Medicare

Regardless of whether you agree or disagree with his politics, you gotta give the guy credit for timing.  Quoting the New York Times:

Senator Edward M. Kennedy returned to the Senate on Wednesday for the first time since being sidelined with cancer and was greeted by a bipartisan barrage of whoops, cheers and applause before savoring a legislative triumph.[…]

“I return to the Senate today to keep a promise to our senior citizens,” Mr. Kennedy said in a statement released by his office, “and that’s to protect Medicare. Win, lose or draw, I wasn’t going to take the chance that my vote could make the difference.”

The bill would block a 10 percent cut in Medicare payments to doctors because of a statutory formula that reduces payments to doctors when spending would otherwise exceed certain goals.

Admittedly he returned to help pass a bill that aggravates Medicare’s dire financial condition…but still, dropping in after some chemo to help ensure your doctor gets paid is a rather dramatic statement.

(In fairness, I should point out that the bill’s failure also wouldn’t have addressed Medicare’s problems, thus supporting my belief that Congress doesn’t really care about doing the right thing; they just want to look good for their constituents.)

I wrote earlier that the wackiest Democratic Presidential contender, Dennis Kucinich, introduced a House resolution calling for impeachment of the President.

A Moment of Truth has posted a copy of Kucinich’s resolution, and I couldn’t help but notice part of the reason he’s calling for Bush’s impeachment:

A Medicare Actuary who possessed information regarding the true cost of the plan, $539 billion, was instructed by the Medicare Administrator to deny Congressional requests for it. The Actuary was threatened with sanctions if the information was disclosed to Congress, which, unaware of the information, approved the bill. Despite the fact that official cost estimates far exceeded $400  billion, President Bush offered assurances to Congress that the cost was $400 billion, when his office had information to the contrary. In the House of Representatives, the bill passed by a single vote and the Conference Report passed by only 5 votes. The White House knew the actual cost of the drug benefit was high enough to prevent its passage. Yet the White House concealed the truth and impeded an investigation into its culpability.

In all of these actions and decisions, President George W. Bush has acted in a manner contrary to his  trust as President, and subversive of constitutional government, to the prejudice of the cause of law and justice and to the manifest injury of the people of the United States. Wherefore, President George W. Bush, by such conduct, is guilty of an impeachable offense warranting removal from office.

Man, I did not expect to see an actuarial reference in that document.

Seriously, the document is interesting enough to merit a quick skim-through.  I seriously doubt that many of the points Kucinich raises really rise to the impeachment threshold of “high crimes and misdemeanors”, but the recitation is a decent, if somewhat biased, reminder of the antics that have transpired over the past 7½ years.

Behind the very public calls for universal health care to be The One True Solution to the American health care crisis, and my own Cassandra-like observations that underlying inflationary patterns are being ignored, some folks have pointed out that another piece of the puzzle might be found by looking at how medical professionals are compensated.

Oversimplifying, compensation seems to be driven by how many “things” a care provider does, multiplied by the relative trendiness of those things.   That math appears to be driven in part by ripples from Medicare reimbursement schedules.  And, if those schedules are prescribed by bureaucracy, rather than emerging out of free market forces, a logical consequence is that you’ll find more medical professionals interested in doing a lot of trendy things, while professionals working in a more mundane mode will see their income suffer.

This concept, I have to admit, I hadn’t really thought much about.  But, a recent Wall Street Journal article (subscriber link) has started to remedy that.   Quoting from the article:

A discipline built on spending time with patients to gather clues for a diagnosis, neuro-ophthalmology could become another casualty of a medical payment system that favors high-tech procedures over low-tech exams. The median income of a neuro-ophthalmologist at a teaching hospital is $200,000, according to the North American Neuro-Ophthalmology Society. That’s a third less than most general ophthalmologists, who undergo less training but can see more patients, and do more pricey procedures, in a given day.

Many in health-policy circles have focused on how the current health-care payment system is helping create shortages among primary-care doctors, internists and others on the front lines of medicine. But often lost is how the system is endangering some of the country’s most highly trained specialties as well.

