Medicare and health IT not addressed by candidates

November 4, 2008

The candidates are generally in agreement that the next administration should work toward reducing healthcare costs, delivering high-quality patient care, placing an increased emphasis on prevention, and providing coverage for an estimated 46 million uninsured Americans, but their proposals differ dramatically.

Family practitioner Tim McFarland, MD, relies on Medicare and Medicaid reimbursements for at least half of the patients he treats. Earlier this year, he borrowed $70,000 to cover his operating expenses when Medicare reimbursements lagged behind at least six months because of changes in the payer’s system.

Not surprisingly, Medicare is one of several hot-button health policy decisions that Dr. McFarland – and many in his situation – hope to see addressed in this year’s presidential election.

“For a small-town doctor, there are problems with the healthcare system in the United States,” he says.

Sens. John McCain and Barack Obama, are generally in agreement that the next administration should work toward reducing healthcare costs, delivering high-quality patient care, placing an increased emphasis on prevention, and providing coverage for an estimated 46 million uninsured Americans.

Moreover, many in the medical community are looking to the next president to inspire systemic changes that will remove the obstacles that hinder quality patient care.

A study released in March by the Medical Group Management Association listed the top concerns among physicians:

• Maintaining physician compensation in an environment of declining reimbursement;• Dealing with operating costs that are rising more rapidly than revenue;

• Selecting and implementing a new electronic health record system;

• Recruiting physicians; and

• Managing finances with the uncertainty of Medicare reimbursement rates.

Ted Epperly, MD, president of the American Academy of Family Physicians (AAFP), says those five issues – either singly or in combination – are adversely affecting patient care in the United States. And the biggest elephant in the room has garnered little attention from either candidate.

“Medicare is an issue that has been met with silence on the part of both campaigns,” he says.

As the nation’s 75 million baby boomers begin to reach retirement age in 2010, Dr. McFarland and other physicians operating under Medicare find themselves facing steady financial pressure to balance patient care and their ledgers.

Regina Herzlinger is the Nancy R. McPherson Professor of Business Administration Chair at the Harvard Business School and specializes in healthcare issues. During her last 30 years at Harvard, she has seen the number of experienced physicians getting an MBA in order to pursue another career grow exponentially. That’s because careers in primary care fields that were once considered profitable and rewarding are less so today.

“There is a belief in Congress that doctors are extremely well paid, and if you take a haircut, well it’s no big deal,”

Herzlinger says.Herzlinger says that the looming Medicare payment cuts would likely have immediate and long-term effects on access to appropriate care. Below-market reimbursement, she says is a leading disincentive for those entering or remaining in the field of geriatric medicine, for example.

Josie R. Williams, MD, is a gastroenterologist and president of the 47,000-member Texas Medical Association, the largest state medical group in the nation.

For primary care physicians, “especially for those working in the inner cities and rural areas, there is very little financial relief,” Dr. Williams says. She notes that primary care physicians in Texas make an average of $145,000 two years after leaving medical school. That figure is less than half of what, for example, an average dermatologist may earn in a year.

In the coastal town of Port Lavaca, Texas, Dr. McFarland says compensation for his services has varied greatly.

“I’ve been paid by patients in shrimp, chicken and frog legs,” he says.

Laurence Kotlikoff, a professor of economics at Boston University who studies healthcare, believes that even with recommended pay cuts for physicians, there is no fiscal silver bullet to cure the long-term ills of Medicare, which will cost an estimated $500 billion to administer this year.

“[The candidates] have no plans to contain the costs of Medicare or Medicaid, which are exploding and will surely bankrupt the country,” Kotlikoff says.

Medicare Part D is another issue that the candidates have not weighed in on, but is a growing concern. The AMA last August called for the federal government to simplify the Medicare Part D formulary prior to the authorization process.

Sen. McCain has called out for a change to Medicare Part D as well so that wealthier Medicare recipients would pay higher premiums in order to qualify for the prescription drug coverage.

Philip Burgess, RPh, national director of pharmacy affairs for Walgreen Co., says while not high on the candidates’ radar the growing financing gap for Medicare Part D is a growing concern of patients, physicians and pharmacists, as is “the donut hole.”

This situation has been exacerbated for those Americans who are underinsured and who are experiencing rising healthcare bills and rising co-payments.

“There are studies that show that as co-pays rise, people are less willing to get their prescriptions filled,” Burgess says. That in turn, puts people at risk, especially the elderly and those with degenerative diseases such as Type 2 diabetes he says.

Sen. McCain observes that prescription drugs are too high, so according to his plan, he will let people reimport them from Canada.

