Healthcare Financial News

During his weekly address to the nation on Saturday, June 13, President Obama announced a Medicare and Medicaid savings proposal that would contribute another $313 billion to the $635 billion already identified in the administration’s FY2010 budget to fund healthcare reform over the next 10 years. With the addition of the new proposed savings, Medicare’s Hospital Insurance Trust Fund would remain solvent until 2024, according to a fact sheet on the White House’s web site. 

The Obama administration outlined the following sources of new savings to offset the cost of reform:

• Incorporate productivity adjustments into Medicare payment updates—savings of $110 billion over 10 years.
• Reduce payments to hospitals for uncompensated care as more uninsured people obtain health insurance—savings of $106 billion.
• Save $75 billion on the cost of Medicare Part D drugs, such as by reducing drug reimbursement for beneficiaries eligible for Medicare and Medicaid.

The following changes would amount to $22 billion in savings over a decade:

• Increase the equipment utilization factor for advanced imaging such as MRI and CT from 50 percent to 95 percent so that payment reflects actual usage of imaging services.
• Implement MedPAC’s 2010 recommendations for skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals based on variables such as quality, access to care, and adequacy of payment.
• Reduce waste, fraud, and abuse by scrutinizing the practices of certain physicians.

Of the $635 billion described in Obama’s FY2010 budget to create a healthcare reserve fund, $309 billion would be realized through Medicare and Medicaid savings. Those saving proposals include reducing Medicare overpayments to insurers; improving Medicare and Medicaid payment accuracy; reducing hospital readmissions; and making a portion of Medicare payments for acute inpatient hospital services dependent on hospitals’ performance on quality.

Read the White House fact sheet.

Unless hospitals and physicians are held accountable for the cost, quality, and utilization benchmarks achieved by their best-performing peers, healthcare costs won’t be contained, states a white paper by Health CEOs for Health Reform (HC4HR), a coalition of healthcare leaders whose mission is a “willingness to transform their business models to create a more sustainable health system.”

Realigning U.S. Health Care Incentives to Better Serve Patients and Taypayers advocates that CMS pay providers outcome-driven bundled payments based on shared risk. “Providers willing to accept greater shares of the risk within a shorter time-frame should be allowed to capture a greater share of the savings,” says the report. And for providers whose costs are higher than the median and who don’t follow integrated models of care, HC4HR recommends that CMS freeze or reduce their annual update factors. Rigorous quality standards should dictate payment for high-cost and overutilized services, while only regional “Centers of Excellence” would deliver the mostly costly and resource-intensive services.

The group would also like to abandon the Sustainable Growth Rate formula for physician payments and replace it with a value-based payment system. Other reforms outlined in the white paper include changes to medical malpractice laws, regulation of insurer billing to reduce administrative costs to hospitals and physicians, and enactment of laws to give clinicians a share of cost savings from better quality and efficient care.

Read the white paper.