CMS is going to change the way it pays physicians. Really. Well, CMS Director McClellan says they will, and soon. Policy types will recall that every year, physician reimbursement for procedures under Medicare is slated to drop by between 3% – 5%, depending on total expenditures the prior year and a really complicated formula (that is never followed). So each year, physicians scream, and every year, politicians say “no, just kidding”, and tweak the reimbursement to send a few more dollars to the docs. And I do mean “few”.
This year expect the same to happen; it is an election year, there are lots of powerful (read “lots of money”) forces in play here, and few elected officials want to take the political hit for cutting Medicare. So far, 80 senators have signed a letter asking that reimbursement levels be increased, not reduced.
Despite the political realities, McClellan is of the opinion that our elected officials will come up with a pay-for-performance scheme for CMS. Whether it ever gets through Congress is another story altogether.
For further edification, I’ll pass on the perspective of Bob Laszewski, long-time national health care policy expert and good friend. Bob’s view is that the increase in utilization driven by physician practice patterns is leading to the huge cost increases we are seeing in Medicare, and the stats back him up. Medicare’s per-service reimbursement in 2006 is essentially unchanged from five years ago, while utilization has gone up dramatically. So, price controls have not worked to hold down medical inflation.
Thus the interest in pay for performance for physicians. While it sounds interesting, it’s really hard to do.
As tough as it’s going to be, I see no better alternative.

The latest budget projections have federal spending on Medicaid programs dropping below projections, while Medicare is suffering from the reverse. It appears that the shifting of reimbursement for drugs from Medicaid to Medicare is at least partially responsible for the financials, but increased utilization of physician and outpatient hospital services is also a major contributor to the increase.
This last point illustrates just how ineffective the price controls used in Medicare have become. While per-service prices have been held flat, utilization, driven by the use of more services and higher-cost services, has been the driving force behind the need to increase Part B premiums by 11% for 2007.
Meanwhile, preliminary indications are that Part D costs will come in under (the already highly inflated) expectations, although how this can be determined based on one quarter’s worth of data is a mystery to me.
Perhaps those actuaries have gotten much better at predicting direction by looking in the rear view mirror.

The Fresno Bee editorial page picked up on a study published in the New England Journal of Medicine about the impact of deductibles and copays on compliance. The study analyzed what happened to seniors once they met their coverage limit under a drug program known as Medicare Premium Plus. (this limit was set at $1000)
The results are not terrible surprising – visits to the ER rose, compliance with drug regimens diminshed, blood pressure rose.
We may well see the same result around October, when many seniors will hit the “doughnut hole”; after they have incurred about $2250 in costs, they are responsible for the next $3000 or so, after which coverage kicks in again. If they stop taking their medications, we can expect to see a bump up in ER visits and potentially other services. When you add in their copays and the doughnut hole payouts, a beneficiary who hits $5100 in total expenditures will have paid $3,600 out of pocket.
About 25% of beneficiaries are projected to hit the doughnut hole; 10% will hit the $5100 level and therefore be defined as catastrophic cases.
It is likely that these folks will be less healthy than the seniors who don’t spend that much on drugs. And for many, the drugs are keeping them out of the hospital by managing their blood sugar, hormone levels, lipids, hypertension, psychiatric issues, and chronic pain.
If they stop taking their meds, Part D costs may well come in under projections. The other Medicare “Parts” wiil not be so fortunate.

Listening to all the noise about the upcoming Part D enrollment deadline you’d think if you don’t sign up now you’ll never be able to. Nothing could be further from the truth.
For seniors who enroll in Part D after the “deadline”, their premiums will be increased by 1% for each month post-deadline. So, if the premium is $25.00 now, it will be $28.00 in a year. Now, I know many seniors live on fixed incomes, but the extra three bucks is not likely to break most individuals.
Especially when one considers the decision process seniors are going thru. They look at their drug bills today, see if they can save money by enrolling in Part D, and if they can, they do, and if they can’t, they don’t. And when they can save money by enrolling, they will.
Plan sellers could change their premiums between now and when a senior decides its finally worth it to enroll, but they can do that anyway.
So the deadline is not a “line in the sand”, but it sure makes for good press. It’s too bad that the mass media is not doing a better job of educating seniors about the soft deadline, instead choosing to create a false crisis.