicare program during his time at CMS, given many of his statements:

“Obamacare reduce costs…”  That’s not what Medicare’s own actuary said.  Earlier this year, the actuary published an analysis indicating the law would raise costs by more than $478 billion.  Last year, the actuary testified before Congress, calling “False” the Administration’s stated goal of reducing health care costs.

“It targets waste, fraud, and abuse, reduces unnecessary subsidies to insurance companies…”  Again, that’s not what Medicare’s own actuary said.  He has concluded that over the long-term, up to 40 percent of providers would become unprofitable due to Obamacare, and could “have to withdraw from providing services to Medicare beneficiaries.”  Just this week, an Alabama hospital took a different course – it decided to shut down entirely, due to the impact of Obamacare on its business model.

“President Obama’s health reforms do not cut any guaranteed Medicare benefits…”  This statement is manifestly FALSE, as we have previously demonstrated.  Obamacare cut benefits for wealthy seniors, by forcing them to pay more for their Medicare coverage.  And President Obama’s budget proposed even further benefit cuts – new means-testing, additional co-payments, and higher premiums.  In many cases, these changes are actually good policy, but they’re still cuts to “guaranteed benefits” – and no one should be dishonest enough to claim that they aren’t.

“Thanks to Obamacare, seniors can now get a free annual wellness visit…”  Also incorrect.  These services may be delivered without any out-of-pocket cost-sharing, but they are NOT “free” – someone ends up paying for them.  In fact, all seniors end up paying, as do all Americans – through higher taxpayer spending on Medicare, and higher Part B premiums for seniors.

“Medicare and Medicaid both face challenges today, but not because of Obamacare.  The challenges exist throughout the health care system, mainly in the form of rising costs.”  The implication is that Medicare isn’t the problem – that health costs as a whole are a problem.  But the fact is that Medicare – and particularly its focus on fee-for-service medicine – has been one of the driving elements of rising costs and inefficiency in our health care system.  The non-partisan Congressional Budget Office, in a January report analyzing dozens of Medicare demonstration programs, said these programs did not contain health costs, precisely because of the flawed incentives included in fee-for-service medicine: “Demonstrations aimed at reducing spending and increasing quality of care face significant challenges in overcoming the incentives inherent in Medicare’s fee-for-service payment system, which rewards providers for delivering more care.”  In other words, Medicare isn’t the solution to health care costs – it’s the problem.

Dr. Berwick’s tenure at CMS was cut short due to his many controversial remarks, most notably his (in)famous interview in which he claimed that “The decision is not whether or not we will ration care – the decision is whether we will ration with our eyes open.”  Given his economies with accuracy in the op-ed, many may wonder if Dr. Berwick has also decided to ration the true facts about Obamacare with his eyes open.

More Reasons Why Obamacare Is the Wrong Approach to Reducing Costs

The Wall Street Journal reports this morning on yet another study finding that reforms to change the delivery system of health care have failed to produce their intended results:

A high-profile Medicare policy that sought to reduce certain hospital-acquired infections by cutting payments tied to treating them turned out to have no impact, according to a new study in the New England Journal of Medicine.  The study…found “no evidence” that the shift had any measurable impact on the infections, which were already decreasing before the change went into effect.  The study follows other research that has cast doubt on the effectiveness of some efforts to tie reimbursement to quality-improvement efforts in health care, an approach that is being considerably ramped up under the federal health overhaul.

While this particular initiative pre-dates Obamacare, the health law builds on the same concept – that federal bureaucrats can reduce Medicare costs by engaging in various tweaks to the health care delivery system.  Unfortunately, however, several other recent studies have come to the same conclusions as this morning’s report – that these efforts to “build a better mousetrap” in Medicare will not succeed in reducing costs:

  • A paper in Health Affairs (subscription required) released last week found that even “aggressive” improvements in performance measures by accountable care organizations caring for diabetic patients would result in minimal cost savings – and “after the costs of performance improvement, such as additional tests or visits, are accounted for,” those minimal cost savings could become cost increases.  In other words, an initiative the Administration has trumpeted as “bringing real change to a health care system that has cost us too much” won’t have much impact on reducing costs.
  • A recent analysis of North Carolina’s patient-centered medical home initiative found the program yielded no budgetary savings, contrary to expectations.
  • More broadly, the Congressional Budget Office noted earlier this year in a major report that most Medicare demonstration programs over the past several decades have NOT saved money – re-iterating the above findings, and again suggesting Obamacare’s efforts to control costs by micro-managing Medicare in a slightly different fashion won’t work.