Sen. Obama proposes that the government should use its bulk purchasing power to negotiate a better price with pharmaceutical companies.

Health IT

Sheera Rosenfeld, who directs the health information technology practice at Avalere Health LLC, a Washington, D.C., consulting firm, says both candidates have voiced general support for health informatics to be able to achieve return on investment, reduce medical errors, and improve efficiencies and service quality.

By definition, health information technology (HIT) is meant to expand care providers’ ability to reduce paperwork, replace manual documenting processes, and reduce errors in the delivery of patient care through software, hardware and the necessary infrastructure used to support the collection, storage and exchange of patient data.

The tools include electronic medical records, electronic health records, e-prescribing systems, practice management systems and computerized physician order entry systems.

A September 2005 report by the RAND Corp., which Sen. Obama touts as part of his healthcare platform, estimated that $77 billion annually would be saved if 90% of physicians adopted HIT. To date, between 22% and 34% of physicians in ambulatory settings currently use an electronic health record, according to the American Medical Assn.

“There is bipartisan recognition of the value and potential impact of HIT as a core component to improving healthcare quality, outcomes, addressing costs, etc.,” she says. “Neither is aware of the innate challenges of HIT adoption and implementation.”

The most pressing matter that many physicians currently face is paying for the upfront costs to make their practices HIT-compatible. Williams says in ambulatory settings, particularly in small and medium-size practices, physicians face many barriers and continue to have the lowest rates of HIT adoption.

Physicians are bearing the brunt of up-front costs of HIT innovations, but insurers and other payers are reaping the savings that the streamlined systems were intended to deliver. And that is when physicians can afford it. Despite the occasional payment of chicken or shrimp, Dr. McFarland says he was able to invest $70,000 this year to make his practice HIT capable, including a computer system that will track patient health and administrative data.

“Money is without question at the top of the list,” of HIT concerns, Rosenfeld says.

Sen. Obama has included in his healthcare reform package a $50 billion commitment to establish health informatics infrastructure. Sen. McCain hasn’t declared how his administration would go about pushing an HIT initiative.

Some economists point to the $700 billion bailout package proposal for the country’s fractured financial institutions and predict that the staggering amount will hamper the ability of the next president to pursue new domestic programs such as HIT without major tax increases.

Rosenfeld says the Medicare Electronic Medication and Safety Protection (E-MEDS) Act of 2007, which outlines financial incentives for physicians and other eligible professionals who successfully adopt electronic prescribing systems, enjoys bipartisan support and views its passage as the first step in the broad adoption of electronic medical records.

In addition, she looks to the new president to provide more positive traction in moving the health informatics initiative forward. Moreover, progress is occurring in states in which could translate onto the national stage. For instance, the state of New York is investing $250 million in a comprehensive health information and quality improvement infrastructure.

The Democratic candidate has estimated that his health plan will cost between $50 billion and $65 billion per year when fully phased in. A large chunk of the subsidies would be paid by allowing President Bush’s tax cuts to expire for people making more than $250,0000 annually.

Herzlinger sees the hand of government leaving too heavy an imprint on Sen. Obama’s core health proposals and doubts his overall plan would stem rapidly rising healthcare cost as he predicts.

“Obama’s solution is more government, in that government will control cost,” Herzlinger says. “But, if it becomes a monopoly, then it becomes worse.”

Instead, she views Sen. McCain’s plan based on a free-market approach as more feasible solution. Some critics charge that his plan for changing the tax code could ultimately result in the demise of employer-sponsored health insurance.

An independent study published in September on the Web site of the policy journal, Health Affairs, estimates that 20 million Americans who have employment-based health insurance would lose it under the McCain plan. Subsequently, those millions would venture into the health insurance marketplace to fend for themselves.

Vivian Ho is the James A. Baker III Institute Chair in Health Economics, where she specializes in health economics.

She sees good and bad in both candidates’ plans. However, she finds Sen. McCain’s more ground-breaking because of its reliance on the open market.

Ho explains that by shifting the subsidy away from the employer as he proposes, it will make consumers more price sensitive to the cost of health insurance and they can make comparative choices in health coverage. In some cases this is a preferred option over a less flexible, or ill-suited plan offered through an employer.

However, there are pitfalls in his position as well, she explains.

“Persons who are healthy tend not to buy insurance,” she says. Once sick, however, that financial burden for caring for them usually falls to the taxpayer.

Charles Wheelan, who teaches at the Harris Graduate School of Public Policy Studies at the University of Chicago,

“Neither plan makes much sense in terms of solving the systemic challenges,” Wheelan says. “That’s not a surprise, as real reform will involve costs, tradeoffs, etc. Voters don’t like to hear about those kinds of things.”

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