Endocrinologists, rheumatologists and pulmonologists — specialties that also don’t involve performing many procedures — face acute shortages. Many of the severest deficits affect children. Though nearly 300,000 children in the U.S. are diagnosed annually with juvenile arthritis, lupus or other complex rheumatic diseases, there are fewer than 200 pediatric rheumatologists to take care of them, according to the U.S. government’s Health Resources and Services Administration.[...]

For two years, 68-year-old Al Purdon says he searched for a diagnosis for his persistently drooping eyelid. A visit to an optometrist led to a referral to an ophthalmologist and six more doctors, including an endocrinologist and a plastic surgeon. (Optometrists complete a four-year postgraduate program; ophthalmologists have a medical degree.) Several scans, a surgery and a biopsy later, Mr. Purdon says his eye still drooped, his Medicare had spent $10,850 on bills and there was no diagnosis.

Frustrated, Mr. Purdon and his wife went in early 2007 to Dr. Frohman. Dr. Frohman “took one look and said, ‘I think I know what it is,’” Mr. Purdon’s wife, Johannah, says. A series of seemingly basic tests, some questions and a blood sample later, Dr. Frohman diagnosed Mr. Purdon with myasthenia gravis, an auto-immune condition that impedes signal transmission from nerves to muscles throughout the body, but often first in the eyes. Medicare paid $220 for the visit, and Dr. Frohman said he’d continue to monitor the condition.

Mr. Purdon’s prior treatments may pose another risk. Because myasthenia can go into remission, doctors say the eye-lid surgery Mr. Purdon had can sometimes overcorrect the lids and make them appear to bulge.

The subject resonates with me in no small part because of what my wife’s been through in the past several years.   Folks who have read my writing are probably aware that she was in a car accident and suffered a freak brain injury.  However, because of the interrelationship of her symptoms, aggravated by limitations on her ability to communicate, it took us a couple of years to find a doctor willing to sit and take the time to start peeling back what all was going on with my wife until a couple of years later we actually got fairly robust set of diagnoses.

You know, there is something rather intoxicating about living in a society that is exciting, fast-paced, and highly reactive.  Something happens, and we quickly react to it, and hurry on to the next development.

However, there is something to be said for stopping, looking at the environment around us, and taking the time to really contemplate the complexities of what is going on, thereby hopefully gaining better understanding of what is happening.  That is a shame, because reacting without understanding can introduce inefficiencies, or undesirable unintended consequences.

One of my biggest fears about our seeming rush to universal health care is that it seems to me to be a “solution” prescribed without understanding the full problem.  Moving more people into a system where professionals have an incentive to react, rather than to diagnose and to fix, would likely aggravate some of the health care issues the country faces.

I’m enough of a social liberal that I love the idea of ensuring that everyone has access to a basic level of healthcare.  But unless some of the inefficiencies and inflationary pressures are addressed, and until there’s been a good, honest public discussion over the pros and cons of different levels of universal care versus the costs associated with that care…the path political inertia seems to be moving us down is going to have a very ugly fiscal surprise waiting for us around the next bend.

Seen at the Washington Post:

Trustees for the government’s two biggest benefit programs warned Tuesday that Social Security and Medicare are facing “enormous challenges” with the threat to Medicare’s solvency far more severe.

The trustees, issuing a once-a-year analysis of the government’s two biggest benefit programs, said the resources in the Social Security trust fund will be depleted by 2041. The reserves in the Medicare trust fund that pays hospital benefits were projected to be wiped out by 2019.

Both those dates were the same as in last year’s report. But the trustees warned that financial pressures will begin much sooner when the programs begin paying out more in benefits each year than they collect in payroll taxes. For Medicare, that threshold is projected to be reached this year and for Social Security it is projected to occur in 2017.

In English, that last paragraph means that this year, Medicare will have to start drawing upon its trust fund to pay the bills. Of course, since the Medicare trust fund has already been spent to fund other government priorities, cashing in the IOUs the Treasury left behind means that the feds will have to borrow that much more….

Every year the federal government stalls in addressing the projected shortfalls, the harder it will become to avoid them. The menu of choices available to address the funding issues has been well-known for years. However, politicians seem far more enthusiastic about playing politics than in actually making the tough decisions required.

So, remember how a move towards universal healthcare is supposed to reduce costs to society?

