THE US PRESIDENT Barack Obama’s plan to rein in federal spending on healthcare could end up shifting costs to the private sector, economists say.
Unless doctors and hospitals are able to respond to the government cuts by becoming more efficient, the result could be higher costs for insurers, employers and people with private medical cover, they say.
Historically, healthcare spending has been a bit like a balloon: if it is squeezed in one place, it tends to bulge in another. “I think there’s definitely a risk that a portion of the reduction in hospital payments from Medicare will wind up as increased payments by private insurers,” says Paul Ginsburg, president of the Center for Studying Health System Change.
Depending on the circumstances, hospitals may have the motive and means to “transfer those charges to somebody else”, and “we’ll see costs increasing on the private side and not necessarily falling everywhere”, says Harold Luft, director of the Palo Alto Medical Foundation Research Institute.
The biggest healthcare proposal that Obama announced is especially likely to move costs to the private sector, because it would cut Medicare payments without giving hospitals the tools to deliver care more cost-effectively, says Luft.
The administration predicts that measure – adjusting Medicare payments to reflect productivity changes in the overall economy – would save the government $110 billion over 10 years. Squeezing from the government’s end could make healthcare more efficient for everybody.
“If you push on one side, you’re actually pushing on the whole thing,” says Kenneth Baer, a spokesman for the Office of Management and Budget.
But a report issued by the Congressional Budget Office (CBO) portrayed that outcome as speculative. There is no guarantee that the healthcare system’s response to pressure would be greater quality or efficiency, according to the CBO analysis.
Throwing cold water on hopes for effective healthcare reform, the CBO described a variety of problems that could make it hard to slow federal spending on care – and to do so without putting quality at risk.
“At this point, experts do not know exactly how to structure such reforms so as to reduce federal spending on healthcare significantly in the long run without harming people’s health,” the CBO says.
The challenge is that the administration and Congress are trying to extend medical coverage to the uninsured without increasing the federal budget deficit over the next decade. As a result, they are bound by the budgetary scoring process – meaning they must come up with solutions that can predictably and measurably reduce federal outlays.
Some steps that might prove cost-effective over the long run do not necessarily mean savings for the federal budget.
Conversely, some steps that save the government money would not necessarily translate into overall reductions in national healthcare spending.
If Medicare cuts payments to hospitals but the costs of treating patients stay the same, “then you have the potential for cost-shifting”, says Kenneth Thorpe, a professor of health policy at Emory University. But Obama is trying to implement policies “that would lead to hospitals reducing their expenditures’’, he says.
One of the president’s signature proposals would reward hospitals for reducing readmission rates and penalise hospitals whose patients must return for another stay because they did not receive adequate treatment the first time.
That proposal is unlikely to create a bulge in private medical costs, because it would lead hospitals to change the way they function, Thorpe says.
The administration is counting on improved readmission rates to save the government $25 billion over 10 years. – (Los Angeles Times/ Washington Post)