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Are we saving or spending money with PPACA?

March 15, 2013 by

Will the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) PPACA actually save money? Will it do as President Obama promised and curb spending while providing health care for many more individuals? Or will it, as Senator Jeff Sessions (R-Ala.) states, cost the government $6.2 trillion? Although the recent GAO report says the answer is “depends,” the Congressional Budget Office (CBO) recently reviewed its estimates claiming that Medicare and Medicaid spending will decrease substantially. So, who do you believe?

In a hearing in late February, Sessions stated that “According to GAO [Government Accountability Office], under a realistic set of assumptions, the health care law will increase the deficit by…roughly $6.2 trillion over the next 75 years.” Sessions requested that the GAO estimate what would happen if the cost containment provisions in the law, such as the Independent Payment Advisory Board, excise tax on high-cost plans, and reductions in Medicare payments to providers  are “phased out over time” while the coverage provisions remain. Given this set of circumstances,  the GAO concluded that if the portions of the law that were specifically designed to keep costs under control don’t go into effect, then the law won’t be effective in lowering health care costs.

The same GAO report, however, also concluded that if “both the expansion of health care coverage and the full implementation and effectiveness of the cost-containment provisions” are sustained, “there was notable improvement in the longer-term outlook.” It was only by completely phasing out the cost savings mechanisms of PPACA that the report provided the estimates it did.

Even under the most optimistic simulation, the GAO noted the country’s spending on health care is not sustainable over the long haul. According to the report, federal health care spending is expected to continue growing faster than the economy. In the near term, this is driven by increasing enrollment in federal health care programs due to the aging of the population and expanded eligibility. This targets two programs, Medicare and Medicaid, which, under a new CBO report, the outlook remains positive.

On February 5, the CBO released a report actually reducing its estimates of spending for the Medicare and Medicaid programs compared with its estimates in the August 2012 baseline. For the 2013–2022 period, CBO estimates projected spending for those programs is now $382 billion (or 3.5 percent) below the agency’s prior estimates in August 2012.

CBO Director Doug Elmendorf recently commented in a blog post that three types of developments might cause the CBO to revisit its projections: (1) enacted legislation, (2) updates to the economic forecast, and (3) technical changes.  Technical changes, which have a hefty impact on spending,  accounted for a total of $373 billion. The legislative and economic changes, Elmendorf noted, accounted for $9 billion. The biggest noted decrease projected by the CBO is for Medicaid spending. For the 2013–2022 period, CBO has reduced its estimate of Medicaid spending by $239 billion (or about 5.5 percent) compared with its estimate in August 2012. As for Medicare, CBO has reduced its 10-year projections of outlays for Medicare by $143 billion (or about 2 percent). No matter how you look at it, estimates for health care spending look to decrease over the next several years.

Filed Under: Congressional Budget Office, Government Accountability Office, Health care spending, Medicaid, Medicare, Patient Protection & Affordable Care Act

Hospitals’ Price Quotes for Hip Replacement Surgery Vary by Over $100,000

February 13, 2013 by

Hospitals either could not provide a price quote for total hip replacement surgery or quoted prices that varied by over $100,000, according to a study the Journal of the American Medical Association (JAMA) published on its Internal Medicine website, titled “Availability of Consumer Prices From US Hospitals for a Common Surgical Procedure.” Now that consumers are being asked to help keep health care costs down, the JAMA researchers, posing as typical consumers, wanted to see if they could get hospital price estimates on a common elective surgical procedure as well as whether prices would vary widely.

JAMA Study

The JAMA researchers randomly contacted two hospitals from each state and Washington, DC that perform hip replacement surgery as well as the 20 top-ranked American orthopedic hospitals. They asked about the price of the surgery for a 62-year old woman without health insurance. The researchers received complete price information from nine top-ranked hospitals and from 10 non-top-ranked hospitals, and they were able to piece together complete price information from three more top-ranked hospitals and from 54 non-top-ranked hospitals by contacting physicians and hospitals separately. Thus, they did not receive complete price information from 46 hospitals out of the 122 studied. The complete prices quoted varied widely for both top-ranked hospitals, ranging from $12,500 to $105,000, and for non–top-ranked hospitals, ranging from $11,100 to $125,798.

JAMA interviewers used a standard script and telephoned hospitals, asking about total out-of-pocket costs for their uninsured 62 year old “grandmother.” Each hospital was contacted up to five times to obtain pricing information.

