Two Ways to Limit Medicare Costs
Two Ways to Limit Medicare Costs
Medicare costs are rising a bit faster than they have during the past few years. But by reinforcing some the changes that are already occurring, we can nip this increase in the bud -- and two developments show the way.
First, hospitals are starting to more aggressively screen skilled nursing and other facilities that treat discharged patients. Second, the Medicare actuaries now have acknowledged the evidence that it's possible to reduce spending by changing the form of payment, and not just by making blunt cost cuts.
Policy makers and insurance companies have been trying to pay health providers based on the quality of care rather than how much care they provide. One example is the use of so-called accountable care organizations, which give hospitals and other providers the financial incentive and responsibility to orchestrate comprehensive treatment for patients.
Hospitals do seem to be looking in some of the right places to cut wasteful spending. An Institute of Medicine analysis in 2013 showed that spending on outpatient care is the primary reason that Medicare costs vary so much from place to place. And a more recent analysis suggested that excessive spending after a patient was discharged actually did harm. Those facilities that spent more on outpatients had worse results, including higher mortality rates, than lower-cost facilities. Skilled nursing facilities -- where about a fifth of Medicare patients go after leaving the hospital -- were the biggest offenders.
These findings suggest a lot of unnecessary spending can be cut after a patient leaves the hospital and have a positive effect on care quality. Hospitals are on to the problem based on a recent article in Modern Healthcare. There are signs that they are scrutinizing skilled nursing facilities, and trying to send patients to ones that produce better results. Doing so represents “a substantial opportunity to reduce cost and improve quality,” the head of Beth Israel Deaconess Medical Center said recently. I agree wholeheartedly.
The other encouraging development is that the Medicare actuaries have now certified that accountable care organizations are making headway in holding down costs. One such organization saved Medicare $384 million in its first two years of existence, according to Medicare actuaries. That isn't a huge amount, but stronger versions of the ACO concept have shown greater cost reductions in Massachusetts, especially as time went on. What's important isn't the finding but that the actuaries said it. Such certification is required for the Health and Human Services Department to expand various pilot programs that are testing ways of moving to new payment systems.
Let’s hope the actuaries find and certify cost reductions and quality improvements from other payment models, followed with aggressive efforts by HHS to transform the successful pilot programs into national ones. When combined with efforts by hospitals to seek out more efficient care, especially for outpatients, we might be able to beat back any renewed surge in Medicare costs.
To contact the author on this story:
Peter R. Orszag at firstname.lastname@example.org
To contact the editor on this story:
James Greiff at email@example.com