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The Real Politic$-As-U$ual of Health Care

Aug
10
2006

The politics of health care is really all about the divvying up of federal tax dollars.
It’s is not about solving the problems of the uninsured or the general problem that ever-increasing costs pushes onto the rest of the economy. Day to day, it’s about redistributing the money.
Take San Francisco, which has finally passed its health insurance plan into law. At its most basic, the plan involves re-funneling the money the city spends on health care and hitting up employers and citizens who can pay something, for their insurance to pay the bills of the uninsured.
In the meantime, I sat in on a lecture from a rational Republican. Yes, I know you don’t believe I wrote that sentence but the Republican in question works for Massachusetts Governor Mitt Romney, so he’s not a “real” Republican. Among other things, he thinks uninsurance is actually a problem. Why? Because in Massachusetts, uninsurance is a problem for the state’s politicians. Health care spending in the state is the highest in America (and therefore the world), and the political power of the big teaching hospitals – Partners (the corporate entity that runs Mass General and Brigham and Womens) is the best known but there are a bunch more – in the state is huge. The uninsurance rate is among the lowest in America. What’s happened as a result? With a special combination of Federal money and a series of “lies” that politicians tell about how transferring costs from one group to another is not a tax increase, Massachusetts might succeed in reducing uninsurance. And if ways can be found along the way of sending more money to the big teaching hospitals, so much the better!
Those are local examples but right about now, the health care conversation is about to go into a very contentious little moment of money redistribution. Yup. We’re talking about Medicare, the big, rich federal program that pays for the care of the elderly.


This year Medicare will pay some $440 billion into the health care system. Most of that, as the chart below shows, goes to hospitals and doctors (Part A and Part B). The new prescription drug spending bill (Part D for health policy wonks) kicks in another $60 billion of taxpayer’s money to the drug companies.
Medicare
This year total spending on hospital services will be around $623 billion, while payments to physician will be around $423 billion and roughly a third of both totals comes from Medicare. It’s not exactly surprising then that hospitals and physicians are acutely aware of how they get paid. Now some five years ago in a fit of concern about the budget Congress said that it was going to reduce Medicare fees to physicians by a big chunk (around 5% a year). But every year the American Medical Association has harangued Congress on behalf of doctors and it’s made a little exception.
This conversation will eventually become more and more unpleasant as budget conservatives realize that the nation is broke. The coming version of the battle involves the AMA telling seniors that they’ll find no doctors willing to treat them, and are trying to get said seniors to call their Congressmen. It seems to be working in that some 80 Senators have written to the Center for Medicare and Medicaid Services suggesting that they rescind the cuts. The hospitals did even better than the doctors. They got a 3% spending increase. Perhaps there are elections coming up or something.
Meanwhile there’s an even more technical argument going on between different doctors as Medicare tries to correct another problem built into the system: We pay specialists far too much for their time, and generalists too little. Hospitals are arguing that the way they get paid (on an incredibly complicated per admission basis dependent on the patient’s disease group) shouldn’t be changed because they worry that buried in those technical changes will be reductions in the amount they get for specific patients
Funnily enough, there is some actual research showing that reducing Medicare payments doesn’t actually reduce Medicare patients access to physicians. So you’re a doctor. Are you going to kiss off a third of your revenue because the fees that customer is paying are going down? Of course not – that’s pretty bloody obvious. But you might start providing more of the services. More services at a lower price might add up to more total money. And when you look at overall health care spending, which has been going up 8% to 10% a year for a long time, it’s obvious that more services are being provided. Now, that should tell you that in a rational world we shouldn’t have Medicare paying fixed fees to physicians and hospitals without being able to control the volume of services or the total cost. But we live in a political world, not a rational one.
Meanwhile, if you really want to know how the political game is played, you should see what happens when you suggest that, just perhaps, Medicare should pay less than that huge amounts it pays for implantable medical devices (pacemakers, for instance). Those payments translate into huge margins for the corporations that make those devices. CMS tried to make this argument a few weeks back and had to retreat with tail wedged firmly between its legs. And of course there was just a hint of political activity from strange bedfellows there.
But eventually the divvying up of the Federal money will have to include some rationality about how to contain health care costs and cover more people too. And that will not be politics as usual – it’ll be much more vicious.

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