The Medicare Trust Fund Will Run Out of Money in 8 Years. So, Lets put More People into the Program?

By Jill Serbousek

The news coverage on Healthcare reform and Medicare can be very confusing these days. The current administration continues to tout Medicare as a model for reform. Then other reports discuss the fact that Medicare cannot be sustained without the help of the private insurance industry, who supplements a percentage of the Medicare bill. In the same Chicago Tribune article that reported the grim news about Medicare’s impending insolvency, I also found this quote: "Medicare is central to the effort to promote high-quality, affordable healthcare for all Americans," said Health and Human Services Secretary Kathleen Sebelius, a member of the Social Security and Medicare Board of Trustees.

Here are a few of my questions:

1. Does Medicare really provide high-quality care? Compared to other countries, the answer is most likely YES. Compared to private insurance? Doubtful. Medicare pays a pre-negotiated “flat fee” based on a Diagnostically Related Group or DRG. So, if you were having surgery, the hospital and surgeon will get a fixed amount to care for you. This means that they will work hard to make sure that the cost of your care fits into that fixed/flat payment. Would your younger, non-Medicare, friends receive the same care? Maybe, maybe not. Since there is no flat fee to work with, the doctor may be more willing to utilize newer technology, in many cases, more current standard of care. Even if you pay more for your Medicare coverage, as do patients who are in a higher earning category are required to do, your care will be dictated by the same pre-negotiated flat fee for your condition/procedure. In fact, those patients will pay 2 to 3 times the amount in the Part B premiums than their lower earning counterparts, for the same care. For basic healthcare needs, Medicare is probably adequate in quality. Not sure that I would characterize it as “high” quality, knowing that the flat fee forces a rationing of technologies utilized.

2. Does Medicare provide “affordable” care? It depends on who you listen to, and who you are talking about. The Sebelius quote implies that Medicare provides affordable care, so much so that it should be offered to “all Americans.” She is most likely referring to the affordability to patients. However, there are reports that estimate up to 89% of Medicare recipients have a supplement because it’s commonly known that Medicare will only pay for about half of a retiree’s healthcare costs, leaving large gaps. So, who is Medicare affordable and cost-effective for? The government? It appears that way since they are using the program to pay for only half of the participants needs.

3. If 89% of Medicare participants need a Medicare Supplement to pay for up to half of their healthcare costs, and Medicare is going broke, how does it make the program a great “model” for reform? This is the big question. I’m still doing research. Still trying to figure out why the politicians think that expanding Medicare or coming up with a Federal Health plan is a good idea. Once thing I am sure about, my confidence in the success of a federal plan is low…..

Resources worth reading:
http://newsblogs.chicagotribune.com/triage/2008/09/medicare-2009-p.html

http://www.online-health-insurance.com/health-insurance-resources/HFHC/content/medicare-supplements.htm



About Jill Serbousek:
Jill has been a marketing executive in the Medical Device industry for the past 20 years. First at Johnson & Johnson, then at Medtronic’s Spinal and Biologics business. She is a recognized expert, writer and frequent speaker on both web marketing and social networking in healthcare. Jill lives in Memphis, TN .

Link: http://www.healthandsharing.com/

Grab a Calculator the Math is Getting Fuzzy

By: Jill Serbousek

I admit to needing a calculator when doing math problems that involve multiple digits. I even resort to using a spreadsheet because my calculator isn’t great when doing problems in the trillions. So, as I read through the news reports, government reports and analyst summaries, I actually attempt to keep up with them on the math. Sometimes the methodology and assumptions are tough to understand, but the math should make sense right? The hardest part is that they never give you all of the numbers that are needed to reproduce their answers. Often the ‘denominator’ or some key factor is missing. When this occurs, I try to track down the source reports that are referenced. This is typically when I get really concerned…..

Here are some of the “facts” currently being discussed:

• An additional “$1 trillion over 10 years will be needed to cover the uninsured”, however, according to the Congressional Budget Office “36 million people would still be uninsured.” I need help understanding this one. Why would we change our entire healthcare system to compound the cost and not even take care of those that were supposed to receive help?

• Obama stated that the government could save $106B by cutting federal payments to hospitals. Wouldn’t cutting federal payments further hinder the Medicaid program’s success in caring for it’s participants?