Conclusions

The JAMA study concluded that it is difficult for patients doing comparison shopping to obtain price information. Hospital representatives, who were often confused and uncertain, could not provide reasonable price estimates. Less than one-half of top-ranked hospitals and one-third of non–top-ranked hospitals were able to provide a complete price during the first or second telephone call. The JAMA study noted that it is now much easier for consumers to research hospital rankings and quality of care results than pricing information. The JAMA study also noted that its findings mirror a 2011 Government Accountability Office study on the difficulty in obtaining hospital pricing information.

Filed Under: Government Accountability Office, Medical Coding, News

Fiscal Cliff Legislation Could Revamp Long-Term Care

January 11, 2013 by

The legislation avoiding the fiscal cliff,  the American Taxpayer Relief Act of 2012 (ATRA),  included 29 provisions affecting Medicare, Medicaid or other healthcare programs.  Other than altering the physician fee schedule to avoid a massive reduction in payments to physicians, the majority of these measures extended provisions that would expire in 2012 to 2013 or  made budgetary tricks like altering Medicaid disproportionate share payments in 2021 and 2022–those payments will undoubtedly be altered before they go into effect 9 years from now, thereby having no impact at all on hospitals.  Two  sections of the ATRA 2012, however, have the potential to dramatically change how long-term care is provided in this country. Section 642 of the ATRA repealed the Community Living Assistance and Services and Support (CLASS) program  which was included in the Patient Protection and Affordable Care Act (PPACA)(P.L. 111-148), and section 643 of the ATRA establishes a Long-Term Care Commission that has some interesting powers.

LTC Commission

The Commission is to develop a plan to establish, implement, and finance a high-quality long-term care system that ensures the availability of long-term care services and supports for individuals with substantial cognitive or functional limitations. Within 6 months of the appointment of the 15 member Commission, the Commission is to make a report that includes legislative language to carry out their recommendations. That language is to be introduced in the Senate and House within 10 days of the Commission’s approval of its report.

The Commission’s report is to examine the interaction of long-term care services in Medicare, Medicaid and private insurers.  The Commission is to make recommendations to improve those systems and the availability of long-term care in general.  It is to take into account demographic changes, as well as the potential for the development of new technologies, delivery systems, or other mechanisms to deliver long-term care.

To complete its work, the Commission has been given an appropriation of  10 percent of the remaining amount of $6 billion for a program to create qualified non-profit health insurers which is also being defunded by the ATRA.  The Commission is to work with the Medicare Payment Advisory Commission (MedPAC) and other groups.  Members of the Commission are to include individuals who represent the interest of  consumers of long-term care services, older adults, individuals with cognitive or functional limitations, family caregivers, healthcare workers from long-term care providers, private insurers, employers, and representatives of state Medicaid agencies and state departments of insurance.  The Commission can hire staff and ask for studies by the General Accounting Office  and the Congressional Budget Office.

CLASS Repeal

The Commission was created as way to find an alternative to the CLASS program, which was repealed by  the ATRA of 2012.  The CLASS program was designed to help individuals receive long-term care services in their homes.  Under CLASS, people would have  paid a premium and then received a cash benefit of not less than $50 per day, with which they could purchase long-term care services.  On October 14, 2011, the HHS Secretary suspended activities implementing the CLASS program for financial reasons.  A report by HHS determined that the CLASS program was not actuarially sound, meaning that it could not raise enough revenues to pay for the benefit.

PPACA Funding

A larger problem with the repeal of the CLASS program is that when PPACA was adopted, the Congressional Budget Office (CBO) estimated that CLASS would generate significant savings to the Medicare program and additional revenue that was used in determining how much PPACA would cost or save the government.  CBO estimated that the CLASS program would result in savings of  $70.2 billion to the Medicare program over a 10 year period.  In addition, CBO estimated that CLASS would generate $83 billion in premiums  during the 2012-2021 years. All of that money and expected savings are now gone.

Costly Care

HHS reported on the need for changes in how long-term care is provided primarily because it is so expensive. In its report on the actuarial soundness of CLASS, HHS stated that the cost of nursing home care can be $70,000 to $80,000 per year and that people who obtain long-term care services in their homes spend about $1,800 a month on those services.  These expenses are not covered by Medicare and are only covered by Medicaid once a person has spent all of their money and sold a number of assets.

Filed Under: Centers for Medicare and Medicaid, Congressional Budget Office, Government Accountability Office, Government Document, Health care spending, HHS, Legislation, Medicaid, Medicare, Patient Protection & Affordable Care Act, Skilled Nursing
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