Here's how Part B can save Medicare

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Tuesday, June 30, 2009

This past May, when President Barack Obama lauded the impact of his administration’s $787 billion economic stimulus plan on jobs, many were taken aback to hear a very different methodology used in calculating the nation’s employment health. While 539,000 jobs were actually lost in April, causing the national unemployment rate to rise to 8.9%, Obama argued that his stimulus plan was actually working because it had “saved or created 150,000 jobs.”

Many of the president’s political opponents promptly accused him of a deceptive assessment since the underlying assumptions associated with the number of jobs saved (unlike the very objective measurement of those added or lost) is a somewhat speculative exercise. The statement, his critics argued, presented a vastly inflated view of the stimulus package’s actual impact on American jobs. However, while it’s not typically used by federal governmental agencies, such analysis, known as “dynamic scoring,” is actually used widely in business and other non-governmental budgeting and economic forecasting. In governmental budgeting, dynamic scoring analysis, if used more broadly, could be hugely valuable because it provides a more complete and accurate assessment of the total impact - both real and speculated - of fiscal policy actions or proposals, permitting policymakers to reach more sound policy conclusions. 

Dynamic scoring has not typically been embraced by the Office of Management and Budget (OMB) or the Congressional Budget Office (CBO), both of which typically utilize static input data in their budgeting assumptions. But such oversimplified analysis by governmental bodies is often failing to offer accurate conclusions about the ramifications of various budget and other fiscal decisions.

As the administration and Congress begin embarking on a revolutionary proposal to overhaul the nation’s healthcare system, including the nation’s Medicare program, the time has come for dynamic scoring to assume a more central role in American healthcare policy. Because the control of total Medicare outlays rests largely on the variable healthiness of the nation’s Medicare population, it is hugely presumptuous to conclude, as most administration and Congressional budgetary agencies now do, that a dollar saved in total budgeted Medicare outlays will represent a total Medicare dollar saved in actual expenditures. It may defy conventional wisdom on first glance, but it is wholly possible and indeed likely that cuts that reduce access to, and utilization of, preventive or home-based care will lead to preventable clinical incidents and disease regression among Medicare beneficiaries that actually increase overall Medicare expenditures. In their efforts to restrain Medicare outlays, this administration and Congress run the risk of actually increasing them. Nowhere is this more likely than with Medicare Part B. By providing competent preventive medicine and by treating chronic disease in the home, as opposed to hospitals, sub-acute rehabilitation centers or other costly institutions, the physician and medical supplier services and products covered under Medicare Part B have largely been a restraining force on total Medicare outlays and a force for good in overall Medicare patient care. Were it not for the existing Medicare Part B benefits, total outlays in Medicare Part A and Medicare Part D would almost certainly be significantly higher.

Despite home-based medical services and device suppliers already having undergone costly changes in reimbursement methodologies and cuts in service and product allowables, all implemented with the intention of reducing Part B outlays, the Obama administration seems intent on cutting even deeper into Part B as part of its overall healthcare reform initiative.

But reckless cuts to Medicare Part B, as a dynamic scoring analysis would clearly demonstrate, run the risk of actually increasing overall Medicare costs while also failing to address proper disease prevention, diagnosis and treatment in ways that will almost certainly prove a public health risk to the nation’s disabled and elderly. On both a fiscal and public health basis, further Medicare Part B cuts are filled with multiple ominous implications.

Power mobility providers, for instance, already have faced tedious and costly new medical documentation requirements, new product coding (used mostly to further cut allowables) and deep cuts in existing Part B allowables for these important products. Providers now also face the possible introduction of competitive bidding in the coming months, which will almost certainly further reduce both product allowables and available suppliers, since CMS will no longer reimburse providers who do not win bids to sell to beneficiaries.

CMS is doing more harm than good with these cuts and policies, which the agency has implemented with the goal of reducing both product utilization and benefit outlays. Even before CMS’s recoding and cuts in power mobility allowables, for instance, a 2004 study conducted by the Texas-based economic consulting firm RRC Inc. reflected that Part B outlays for power mobility were actually representing an actual savings - not a cost - in total Medicare expenditures. It found that those beneficiaries afforded access to power mobility actually incurred $5,300 less in total Medicare expenses because they remained healthier, independent in their homes and required fewer hospital visits and other costly medical interventions. Extrapolated over the entire Medicare population, RRC concluded, power mobility actually represents a total savings of billions of dollars to Medicare.

As it begins to wrestle with the complexities of healthcare reform, this administration and Congress must avoid surface thinking and look deeply. Using traditional budgeting assumptions and failing to utilize the more appropriate dynamic scoring analysis, it would appear that the greatest burden on Medicare outlays is the nation’s aging demographic. But conducted recklessly, the greatest such financial burden could be Medicare cost cutting itself. hme

Michael Johns is a healthcare executive and public policy expert. A former vice president for Electric Mobility Corp. and Gentiva Health Services, he has served previously as a White House speechwriter and Heritage Foundation policy analyst. He can be reached at michaeldjohns@gmail.com.

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