Remember my concerns about such a system inviting government intervention into citizens’ private lives and/or bureaucrats rationing treatment in the interest of keeping the budget under control?

Seen at the Telegraph, in a story about the British National Health Service:

Doctors are calling for NHS treatment to be withheld from patients who are too old or who lead unhealthy lives.

Smokers, heavy drinkers, the obese and the elderly should be barred from receiving some operations, according to doctors, with most saying the health service cannot afford to provide free care to everyone.[...]

Gordon Brown promised this month that a new NHS constitution would set out people’s “responsibilities” as well as their rights, a move interpreted as meaning restrictions on patients who bring health problems on themselves. The only sanction threatened so far, however, is to send patients to the bottom of the waiting list if they miss appointments.

If you’ve been reading my blog for a while, you’re probably aware that one of my pet peeves with Washington is the degree to which it’s neglecting the financial prospects of Social Security and Medicare.

The key dates for Social Security have been reasonably widely distributed:  The most recent forecasts project that in 2017, Social security will have to begin tapping interest income from the OASDI trust funds in order to maintain operations.   In 2027, it is projected that the OASDI trust fund itself will have to be tapped.  And in 2041, it is expected that the trust fund will be exhausted, and revenues will be able to fund only a portion of projected benefits.

(The real situation is more complex, since the retirement and disability sides of Social Security technically have different accounts.  Disability’s dates are 2005/2013/2026, while Retirement’s are 2018/2028/2042.)

For Medicare, the magic dates are less-well known.  In 2007, Medicare is expected to have had to tap interest income from its trust fund to satisfy its obligations.  In 2011, the Medicare trust fund is expected to be tapped.  And, in 2019, it’s expected that the Medicare trust fund will be exhausted.

In the past couple of years, there has been quite a bit of discussion about the nature of the trust funds — do they “exist” or not.  From my perspective the “existence” / “non-existence” of the trust funds is a question of semantics.  The accounts exist, but the federal government has borrowed against them to reduce the appearance of a budget deficit.   When the trust funds are tapped, the feds will have to pay themselves back, via some combination of revenue increases, a reduction in spending, and external borrowing.

In plain English — starting this year, paying for past borrowing begins to become an increased drag on the federal government’s budget, and without something happening, it’s going to get worse.

Sadly, the nature of American politics is such that politicians tend not to think beyond the next 2, 4, or 6 years…and future budget crises don’t seem quite as important as winning that next election.  That’s a shame because as time drags on, the challenge of addressing the forecasted shortfalls will grow exponentially.

In an ideal world, Washington would have already done something about this by now.  I’d like to think that the winners of this year’s elections will take on the challenge.   But I won’t hold my breath.

For Social Security, the potential fixes are known.  They include:

• Increasing the OASDI tax rate;
• Adjusting the cap on earnings subject to OASDI tax;
• Increasing the age at which one becomes eligible for partial or total social security benefits;
• Reducing the rate of future increases in social security checks for some or all beneficiaries; or
• Some combination of the above

The challenge is reaching political consensus on which of those options, or what combination of those options, are most palatable to the country.   Heck, if the Executive and Legislative branches didn’t want to make the tough call, they could simply survey the country, asking which option(s) would citizens prefer, and allocate the fix based on the survey.

(I personally don’t have a strong preference.  I’d just like the powers-that-be to pick one and move on, so I can plan accordingly.)

For Medicare, the challenge is somewhat tougher, and is (or at least should be) wrapped up in with the larger health care debate going on.  We as a society seem to believe that Americans are entitled to the most advanced health care and newest medications.  Are we as a society willing to pay the cost?  Or, is there a way to better manage that cost.  Or, does everyone need the most expensive treatments from the get-go?

In the past couple of years, there was talk of “private accounts” as being part of the solution for the Social Security mess.  Personally, I don’t think anyone with a couple of ounces of actuarial or financial sense believed that private accounts were the solution.  I’m not necessarily opposed to the idea of private accounts — personally, I’d rather invest my retirement savings rather than letting it sit as a piggy bank for the Treasury to drain — but that sort of a change would need to be implemented as one part of a larger reform effort.

