More Caps on Medicare and Medicaid no Solution to Rising Health Care Costs

As federal and state governments grapple with possible solutions to spiraling health care costs during what appears to be the nation’s longest recession in 30 years, the nation’s hospitals and health insurers want to make one thing clear: Neither they nor consumers can afford more cuts to Medicare and Medicaid programs.

The American Hospital Association, American Health Insurance Plans and Premera Blue Cross released a study that shows government health plans reimbursement caps to hospitals and doctors were passed onto private insurers, costing employers and consumers nearly $90 billion more a year in health care payments. That equates to $1,788 in added cost to cover a family of four, including nearly $675 in direct spending from the family.  

“What we’re trying to show here is simply reducing payment in health care will not lower costs,” said Robert Zirkelbach, AHIP’s spokesman. “That’s only passing the cost through the system. Ultimately, it’s the consumer and employer who will end up footing the bill.”

It’s no coincidence that the study was released a day before President Elect Barack Obama officially named former Senator Tom Daschle to lead the Department of Health and Human Services and oversee a new White House Office of Health Reform.  Daschle, who recently authored “Critical: What We Can Do About the Health Care Crisis,” has said he will write the health care plan Obama submits to Congress, and he hopes it will be  enacted by the end of next year.

Health Policy experts say -- economic challenges aside -- the mood in Washington is better than ever to act on real health care reform.  Earlier this week, Senator Ted Kennedy even gave up his chairmanship of the powerful Senate Judiciary Committee to devote more time to leading the health reform effort in the Senate.  

With some health care policy experts predicting lawmakers will look for savings inside the health system, the nation’s hospitals and health insurers are more motivated than ever to be a big part of the discussion.  As is, industry experts say Medicare and Medicaid reimbursements are contributing to hospitals’ uncompensated care expense, which increased 8 percent in the third quarter, when compared to the year ago period.

Meanwhile, a study released Tuesday by the CSC, a health care technology provider, said nearly 55 percent of hospital participants have had revenue cuts from Medicaid payments and many are beginning to prepare for increases in uncompensated care.

The AHA and AHIP acknowledged that higher reimbursements to hospitals and providers can’t be the only solution to what financially ails them.

So what are the organizations doing to hold down costs?

Caroline Steinberg, the AHA’s vice president of trend analysis, said hospitals are still trying to figure out the best solutions, but many are focusing on reducing utilization by implementing programs to improve patient wellness and coordinate better after care for patients released from the hospital.  

The AHIP, meanwhile, has said it will guarantee insurance for all individuals if lawmakers require everyone get insurance.  In its health reform plan released last week , the AHIP is calling on lawmakers to allow individuals to use pretax dollars to pay for health care coverage and subsidize low income adults and children who can afford coverage on their own.

“We know the system is broken. But we’ve tried (reimbursement) capitation and putting pressure on doctors,” Steinberg said.  “Now is not the time to cut more because it puts more pressure on employers and employers are cutting benefits for their own business reasons.”