Medicare cost control in action

Tens of thousands of people with chronic conditions and disabilities may find it easier to qualify for Medicare coverage of potentially costly home health care, skilled nursing home stays and outpatient therapy under policy changes planned by the Obama administration.

In a proposed settlement of a nationwide class-action lawsuit, the administration has agreed to scrap a decades-old practice that required many beneficiaries to show a likelihood of medical or functional improvement before Medicare would pay for skilled nursing and therapy services.

…Neither she nor Medicare officials could say how much the settlement might cost the government, but the price of expanding such coverage could be substantial.

The story is here.  Without knowing the cost, it is difficult to say whether this coverage expansion is a good idea.  But that is exactly my point.  I see a good deal of cognitive dissonance when I read discussions of plans for Medicare cost control.


It's a legal settlement. How much would the damages and litigation costs have been if the case went to court? Talking about "cost-control" doesn't make sense unless you're comparing things to the relevant counterfactual, which is not "current policy," but "current policy + legal costs and damages."

Expected legal costs would be zero. The federal government has sovereign immunity, and even if it didn't the Supreme Court has ruled time and again that citizens have no legal claim on social security or medicare benefits.

The Obama administration has always had the ulterior motive of creeping government involvement in healthcare until the entire sector is socialized. The "settlement" is simply a convenient excuse for them to go forward with their plans bypassing congressional approval.

Yeah, who is the actual defendant?

It is so weird how people slip seamlessly between a public choice view and the "government R us" view,

Under US Law isn't the Govt. immune from Class Action Suits? Why did they have to settle?

I don't see why that would be:

Political rhetoric isn't about policy?

"how much the settlement might cost the government": not a penny. Might cost the taxpayer a few bucks though.

putting on my Fraktian health economist cap: "public funds may in fact increase as a result, but perhaps the total public + private monies spent on skilled nursing and home health care under this new policy will be reduced as a result of Medicare's market power in commanding reimbursement rates and prices."

me: I don't buy it, and there is much that is unseen in this case, such as the shift in the basket of services provided, the quality of services given the new reimbursement rates, etc


Yeah, I really don't buy it either. The alternative to, for example, public expenditures on continued speech and physical therapy for elderly stroke victims showing no signs of progress is not private expenditures on the same services, but rather, *no* expenditures at all on what are often futile, expensive, end-of-life treatments. The new criteria, to me, sound almost unfalsifiable (sort of like 'jobs saved or created'):

Medicare will pay for such services if they are needed to “maintain the patient’s current condition or prevent or slow further deterioration,” regardless of whether the patient’s condition is expected to improve.

We have two competing ideas about how to control the fiscal costs of Medicare, the Ryan idea of capping the annual voucher and requiring the beneficiary to pay any additional cost, and the ACA idea of jiggling the reimbursement rates/conditions. Either could work in theory. Both are subject to pressure from beneficiarias/insurance companies/service providers to make cost control less effctive. A judgement between the two requires both an analysis of how each would workd in principle, AND how each would work in political reality. My personal judgememt is that ACA idea holds more promise. It at least has and entry point for a tenchical analysis of the cost/benefit of treatment type/condition on the margin.

That's crazy. In a voucher system, all the special interests can do is lobby for a higher voucher amount. How could that NOT work better than the ACA?

Exactly. Make the costs explicit.

One single talking point shared and repeated by all interest groups diminishes the effectiveness of lobbying/advertising?

It's no problem at all. All we need is for these people to be mandated to have paid into a "lock box" to pay for their care. And since we don't have a time machine, it's no problem, all we need is to make their children pre-pay for their own future care, passing through pay-as-we-go to these current folks, into the lock box.

Children have always taken care of their parents when they get old, that is one of the reasons people use to have lots of children.

My mother's a home health nurse (I've talked about her here before) and she would say doing this would be a disaster. They don't have enough nurses, physical therapists, or occupational therapists as is and are perpetually slammed. She's told me before about how resources are wasted trying to give OT and PT to elderly patients with severe Alzheimers who are never going to benefit from it. If the requirement was lifted entirely it would get even worse.

Actually, my mother thinks the whole healthcare law is a disaster waiting to happen because we don't have the medical infrastructure to deal with it. Few doctors want to take medicare patients because the reimbursements are so small. Nursing is ridiculously hard work for low pay for someone with a four year science degree. The US has had a chronic nursing shortage for years (my mother was recruited from another country 30+ years ago) but hospitals still find themselves laying people off because they can't afford them.

Exactly. The problem was never "the system" or "the insurance companies." The problem was always under-supply of healthcare practitioners and services. People who supported/support the ACA should be forced to answer for their ignorance.

'The problem was always under-supply of healthcare practitioners and services.'