In an article this morning, the New York Times notes that “in the 2008 campaign, Mr. Obama often told voters that he would lower premiums by $2,500 a year per family ‘by the end of my first term as president.’  It has not happened…”  That fact should be glaringly obvious to anyone who has paid a health insurance premium in recent months.  And the events of the past few weeks demonstrate both why Obamacare has failed to lower costs thus far, and is also unlikely to lower costs in the future.

Obama Administration, Asleep at the Switch…

Yesterday various press outlets reported that the Administration warned hospitals and other medical providers about questionable Medicare billing tactics that could range from abusive to fraudulent.  But that’s not the real story – the real story is how the Administration was asleep at the switch for years, allowing these abusive practices to continue, even accelerate.  A study by the Center for Public Integrity published in the Washington Post more than a week ago, and highlighted in this space, noted that “thousands of doctors and other medical professionals have billed Medicare for increasingly complicated and costly treatments over the past decade, adding $11 billion or more to their fees – and signaling a possible rise in medical billing abuse.”

So what did the Administration do when this major Washington Post expose appeared, questioning $11 billion in Medicare spending as questionable, abusive, or even downright fraudulent?  Exactly nothing.  Only when a second, similar story appeared in the New York Times this weekend did Secretary Sebelius finally send a letter questioning provider billing practices, and promising vigilance on this issue – with “vigilance” hopefully meaning something, after her Department’s years of neglect.

The Administration has asked questions of Medicare providers about their billing practices, but the real questions belong to the Administration:

  1. Why did the Administration wait so long to take action – and how many billions of dollars in questionable transactions were completed because this Administration decided not to examine billing practices for potential abuse and fraud?
  2. How can the Administration implement the 2700 pages of Obamacare if they can’t even ensure that existing laws and practices within Medicare are being followed?  Conversely, was the Administration asleep at the switch when it comes to questionable billing practices because HHS is spending all its time, personnel, and resources implementing Obamacare, rather than watching over Medicare?
  3. How can President Obama and Secretary Sebelius claim Obamacare helps crack down on fraud, when they allowed $11 billion in questionable transactions to go unchallenged?  Given this record, perhaps the Administration would be better off outsourcing oversight of Medicare to the Center for Public Integrity and the New York Times.

One final note:  Three liberal advocates, including former OMB advisor Zeke Emanuel and former CMS Administrator Donald Berwick, penned an op-ed in this morning’s Wall Street Journal denouncing comprehensive Medicare reform, and claiming that government-run Medicare can do a better job containing costs because “the key to sustainable cost control lies in encouraging physicians and hospitals to focus on quality rather than quantity, and value rather than volume.”  These claims would have somewhat more credibility if they weren’t co-authored by someone who, in nearly two years at CMS, allowed transactions potentially bilking Medicare for billions to pass through undetected right under his nose.  Given that track record, Dr. Berwick is in absolutely no position to give lessons on how to “save” Medicare.  Instead the old proverb rings true:  Physician, heal thyself.

How the Status Quo Leaves Medicare Ripe for Abuse

Yesterday, the Washington Post ran its second major expose in as many months about abuses in the Medicare program.  Last month’s article was about the way drug companies abused reimbursement for anti-anemia drugs; yesterday’s piece focused on providers “up-coding” – that is, claiming to see patients for longer and more intense visits, so as to claim higher reimbursement from Medicare.  The article notes the practice has become widespread, and costs Medicare billions annually:

Thousands of doctors and other medical professionals have billed Medicare for increasingly complicated and costly treatments over the past decade, adding $11 billion or more to their fees — and signaling a possible rise in medical billing abuse, according to an investigation by the Center for Public Integrity.

