Across the healthcare reporting spectrum, from the New York Times to U.S. News and World Report to the Kaiser Family Foundation, there is much being said about the reduction in per person Medicare spending.
In one such article (“Medicare: Not Such a Budget Buster Anymore”), New York Times healthcare correspondent Margot Sanger-Katz examined the Congressional Budget Office’s (CBO) estimates of what the federal government can expect to spend on Medicare in the coming years. According to Sanger-Katz, the CBO has reduced its Medicare spending estimates every year for the last six years.
Theories about what’s behind this reduction range from economic factors (lower utilization due to less disposable income) to the stabilization of a healthier Medicare population, buoyed by the fact that Baby Boomers are rapidly aging and entering the program.
From the vantage point of RealTime Medicare Data (RTMD), the practice of medicine is changing from the inside out.
“We are seeing a shift of care into lower cost settings, like physician offices,” said Gina McWilliams, CEO of RTMD. “Additionally, Medicare and other payers are shifting more of the cost of care to patients. While this affects our personal budgets as consumers of healthcare, it should also make us more engaged as patients to take more responsibility for our care. This is a significant piece of what is described as ‘consumer-driven care.’”
To put this in perspective, consider that hospital inpatient services represent one of the largest cost components in Medicare expenditures. According to the CBO’s historical and forecasted budget, inpatient services constitute 24% of all expenditures. The volume of inpatient claims is decreasing while the acuity or severity of the patients being seen (known as Case Mix Index or CMI) is increasing.
While those increases are resulting in higher average per claim amounts, it is because these patients are sicker, and because they are receiving the right care in the right place at the right time and for the right cost. The higher claims are reflective of the additional resources required to treat them. This is a result of policies from the Affordable Care Act and other value-based programs developed to bend the cost curve.
“We’re on the cusp of a major paradigm shift in healthcare,” said McWilliams. “The Affordable Care Act is not without its flaws, but it’s certainly played a vital role in helping correct some of the long-wayward aspects of the U.S. healthcare system. Now, we’re seeing our healthcare structure evolve into a person-focused system. The projected savings reflect the behavior that early adopters began implementing several years ago.”
Examples of these programs include:
- Stricter criteria to meet the requirements for inpatient services;
- Denying payment for medically unnecessary services (such as short stays over the weekend, for example); and
- Implementing pre-payment and post-payment audits. Specifically, these audits examine why inpatient services were used if the patient could have received appropriate care in a less costly setting.
Frankly, it is now tougher to be admitted into a hospital setting without a higher acuity of illness. The pressures of policy and regulation force more conservative treatments first. Policies designed to reduce medically unnecessary procedures have helped eliminate waste. As a result, Medicare pays less per case by shifting more of the cost of care to the patient through out-of-pocket expenses like deductibles and co-pays.
“What we’re seeing are the results of physicians exercising greater precision in their delivery of care, and patients working cooperatively to achieve their own best possible healthcare outcome,” McWilliams said. “Demanding unnecessary tests and procedures is not only an abuse of the system; it’s personally risky.”
Mitigating risk lies at the heart of McWilliams’ mission. She’s spent her entire career, all 33 years of it to date, working in healthcare, first as a strategic planning analyst with Ernst & Ernst, and now with RTMD. Specifically, McWilliams helps RTMD’s hospital clients manage their business to align with ACA mandates.
“There is still egregious waste in the system,” McWilliams acknowledged. “By no means have we arrived at the point where we should pat ourselves on the back or rest on our laurels. We may be onto something, but to sustain efficiencies in the system without sacrificing accessibility to and quality of care, we need to peel back the layers of Medicare claims data and understand its causation. Yes, there are aging boomers and other factors to account for, but in addition to that, we can still discover best practices so that these savings are not reactionary or fleeting.”