And yet strangely, in health care systems in other nations that pay at least a third less (in some cases, easily half as much), this is not true.

However, it is true that those same countries suffer from a noted lack of insurance billing specialists. And they have no plans to create a market for them, either.

The claim that medical under-supply isn't present in other countries is patently ridiculous. I'd elaborate, but doing so is exactly as valuable as attempting to "prove" that the color of the sky is blue.

There's a severe shortage in other countries, especially those with larger populations (and even some with small populations). I have a good number of stories, but we know what Tyler says about using stories to illustrate a point. Regardless, wasn't there a candidate during the last English campaign cycle who was running on a platform of changing patient wait times for specialists from 8 months to 8 weeks? Also, New Zealand publishes how many knee surgeries, etc the government has budgeted for each year. If they budget for x hip replacements and you're number x+1 on the list, you're not getting it, from what I understand.

Seriously, working in medicine sucks. Managing medicine probably sucks more.

Most OECD countries have more physicians per capita than we do.

We are in the middle for nurses.

Yes, without some form of rationing / resource allocation / SOPs / best practices / death panels we are all doomed taxpayers as baby boomers get older. This can be done in a variety of imperfect ways, but we need to pick one of those imperfect ways.

Almost all doctors take Medicare...perhaps if you're a celebrity doctor who can afford to charge patients huge prices and decline all insurance or if you're a plastic surgeon who would normally have few older patients to begin with but for most doctors Medicare keeps the waiting room filled.

As for a 'shortage' of healthcare professionals....look at over the last ten years the portion of people who worked in health care went from about 8% to over 10%. Why would you not think that employment would simply expand in the health care sector to meet demand? It's not like we have a shortage of people.

As a practicing PT, my experience is that the rules and regulations placed on the provider allow for minimal innovation in PT care delivery and stifle any chance at progress via threats of Federal prison for attempt to do so....reality is the documentation hoops we jump through take so much time and attention there is little time or incentive to innovate regardless....

I think to call this cognitive dissonance might be a cheaper shot than you normally do. We know there are managed systems which cost much less per patient than ours, and so we can try harder. The dissonance would be to punt.

Being an expert in the financing and operations of all of the above services, this will provide more treatment and will raise costs significantly.

The potential savings may occur from reduced hospital admissions and some shorter inpatient skilled nursing stays.

"Being an expert in the financing and operations of all of the above services, this will provide more treatment and will raise costs significantly."

Except that Obamacare is predicated on significant cuts to providers.

Ironic how some of these comments

About Futile Care or Care Which Doesn't Improve

Are from folks who falsely talked about IPAB and

Death Panels.

This is an absolute nightmare for people who could really benefit from these services. It's not like we have a bunch of excess capacity in these areas.

My father was in and out of this type of coverage in Medicare for 2 years. I can definitively say this will cost a ton of money. The requirement for some hope of improvement served as a coverage limitation for skilled nursing and rehab. These services can cost $5,000-10,000 for monthly skilled nursing and a similar amount for rehab services.

This ruling expands coverage and consequently will drive up costs on two fronts. Obviously, there will be more people taking advantage of the service and so the quantity of participants will increase. However, there isn't sufficient capacity (at least in my town) when it comes to skilled nursing facilities. Lack of capacity will drive up costs.

One more factor is the duration of coverage. Currently, you are only allowed to be on this type of coverage for 90 days. I would guess they will expand that window, if they haven't already.

Bottom line, billions of dollars in additional Medicare costs have just been approved.

If they are not going to get better, let them die.

If they are not going to get better, let them pay for their own extended lifespans at the ludicrous cost of 10k/mo. If they can't, then let them die.

So many people think that lives are, under all circumstances, worth more than arbitrarily large amounts of resources. Medical advances are made and then people demand that everyone must be able to take advantage of them even before their costs drop to reasonable levels. In light of this, the wisest health care cost cutting strategy is to outlaw medical advances.

Money bandages the aged as cotton bandaged Egyptian mummies.
About half the federal budget goes to the Zero Marginal Product (ZMP) aged
-- social security, medicare, half medicaid,
military veterans administration, military retirements, ...

As we invest less in children, less in college education,
and sink more in the ZMP aging
-- in spending, we must ask what is our goal?
It isn't to maximize GDP, but appears to satisfy some unspecified morality.

Here are some dominions of morality,
1. Person-to-person -- classical morality
2. Business
3. Aged-treatment
Business morality works well, but does not give kindness to other businessmen.
Apparently, aged-treatment morality follows person-to-person morality.
Even if we could afford a kindness in aged-treatment morality,
by ridding ourselves of this kindness, we can greatly improve our GDP.
Yes, economics really can be a dismal science.

Some medicare plans and vouchers are very helpful to increase health care costs. We have to identify plans like this so that we can decrease increase in health care costs.

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