Between 2001 and 2010, doctors increasingly moved to higher-paying codes for billing Medicare for office visits while cutting back on lower-paying ones, according to a year-long examination of about 362 million claims.  In 2001, the two highest codes were listed on about 25 percent of the doctor-visit claims; in 2010, they were on 40 percent.  Similarly, hospitals sharply stepped up the use of the highest codes for emergency room visits while cutting back on the lowest codes….

Medicare billing data do not indicate that patients are getting more infirm, as their reasons for visiting their doctors were essentially unchanged over time. And annual surveys by the federal Centers for Disease Control and Prevention have found little increase in the amount of time physicians spend with patients.  That suggests that at least part of the shift to higher codes is due to “upcoding” — also known as “code creep” — a form of bill-padding in which doctors and others bill Medicare for more expensive services than were actually delivered, according to health experts and the data analysis by the center.

Because physicians and hospitals are paid by Medicare in a fee-for-service format according to the services they perform, many have discovered that they can get paid more by billing for more, and/or more intense, procedures and services.  Ironically, the Post article notes that “the aggressive push to electronic medical records” – which Obama Administration officials claimed would lower health costs – “is likely fueling the trend toward higher codes” and greater Medicare spending.

What does Obamacare do to change fee-for-service medicine?  The answer ranges from “precious little” to “not enough.”  The law does include various demonstration programs designed to improve coordination of care, and shift emphasis back towards primary care physicians.  But the non-partisan Congressional Budget Office, in a January report analyzing dozens of Medicare demonstration programs over decades, said these programs did not contain health costs – because of the flawed and perverse incentives included in fee-for-service medicine:

The evaluations show that most programs have not reduced Medicare spending….Demonstrations aimed at reducing spending and increasing quality of care face significant challenges in overcoming the incentives inherent in Medicare’s fee-for-service payment system, which rewards providers for delivering more care

Ironically, Medicare premium support could encourage a movement away from fee-for-service medicine – by offering an avenue for providers and insurers to come up with new and innovative payment methods that focus on value and quality rather than performing services.  But President Obama and liberal Democrats have decided to oppose these reforms – which means that, under President Obama, we’re likely to see even more stories about how Medicare providers are manipulating and abusing the reimbursement system to the tune of billions of dollars.

The Wrong Philosophy for Reducing Health Care Costs

In his weekly Bloomberg column today, former Obama Administration budget director Peter Orszag once again attempts to defend Obamacare’s Independent Payment Advisory Board (IPAB), the group of 15 unelected bureaucrats who will be empowered to make binding rulings on how to reduce Medicare spending.  His arguments are based on two premises – each of which contains flaws.  The first premise is that providers, not patients, should affect most health care spending:

Focusing on providers is key because health-care expenses are so concentrated: High-cost cases account for the vast majority of the total.  In those cases, the care provided is, as it should be, mainly the services and tests recommended by the provider.  So if you do not influence provider recommendations in those cases, you cannot do all that much to improve the system.

This premise is valid – to a point.  Obviously, heart attack patients rushed to the emergency room will have little substantive opportunity to influence their health care spending decisions.  But the statement lands on shakier ground in other cases; Orszag’s statement that care “should be” directed by the provider also implies that, for instance, knee replacement patients will not, and should not, be able to influence their course of treatment.  In some cases, our health system currently lacks the proper tools to allow such patients to make fully informed choices – but enhanced price and quality transparency data can remedy this defect.

Orszag makes an even less compelling case when he argues that only Medicare can influence provider behavior:  “For better or worse, only Medicare is large enough to lead the health-care system toward a new structure of payment for providers.”  The problem with this argument is that Orszag and his fellow liberals only want to follow the logic one way.  Because if liberals want to argue that only Medicare has the market clout to change the health care system, that also means Medicare’s size was large enough to cause the system’s current problems.  And, nearly 50 years after Medicare’s creation, liberals haven’t explained how “This Time Is Different” – how a Medicare system can help solve a problem of exploding health costs that it helped to create.  In fact, the Congressional Budget Office noted earlier this year that most Medicare demonstration programs over the past several decades have NOT saved money – suggesting Obamacare’s efforts to control costs by micro-managing Medicare in  different fashion won’t work either.

