- - Tuesday, April 24, 2012

On the eve of the release of this year’s Medicare Trustees Report, the Obama administration presented its own version. According to the administration’s telling:

Obamacare will save taxpayers $200 billion in the Medicare program through 2016.

About 90 percent of these savings will be produced by lowering “excessive payments” to Medicare Advantage plans, lower payments to doctors, hospitals and other providers to reflect their “improved productivity” and through efficiencies gained by what is learned from “demonstration projects.”

The demonstration projects include pay for performance, bundling, accountable care organizations and other frequently discussed ideas.

But whereas the trustees report is a serious document reflecting accepted accounting principles, the administration’s document was clearly a piece of political propaganda - one that stretched the truth so much that the word “spin” would be a charitable description. For example, the administration’s document failed to mention:

The Congressional Budget Office has studied the demonstration projects on three separate occasions and, each time, has concluded that they are producing no serious savings and are unlikely to do so in the future.

Medicare’s actuary has determined that reductions in payments to Medicare Advantage plans not only will result in lower benefits for the 1 in 4 seniors who are in these plans, but that about 7.5 million enrollees will actually lose their coverage and have to seek more expensive Medigap insurance elsewhere.

Medicare’s Office of the Actuaries also has concluded that the projected savings are unrealistic and will not materialize - since they will result in hospital closings and seniors’ inability to find accessible health care - a judgment reaffirmed in the chief actuary’s own statement in the latest trustees report.

Even if the $200 billion in savings did materialize, it would not be a saving to taxpayers. Instead, these savings already have been pledged to create a new health insurance entitlement for young people - leaving taxpayers just as burdened as they were before.

The administration’s report also claims that health reform has created $60 billion in new benefits for seniors, without mentioning that, for every $1 of new spending, beneficiaries will lose $10 of spending somewhere else.

On lower payments to providers, chief actuary Richard Foster produced a chart for the trustees’ report, showing what “$200 billion in savings” actually means. The projection assumes that:

Beginning in 2013, payments to physicians will drop by 31 percent to reach Medicaid levels.

Going forward, Medicare payments will fall further and further below Medicaid fees with each passing year.

Remember, the biggest problem for Medicaid patients is finding a doctor who will see them. As a result, they frequently must turn to community health centers and the emergency rooms of safety-net hospitals, where rationing by waiting is common. What we can look forward to is a world in which seniors (from a financial point of view) will seem less desirable customers than welfare mothers.

What about the administration’s preferred organizational form of health care delivery - accountable-care organizations? They have been rejected by the nation’s leading health plans, including those that the administration points to as examples of high-quality, low-cost service. What about other demand-side reforms: forcing/inducing/coaxing providers to adopt electronic medical records, to coordinate care, integrate care, manage care, emphasize preventive care, adopt evidence-based medicine, and so on?

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