• “…cost control (is) a coequal objective, just as important as the expansion of insurance coverage…” according to Rahm Emmanuel. Nobody will argue that reducing/controlling costs should always be a focus. However, I have yet to read an article where the government is willing to evaluate the costs that they directly impose on the healthcare industry. According to Christopher Conover, in 2004 the government imposed nearly $340B per year on regulation of the healthcare industry. I’m sure that this number has been increasing. His report also points out that almost half of this is wasteful. Hmmm… a great example of how regulation leads to increased costs. Why isn’t the government looking more closely at the cost/benefit of how they directly impact the overall costs?

• Another major cost factor that is being treated as the ‘elephant in the room’ is the cost of defensive medicine. It is unrealistic to reduce the cost of healthcare without also evaluating how the legal system drives up the cost of care with increased number of diagnostic tests, medical malpractice insurance, litigation, etc. Obama actually dipped his toe in the water with this topic, but took a cap on malpractice awards off the table. (Which, according to the reports, received a loud “boo” from the audience) Of course, he is a lawyer. Plus, one of the largest lobbying groups in America, who uses 95% of their PAC funds for the Democratic party, is the American Association for Justice. This is a fund for trial lawyers and law firms. You can learn more about all of the lobbying groups in America at Open Secrets’ website. This is an awesome and informative site.
http://www.opensecrets.org/pacs/toppacs.php?Type=C&cycle=2008

• Speaking of the costs that “defensive medicine” adds to the system, it was shocking to me that the whitehouse’s healthcare economic report does not even address the cost of defensive medicine or government regulatory costs in their self-proclaimed “comprehensive” cost report on healthcare. Not even a mention. As if the entire cost of care and coverage is the fault of doctors, insurance companies and industry. Obama had the chance to recognize that defensive medicine is the reason why doctors order “more diagnostic tests than necessary” when he spoke to the American Medical Association this week. However, he chose to blame those alleged “unnecessary” tests on the doctor’s “financial incentives.” That is a VERY broad and unproven allegation. Just ask a doctor, any doctor in the United States, about their practice costs. They will ALL tell you that the threat of being sued is their biggest worry, and the insurance to help them if this happens is one of the largest, if not largest costs. Guess who this cost is passed to? The consumers/insurance companies who pay for the doctor’s services. We simply cannot reform healthcare costs without looking at legal costs associated with medicine.



About Jill Serbousek:
Jill has been a marketing executive in the Medical Device industry for the past 20 years. First at Johnson & Johnson, then at Medtronic’s Spinal and Biologics business. She is a recognized expert, writer and frequent speaker on both web marketing and social networking in healthcare.
Jill lives in Memphis, TN and sits on the Board of Directors for several important organizations in the Memphis area, including: National Civil Rights Museum, The Church Health Center, Memphis Academy of Science and Engineering Charter School and The Leadership Academy.

Bottom line: Other Countries Cut Out Services to Reach their Low Cost Status

By: Richard G. Fessler, MD, PhD

Will a single payer health care system hold down the increasing cost of health care in the United States? President Obama and other proponents of this socialized form of health care argue that it will. Of course there are many ways to debate this question, but much objective evidence suggests that it will not. Let’s look at this from two perspectives. First, what does the comparative cost data between the United States and government controlled health care systems (such as Canada) tell us? Second, what are the financial implications of this “less expensive”, government controlled health care system for the American taxpayer?

Most international comparisons of health statistics are based on data collected by the OECD (Organization for Economic Cooperation and Development). According to the OECD, the United States spends more for its health care than any other country on earth, whether analyzed as dollars per person or percentage of GDP. One problem with these statistics, however, is that not all countries report their cost data using the same guidelines.1 Thus, often the statistics are comparing apples to oranges; or put another way, garbage in = garbage out! For example, Germany includes the cost of nursing care in their cost statistics, Great Britain does not.2 Other countries count hospital “beds” whether it is occupied and staffed or not, others only count it if both are true.3 Obviously, cost data for these countries will vary depending upon what they include and do not include.

A study by Gerald Anderson et al, published in Health Affairs attempted to more accurately assess health care costs across international borders.4 To do this, these authors calculated the average annual increase in the percentage of per capita spending on health care by OECD countries. As seen in the figure below, health care spending in nearly all of the studied OECD countries grew at about the same rate as the US, or greater! In fact, according to these researchers, the real expenditures for hospital and physician services actually decreased in the US during the 1990’s, putting the US well below the mean for other OECD countries. When you consider that the US has greater access to health care and technology, less rationing, and a host of health care stressors not seen in other countries (e.g. a higher rate of homicide, obesity, and AIDS), these results argue strongly for the “strength” of our current health care system.

