Where can the government save Medicare dollars?

We have a huge problem. Medicare expenditures keep increasing. Most physicians believe that too many dollars go to hospitals and technology, and not enough to physician fees.

Apparently the current administration believes that there are savings from hospitals and technology.

Bush Administration Plans Medicare Changes

The Bush administration says it plans sweeping changes in Medicare payments to hospitals that could cut payments by 20 percent to 30 percent for many complex treatments and new technologies.

The changes, the biggest since the current payment system was adopted in 1983, are meant to improve the accuracy of payment rates. But doctors, hospitals and patient groups say the effects could be devastating.

Federal officials said that biases and distortions in the current system had created financial incentives for hospitals to treat certain patients, on whom they could make money, and to avoid others, who were less profitable.

Michael O. Leavitt, the secretary of health and human services, said the new system would be more accurate because payments would be based on hospital costs, rather than on charges, and would be adjusted to reflect the severity of a patient’s illness. A hospital now receives the same amount for a patient with a particular condition, like pneumonia, regardless of whether the illness is mild or severe.

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The basic payment for surgery to open clogged arteries, by inserting a drug-coated wire mesh stent, would be cut by 33 percent, to $7,590. The payment for implanting a defibrillator, like the one used by Vice President Dick Cheney, would be cut 23 percent, to $22,000, while the payment for hip and knee replacements would be reduced 10 percent, to $14,500.

“This is a bit of a catastrophe,” said Dr. Herbert Pardes, president of NewYork-Presbyterian Hospital. In its zeal to cut the profits of doctor-owned specialty hospitals, including cardiac hospitals, Dr. Pardes said, the government has inadvertently hit many nonprofit academic medical centers.

Drug and device makers have been lobbying Congress and the Bush administration to delay the changes to allow further analysis. Device makers are scheduled to meet with top White House officials this week. More than 200 members of Congress have signed letters supporting a one-year delay.

Peter L. Ashkenaz, a spokesman for the Medicare agency, said officials had received the letters but could not comment because they were working on a final regulation, to be issued in a few weeks.

So let the lobbying and politics begin. Our current system clearly provides the wrong incentives. On the surface it appears that the administration has seen through the rhetoric and targetted large profit centers.

Hospitals have gamed the system. We pay too much for procedures and not enough for thinking. We pay too much for some diseases, and not enough for others. I hope the new regulations fix some inequities.

However, one must always worry about the unintended consequences of such adjustments. Will overall health care benefit from the new reimbursement strategies?