• Reflex: November 3, 2011

    Doctors will face a 27.4% pay cut from Medicare on Jan 1, reports the Associated Press. And Modern Healthcare. And Kaiser Health News. “It’s become a regular exercise in budget brinksmanship. Medicare is again warning that doctors face draconian pay cuts on Jan. 1 unless Congress acts. Officials said Tuesday it works out to a 27.4 percent cut.” Aaron’s comment: This is a spectacular waste of time. This is, of course, the SGR kicking in, until the inevitable moment when Congress blinks and passes another doc fix. Until then, expect many stories on how the sky is falling.

    N.C. Rep. Heath Shuler key in getting 100 House signatures encouraging the Supercommittee to consider tax increases, writes Alan Fram. 40 Republicans and 60 Democrats asked the Supercommittee to keep everything on the table, and to shoot for a $4 Trillion deficit reduction over 10 years. Don’s comment: The letter endorses making tax increases a part of any plan along with benefit cuts in achieving deficit reduction, and embraces past “bipartisan frameworks that achieved a $4 Trillion deficit reduction” such as Bowles-Simpson that had a balanced approach. Here is past blogging on Bowles-Simpson fromDec. 2010, and from April 2011 focused on health policy aspects of the commission. An aside: Shuler is a conservative Democrat, whose re-election will be very hard because of redistricting. There are very few Conservative Dems or Liberal Republicans left in Congress due to gerrymandering.

    The Domenici-Rivlin plan for Medicare is problematic, argues Igor Volsky. Some “seniors who choose to stay in the fee-for-service plan would be responsible for the difference between the amount of the premium credit and the actual cost of the policy. […P]rivate insurers may still be able to attract a healthier population (and thus select against sicker applicants) by varying benefits by scope.” Austin’s comment: These are valid concerns about how the Domenici-Rivlin plan would set premium support levels. Yet even under the ACA, Medicare faces a problematic future, though likely one that includes public and private plans. Both Volsky’s critiques of competitive bidding and limitations of the ACA reveal that no plan is perfect and that ongoing reforms — in the areas of cost control, private plan payment, and risk adjustment — are required.

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    • On risk adjustment (applies to Domenici-Rivlin, which I could live with), my understanding is that Medicare’s current risk adjustment system (the HCC system, or Hierarchical Condition Categories) performs acceptably well most of the time. However, it consistently underpredicts very high medical expenses. There’s also some indication that it underpredicts medical expenses among beneficiaries with disabilities. The Program of All-Inclusive Care for the Elderly (PACE) administers a survey to beneficiaries, which gathers information on disability (esp. ADL disabilities) to further risk adjust.

      In addition, PACE is getting a further adjustment for dementia in 2013 (although Don Taylor’s previous post highlights the difficulty of determining dementia from claims data, which is what the HCC is based on). In other words, HCC doesn’t currently account properly for presence of dementia.

      Basically, if the risk adjustment isn’t done right, this would leave many of the highest cost Medicare beneficiaries (including many with disabilities) in traditional Medicare, and it would penalize traditional Medicare by undercompensating the system.