These are some of the items I’d like to see the next President and the next Congress tackle in 2009 (or even during lame-duck season late in 2008), if only they could take a moment or two out of their busy 2010/2012/2014 reelection campaign schedules to do so.

As seen in an AAA press release:

The American Academy of Actuaries will discuss reform options to address Medicare’s and Social Security’s financial challenges during a series of briefings on Capitol Hill. The Academy will also highlight both programs’ recent trustees’ reports and the need for reform. During the first session, the Academy will present its new monograph on Medicare reform options—a compilation and overview of options for public policymakers to consider when addressing Medicare’s short- and long-term financial difficulties. During the second session, the Academy will review its monograph on Social Security reform options, which provides a broad range of options for reform as well as the implications of these options on overall program finances and participants in various circumstances.

If I’m not mistaken, the monographs in question are available on the AAA website (Medicare and Social Security).

It’s nice to see the gospel being preached. However, given that we’re already seeiming to be in full swing on the ‘08 presidential election campaign (only 514 days left!), I doubt that Congress will have the courage to touch this particular political third rail and enact reform.

USA Today ran a front page story Tuesday discussing one manifestation of the federal government’s accounting magic:

The federal government recorded a $1.3 trillion loss last year - far more than the official $248 billion deficit - when corporate-style accounting standards are used, a USA TODAY analysis shows.[...]

Bottom line: Taxpayers are now on the hook for a record $59.1 trillion in liabilities, a 2.3% increase from 2006. That amount is equal to $516,348 for every U.S. household. By comparison, U.S. households owe an average of $112,043 for mortgages, car loans, credit cards and all other debt combined.[...]

This hidden debt is the amount taxpayers would have to pay immediately to cover government’s financial obligations. Like a mortgage, it will cost more to repay the debt over time. Every U.S. household would have to pay about $31,000 a year to do so in 75 years.

The Financial Accounting Standards Advisory Board, which sets federal accounting standards, is considering requiring the government to adopt accounting rules similar to those for corporations. The change would move Social Security and Medicare onto the government’s income statement and balance sheet, instead of keeping them separate.

That the federal government does its bookkeeping using rules that differ from the rest of the country’s standards is not news. However, it’s good to see a major newspaper point out the difference, and the magnitude of the real debt level, on its front page.

I’d hate to be the President or sitting on the majority’s side of the aisle in Congress if/when FASB forces the change. However, I wouldn’t be surprised if there were executive or legislative intervention against any such shift.

Seen at WSJ.com (subscriber link):

The U.S. Social Security trust funds are expected to be exhausted by 2041, a year later than last year’s estimate, while the Medicare trust fund is projected to go broke by 2019, also one year later than 2006 projections, according to the latest annual report from the funds’ trustees.[.]

“The financial condition of the Social Security and Medicare programs remains problematic,” the trustees said in the report released Monday. “We believe their current projected long-run growth rates are not sustainable under current financing arrangements.”

The trustees said “the positive effects of updates in program data and minor changes in methods and assumptions,” a change described as “technical,” helped explain the “slight improvement” in the outlook for Social Security. The improved picture for Medicare was likewise explained by minor variances, such as “slightly higher projected payroll tax income and slightly lower projected benefits than previously estimated.”

The article goes on to note that Medicare is expected to begin tapping its trust fund (read: the federal government will have to start borrowing more to pay off what it owes Medicare) this year, while Social Security benefits are expected to begin exceeding revenues in 2017.

Note to any politicians reading this: the longer you wait on a solution, the tougher it will be to implement.

Bush might actually use his veto pen, according to this wire service story:

President Bush vowed Thursday to veto Democratic-drafted legislation requiring the government to negotiate with drug companies for lower prices under Medicare.[...]

Republicans argue that individual insurance companies already negotiate lower prices on behalf of their customers and that the Democratic approach was tantamount to calling for federal price controls.

The legislation also would ban any attempt to limit the array of drugs available to Medicare beneficiaries by creating formularies. That stands in contrast to the Veterans Administration, which has lower prices for its beneficiaries but uses formularies that limit patient choice.

As annoying as formularies can be, they do play a useful role in negotiating lower prices. So although I can see where it seems foolish to prohibit Medicare from negotiating, I’m not sure that government-standardized prices across all meds is the best idea in the world either.