The bottom line is that the philosophy Orszag approvingly recommends in which “direct modification of the behaviors of providers (versus consumers or payers)” by a board of government bureaucrats isn’t likely to be successful, in two respects.  First, as noted above, CBO has taken a dim view towards the notion that better bureaucratic tinkering will change the dire direction of health spending, and the Medicare program.  Second, and more fundamentally, the American people won’t take kindly to the idea of government bureaucrats engaging in “direct modification” of providers – while ignoring patients entirely.  That smacks of everything Democrats said Obamacare was not – namely, a government takeover of health care.  And it might explain why President Obama, despite blowing full speed ahead on virtually every other aspect of Obamacare implementation, has yet to appoint a single individual to IPAB – because he doesn’t want to reveal the board’s true design until after the November election.

Evidence and Ideology in the Medicare Debate

In a New York Times blog post last Friday, former Clinton Administration official Laura D’Andrea Tyson said that “when formulating public policy, evidence should be accorded more weight than ideology, and facts should matter more than shibboleths.”  On that count, she’s right.  But unfortunately for Tyson, the evidence shows that while liberal, top-down proposals to restructure Medicare – and the health care system – have failed, conservative proposals to introduce market forces into America’s failing entitlements could just succeed.

Tyson dismisses premium support proposals for Medicare, arguing that “the facts do not support” any conclusion that “competition would encourage more cost-sensitive behavior by beneficiaries, providers, and insurers.”  Actually, a new study published in the Journal of the American Medical Association just this month found that private plans would “bid an average of 9% below traditional Medicare costs” under a premium support model.  That’s a savings of tens of billions of dollars – coming directly from the positive effects of competition.

Conversely, Tyson claims that because competition won’t reduce health costs, “enforceable payment and cost-containment reforms like those in [Obamacare] are necessary.”  Those are the same payment reforms that the non-partisan Congressional Budget Office, in a January report analyzing dozens of Medicare demonstration programs over decades, said haven’t worked to contain costs:

The evaluations show that most programs have not reduced Medicare spending: In nearly every program involving disease management and care coordination, 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….Demonstrations aimed at reducing spending and increasing quality of care face significant challenges in overcoming the incentives inherent in Medicare’s fee-for-service payment system, which rewards providers for delivering more care but does not pay them for coordinating with other providers, and in the nation’s decentralized health care delivery system, which does not facilitate communication or coordination among providers.

While the evidence is clear that Obamacare’s focus on payment reform has NOT worked to control costs, the signs for competition as a positive force slowing costs seem promising.  Which means that if Tyson wants to be bound by evidence and not ideology, she has every reason to endorse premium support as opposed to an extension of the failed status quo.

Chris Van Hollen’s Curious Claim on “Arbitrary” Medicare Cuts

The Washington Post’s Ezra Klein published an interview with House Budget Committee Ranking Member Chris Van Hollen over the weekend, in which the latter made an interesting claim about Obamacare’s Medicare provisions.  Klein asked a question noting that “the Democrats like to say…that they’re just cutting providers, not beneficiaries.  But providers often pass their costs along to beneficiaries, either by making them pay more or giving them worse service.  So how real is that distinction?”  Van Hollen responded thusly:

Obviously, if you were just to do across-the-board, arbitrary cuts, that would be the case, but the whole idea behind Obamacare is to change the incentive structure behind Medicare so the payments to providers focus on the value of care rather than the volume of care.  So, for example, before the Affordable Care Act was passed, hospitals…had no financial incentive to coordinate the care of the condition once the beneficiary left the hospital.  We’re now changing the model so hospitals don’t get reimbursed every time the patient gets readmitted.

There’s only one problem with that statement: Obamacare is paid for largely by “across-the-board, arbitrary cuts.”  Take a look at the below chart, which Klein’s own colleague Sarah Kliff published last week:

The red section is the savings from hospital reimbursements – which was achieved by arbitrary, across-the-board cuts.  The blue section is the savings from Medicare Advantage – which was achieved by arbitrary, across-the-board cuts.  And the green section includes miscellaneous savings provisions, many of which (hospice, home health, etc.) come from – you guessed it – arbitrary, across-the-board cuts.  And while CBO hasn’t released a recent re-estimate of the hospital re-admission provision Van Hollen cited, a March 2010 score of Obamacare credited only $7.1 billion in savings – just over 1% of the law’s total Medicare savings – from this particular policy.  By comparison, “arbitrary, across-the-board cuts” comprise more than two-thirds of the Medicare savings, as the chart above clearly demonstrates.

