Money Isn’t Everything: Changes to Medicare Focus on Cost

WomenMatter has determined that there are four factors to good health care: access, quality, choices, and cost. What happens when cost becomes the focus of the health care debate? Are access, quality, and choices compromised?

Doctors, hospitals, and health advocacy groups are worried about proposed changes to the Medicare payment system. They say that the US federal agency that administers Medicare and Medicaid, called the Centers for Medicare and Medicaid Services (CMS) are concentrating on costs and rushing through changes at the expense of health care quality and choices.

CMS plans to change the way that Medicare pays for hospital inpatient care. The Bush administration says the current system encourages hospitals to treat some patients and not others, because some treatment groups have higher reimbursement rates.

But the new plan has gotten a lot of criticism from hospitals, doctors, research pharmaceutical companies, and legislators. Over 200 lawmakers have written to CMS, pleading with Director Mark McClellan to delay the changes.

Challengers to the new system say it demands more investigation. They say the August 1, 2006 deadline is arbitrary and the changes are much too significant to be hurried. Indeed, the proposed changes are the most substantial modifications to the payment system in over twenty years.

What are the changes? And how does the system work now?

Currently, Medicare’s payments to hospitals are determined by "diagnostic related groups," or DRGs. These groups are determined by diagnoses, procedures, age, sex, and the presence of complications. There are about 526 groups total. So, when a patient is discharged from the hospital, Medicare pays the hospital a fixed fee according to that patient’s DRG. The fixed fees are updated each year to reflect hospitals’ average charges for various procedures.

The new system divides 526 DRGs into 861 groups because it subdivides some DRGs into severity levels from one to four. And the new system would base payments on average estimated costs, instead of average actual charges. Those opposed to the changes say that the cost reports used in the formula are often three to five years old, and therefore inaccurate. They say the new rules do not account for expensive new technologies, causing some of the most advanced, effective treatments to be sacrificed.

The Society for Women’s Health Research is especially concerned about this aspect of the new system because many of the treatments and devices designed for women are among the newest technological developments. They say that the new system could inhibit research and development of gender-specific procedures that could help save women’s lives.

How changes could affect people who are not on Medicare

Hospitals that specialize in the affected procedures, like heart surgery, stand to lose millions, so they will likely seek higher reimbursements from private insurers. This could make private insurance premiums go up for many. Further, Medicare sets the example for a lot of private insurers and state Medicaid programs, which may change their systems to match the new Medicare rules.

Who gets to decide?

Hospitals and health advocates are steamed because CMS allowed for a 60-day public comment period that closed June 12, 2006. They say the public should have more time to consider the policy shift, since no directly-elected representatives have power to decide the issue. The subject exposes the importance of appointments. Although we didn’t elect Mark McClellan, we elected George W. Bush, who, like every president, decides who directs important agencies like CMS, the Homeland Security Department, and the Environmental Protection Agency, just to name a few.

What do you think?

Should the Centers for Medicare and Medicaid be able to radically shift its payment formula without Congressional approval? Which of the four factors matters most to you: access, quality, choice, or cost? Or are they equal?

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Posted on: 7/21/2006