Average Annual Real Growth in Per Capita Health Spending 1960-1998:
United States 2.6
United Kingdom 2.5
Canada 0.8
Australia 2.7
New Zealand 2.6
Germany 2.3
Netherlands 2.6
Japan 3.5

The figure above does show that the increase in per capita health spending was much less in Canada than any other country. What is not seen in the figure, however, is that it did this by cutting services to the extent that patient access to care was compromised. For example, block grants to Canadian provinces for health care were cut in 1986, 1989, and (cut IN HALF) in the second half of the 90’s.5 Provinces, in turn, cut funding to hospitals, cut physician fees, limited purchases of new technology, and removed coverage of some services from provincial insurance plans.5 As a result available hospital beds were reduced by 1/3 (6.6/1000 to 4.1/1000) between 1987 and 1995. 6 In Saskatchewan alone, over 50 hospitals were closed. In 2002 it was reported that the Canadian health care system was underfunded by over 5 billion dollars annually!7 Throughout this period, satisfaction with the Canadian health care system fell precipitously.

A strong argument can be made, therefore, that cost increases will not be held down by a government run health care monopoly. Moreover, it also seems likely that access to health care and health care technology will become more restricted. If the Canadian experience is repeated in the US, Americans will not be happy! The second question we wanted to address, was how much will this “less” expensive, (and inferior) health care system really cost the American taxpayer?

Estimates of the cost of the socialized health care system proposed by President Obama are not being disseminated yet, as all deliberations of his health care task force are being kept quite secret. (Wait, didn’t he campaign on a policy of transparency?) However, we can get an idea by examining the impact of policies enacted during the first 100 days of his administration. According to a study conducted by USA TODAY, it will cost EVERY American household $55,000 just to cover the commitments already made by the Federal government, and this doesn’t include the “big ticket” items such as “universal medicare”!8 The US government took on $6.8 trillion in new debt in 2008, and no end is in sight. That means that, right now, the US would already need to set aside $63.8 trillion in a lump sum to pay obligated benefits that won’t be covered by future taxes. (That’s a half million dollars debt for every household in America.) Where do you suppose that money is going to come from? When all the sleight of hand ends, it comes down to this, you either raise taxes, cut benefits (as seen in Canada above), or both. The more I study the “model” systems which President Obama’s health care policies are based upon, two things become very clear: 1) the quality of health care in the US will become significantly inferior to its current state, and 2) it will cost the American taxpayer MORE, not less! As a surgeon, my recommendation for or against surgery for every patient is based upon a realistic analysis of risk vs benefit. (In neurosurgery, you can’t afford to live in a fairy tale.) If the American public were my patient, I most certainly could not recommend proceeding down the reckless pathway proposed by our current President and his administration.

1 OE CD Health Ststems: Facts and Trends 1960-1991, “Organization for Economic Cooperation and Development, 1993.”
2 Goodman, John C., Musgrave, Gerald L., Herrick, Devon M., Lives at Risk, Rowman and Littlefield Publishers, Inc, New York, 2004, pp 78.
3 Hensher, M., Edwards, N., Stokes, R., “The Hospital of the Future: International Trends in the Provision and Utilization of Hospital Care”, British Medical Journal 319:845-848, 1999.
4 Anderson, Gerald F., “Health Spending and Outcomes: Trends in OECD Countries 1960-1998.”Health Affairs (May-June) 2000. pp 150-157.
5 Gray, Gwen, “Access to Health Care Under Strain: New Pressures in Canada Amend Australia”, Journal of Health Politics, Policy, and Law, 23:905-947, 1998.
6 Possehl, Suzanne R., “Northern Plights”, Hospitals and Health Networks 71:56-60, 1997.
7 Spurgeon, David, “Canadians Need to Spend C$5bn More a Year on Health Care”, British Medical Journal 325: 1058, 2002.
8 Cauchon, Dennis, “Leap in US Dept Saddles Taxpayers”, USA Today, Friday, January 30, 2009.


Richard G. Fessler, M.D., PhD is a professor of Neurosurgery at Northwestern University in Chicago, Illinois. He is very active in the research and development of new surgical techniques that are designed to provide patients with less blood loss, faster recoveries and improved outcomes over traditional spinal surgery. You can learn more about Dr. Fessler’s work at Northwestern University’s Feinberg School of Medicine by visiting

http://www.feinberg.northwestern.edu/news/past-years/2008/2008L-January/fessler.html