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April 29, 2013


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Some of these provisions sound good or are long overdue, while others have me somewhat worried. While the topic has been unsavory to politicians for years, we have needed to raise the age of medicare enrollment for a long time. It needs to be set on a gradual progressive increase, perhaps tied to life expectancy. Some sort of provision which accounts for an individuals wealth has also long been discussed as a cost saving measure. Offering a buy-in (presumably tiered) seems like a reasonable approach. Post-acute payment reform is a hot-button topic right now and prime for an overhaul. Exactly what such reform should look like is a bit open to debate though. It just doesn't make sense to make more off of a surgery when there are complications that when it goes off perfectly. It creates warped incentive schemes. It will be much easier to reduce complications if hospitals have to eat the cost of caring for complications.

As discussed in a recent post on this blog, the return on investment for investigations of fraudulent filings within medicare and medicaid has been excellent (7.4 times investment?), so investing more to further reduce medicare fraud makes a lot of sense.

The big items in here that have me worried are the cost reductions for drugs. Medicare has traditionally offered relatively little drug coverage, yet economic studies have repeatedly shown that drugs reduce healthcare expenses from hospitalizations, surgery, and other areas of care. New drugs provide this cost offset effect better than old drugs, as a whole tending to pay for their additional expense by reducing non-drug healthcare costs. Thus, I am troubled by the reductions in medicare's already rather meager drug coverage. I expect we shall see these expenses show right back up in non-drug healthcare expenses.

A significant chunk of the work on the new drug cost offset effect was conducted using medicare as a model system, thus we know that these results hold within medicare when considering drugs generally and new drugs in particular. I therefore find it quite concerning that the government has chosen to cut costs by directly reducing the amount of money spent on drugs and furthermore has done so by more than it is reducing hospital reimbursement, even though hospital reimbursement is a larger chunk of health care costs.

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