Klein didn’t challenge Van Hollen on his assertion that Obamacare doesn’t include across-the-board cuts – because, well, he’s Ezra Klein.  But Van Hollen’s claim is striking nonetheless.  It’s one thing to say that the Medicare provisions in Obamacare are painful but nonetheless necessary, or that the provisions wouldn’t affect beneficiaries at all.  But what Van Hollen said was that “arbitrary, across-the-board cuts” WOULD harm beneficiaries – and then proceeded to deny the clear fact that most of Obamacare’s savings comes from these types of provisions.

Last week came word that Rep. Van Hollen will be tapped to play Paul Ryan in preparations for the vice presidential debate.  Given the level of competence on health care Van Hollen showed in his interview with Klein this week, Joe Biden might want to think about a Plan B.

Liberals Believe IPAB Is the “Medicare Fairy”

The Center for American Progress recently released a paper making incoherent claims against conservative proposals for entitlement reform.  Take for instance the below paragraphs criticizing the Medicare premium support proposal included in the House-passed budget:

The House Republican premium support plan would also limit growth in Medicare spending to growth in the economy plus 0.5 percentage points.  But it’s unclear how this cap would be enforced.  As a result, it’s likely that the cap would be enforced by limiting the amount of vouchers provided to beneficiaries.  Since the proposed growth rate is much slower than the projected growth in health care costs, the voucher would leave beneficiaries to pay substantially more over time.  The CBO estimates that new beneficiaries could pay more than $1,200 more (in 2011 dollars) by 2030 and more than $5,900 more by 2050 under the House Republican budget.

What’s more, the Affordable Care Act already established an Independent Payment Advisory Board that will control the growth in Medicare spending.  While the target growth rate for the independent panel is growth in the economy plus 1 percentage point, the president has proposed reducing that growth rate to growth in the economy plus 0.5 percentage points—the same growth rate as the cap under the House premium support plan.

The premium support budget cap, therefore, would produce little or no savings compared to the president’s alternative approach.  But the cap under the premium support plan would have serious consequences for Medicare beneficiaries.

The CAP paper admits that under the House budget plan, Medicare would grow at the same rate as under the President’s budget.  But to CAP, the House premium support proposal would result in seniors paying thousands of dollars more in costs – while under the President’s budget, Medicare would grow at the exact same rate, but seniors would miraculously avoid paying higher costs, and still have the same access to care.  To some, this argument brings to mind the old phrase, “That dog won’t hunt.”

The premise behind these claims lies in CAP’s belief that only government – through Obamacare’s new Independent Payment Advisory Board and its rulings capping Medicare spending – can reduce health costs.  This belief can be found elsewhere in the paper, where CAP states that “traditional Medicare cannot provide an integrated benefit package…modify benefit designs, or offer provider network options” – all things that generally reduce health care costs – only to turn around and claim that “increasing the privatization of Medicare does not make sense because traditional Medicare costs less than comparable private coverage.”  It’s almost as if CAP believes a “Medicare fairy” can magically erase higher costs in a completely pain-free way that doesn’t affect seniors’ health care.

The problem is, most experts don’t believe CAP’s magical “Medicare fairy” exists.  An analysis from CBO released in January found that most Medicare demonstration programs implemented over the years “have not reduced Medicare spending: In nearly every program involving disease management and care coordination, 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.”  And both CBO and the Medicare actuary have concluded that Obamacare’s IPAB-driven spending reductions won’t work either: CBO concluded that the Medicare reductions will be “difficult to sustain for a long period,” and the Medicare actuary found that provisions in Obamacare “are unlikely to be sustainable on a permanent annual basis.”  The actuary went so far as to estimate that the law will cause 40 percent of hospitals and medical providers to become unprofitable in the long term.

While Democrats’ government-centric “Medicare fairy” approach has been weighed over the years and found wanting, the conservative idea that competition can help lower costs has never been truly explored.  As we noted last week, even the Obama Administration admits that competition has generated savings for parts of the Medicare program.  So instead of waiting around for a “Medicare fairy” that will never show up, why not empower patients instead of bureaucrats, and use competition to reduce costs in health care the same way it has in every other industry?

Obamacare Did NOT Fix Medicare — It Made It Worse…

Politico reported this morning that House Minority Leader Hoyer defended Obamacare as “fixing” Medicare: “We believe that the health care bill — and very frankly CBO believes the health care bill will do something that Medicare very badly needs, and that is to constrain price escalation in health care.”  Where to begin with this statement…?

  • First, a CBO study released just last week found that prior Medicare demonstration programs designed to control costs – along the same lines as those included in Obamacare – did not work at controlling costs.  What’s more, CBO added that Medicare’s fee-for-service system presents “inherent” obstacles to reducing cost growth.
  • Second, the projections that Leader Hoyer said will “constrain price escalation” are based on arbitrary payment reductions that CBO and virtually every other non-partisan expert has concluded are unrealistic.  For instance, the Medicare actuary found that provisions in Obamacare “are unlikely to be sustainable on a permanent annual basis.”  Likewise, CBO concluded that the Medicare reductions will be “difficult to sustain for a long period.”
  • Third, the Medicare “savings” have already been spent – not to improve Medicare’s solvency, but to create Obamacare’s new entitlements.  Medicare actuary Foster noted that the Medicare provisions in Obamacare “cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions under the PPACA) and to extend the [Medicare] trust fund,” and CBO agreed, writing that the Medicare provisions in Obamacare “would not enhance the ability of the government to pay for future Medicare benefits.”  Even President Obama, in an interview with Fox News, admitted that “You can’t say that you are saving on Medicare and then spending the money twice.”

So in sum: The demonstration projects designed to save money likely won’t work, the arbitrary payment reductions can’t be sustained – and even if either of the first two scenarios hold, the money saved will not actually help Medicare, because it’s already been spent to pay for Obamacare’s new entitlements.  That’s not saving Medicare – that’s making it worse.

CBO Gives Obamacare an Epic Fail

One of the key unanswered questions about the health law – highlighted in an interview then-Medicare Administrator Donald Berwick gave back in May – was whether and how Medicare could successfully contain costs, given that Medicare spending has skyrocketed virtually unabated since the program’s creation in 1965.  An analysis from CBO released today examined this very issue, studying literally dozens of Medicare demonstration projects implemented over the years.  In the brief, CBO makes crystal clear that Medicare, and specifically its fee-for-service system, isn’t the solution – it’s the problem:

The evaluations show that most programs have not reduced Medicare spending: In nearly every program involving disease management and care coordination, 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.  Programs in which care managers had substantial direct interaction with physicians and significant in-person interaction with patients were more likely to reduce Medicare spending than other programs, but on average even those programs did not achieve enough savings to offset their fees….

Demonstrations aimed at reducing spending and increasing quality of care face significant challenges in overcoming the incentives inherent in Medicare’s fee-for-service payment system, which rewards providers for delivering more care but does not pay them for coordinating with other providers, and in the nation’s decentralized health care delivery system, which does not facilitate communication or coordination among providers.

The reasons for these programs’ failure to contain spending were myriad: care was not fully integrated; the new care management fees did not offset the meager savings in Medicare spending; the demonstration programs had too few participants to accurately determine cost savings; some providers may have inflated risk scores to generate additional payments.

The Washington Post called the CBO study a “Medicare fail.”  But in reality, the study is an OBAMACARE fail, because it undermines the two prime underpinnings of the entire 2700-page health care law:

  1. That Congress could afford to pass a massive new $2.6 trillion entitlement, because it would ultimately lead to a slowdown in the growth of Medicare spending; and
  2. That Medicare could be a model to drive changes to the broader health care system.

The CBO brief annihilates both theories, virtually obliterating the (already shaky) underpinnings behind this massive entitlement expansion.