The Health Shopper

The Bush Administration released a report finding that Medicare's hospital trust fund will be depleted by 2019. In addition, Medicare is projected to spend more this year than it receives in dedicated tax revenue, but will be able to make up for the shortfall by using interest from Medicare trust fund investments. According to the New York Times, Treasury Secretary Henry Paulson noted that "Medicare poses a far greater financial challenge [than Social Security funding]."

Medicare has a separate trust fund for physician services and outpatient medical care which also faces financial difficulties. Payments for outpatient medical services can be covered by general funds, however, and Medicare officials can also increase premiums and co-pays for physician services in order to make this part of Medicare more financially stable.    

Several insurance companies are placing restrictions on CT scans for policyholders and in many instances are requiring plan members to receive pre-authorizations before undergoing the scans. Insurers are following the lead of Medicare, which announced and then retracted restrictions on CT scans, due to limited clinical evidence supporting their use. At the time of Medicare's reversal, the New York Times noted that "The proposal to curtail payments met with fierce resistance from doctors who perform these scans and companies that make the equipment" who "strongly defended the scans." Medicare alone spent as much as $50 million on the scans in 2006, and in the past six years, their use has been increasing 13 percent annually.

Evidence in favor of their widespread use remains weak, however. A few months ago, Consumer Reports listed CT Scans as one of the ten most overused medical treatments in the United States. A month later, a group of researchers writing in the New England Journal of Medicine found that approximately one third of CT scans were unnecessary, exposing "perhaps 20 million adults and, crucially, more than 1 million children per year in the United States" to a radiation dose roughly equal to 85 to 200 chest x-rays.

The good news is that requiring pre-authorizations seems to work. According to a study by the Robert Wood Johnson Foundation's Center for Health System Change, a health plan that required pre-authorization of the scans successfully reduced the growth rate on scans while denying only 1.5 percent of scan requests. As one insurer said, "We're not saying ‘No' that much, but because people have to now justify what difference the test is going to make, they aren't requesting it as much."

Retiring couples will need approximately $225,000 in savings to cover health expenses, according to a new study by Fidelity Investments. The sum is $10,000 more than the $215,000 estimate Fidelity put out last year, and a 41 percent increase over Fidelity's estimate in 2002. To arrive at that number, the investment firm assumed that couples would retire at the age of 65 and be insured through Medicare-which has co-payments and co-insurance charges for most medical care as well as premiums for Parts B and D. The Associated Press notes that Fidelity's estimates mirror other figures, such as an estimate by Boston College's Center for Retirement Research, which says that retiring singles need $102,000 and couples need $206,000 for health expenses.  

Humana has announced that it will launch a pilot program in Florida to improve care coordination for chronically ill seniors. The program, which will be offered through Medicare Advantage and is an extension of a Medicare pilot, employs social workers, nurses and other health professionals to help individuals manage chronic diseases and avoid the hospital. Under the early Medicare pilot, for example, a nurse visited a 95 year old patient with mobility problems who had been leaning heavily on walls and furniture to get around the house. The nurse arranged to have a bench installed in the patient's house-paid for by the insurer-to prevent falls that could lead to health problems. The program also aims to help patients with multiple chronic health problems manage their conditions.

According to a new study in Health Affairs, national spending on health care will double by 2017 to $4.3 trillion, assuming health spending continues to increase annually by 6.7 percent. As a result, estimates place per capita health spending in 2017 at $13,101, up from $7,026 in 2006. Because the study's authors project increases in health spending to outpace national economic growth, they suggest that by 2017, health costs will total 19.5 percent of the GDP.

Although the study's authors estimate increases in all areas of health spending, they project that the largest growth will occur in Medicare and other federal programs as baby boomers get older and move from private insurance to Medicare. Medicare alone, with a projected price tag of $844 billion, will account for one fifth of health spending by 2017, while the government's total share of health spending will increase to $2 trillion. Prescription costs are also expected to rise quickly from $761 per person in 2007 to $1,537 per person in 2017. The study's authors see out-of-pocket spending increasing to $464.3 billion in 2017, up from $269.3 billion in 2007.

A new study from Health Affairs (subscription only) found that U.S. health care spending in 2006 reached $2.1 trillion totaling 16 percent of the GDP or roughly $7,000 per person. Prescription drug spending had the greatest increase, as it rose 8.5 percent-and because of Medicare Part D, government spending accounted for a third of prescription drug spending, up from 28 percent of prescription spending in 2005.

On the bright side, consumers continued moving toward generic drugs -generics constituted 63 percent of prescriptions, up from 56 percent in 2005-which may help keep drug spending down in the long run.  In addition, spending on physician visits and nursing home care experienced their lowest increases since 1999.  

On the heels of news that Medicare will stop reimbursing for medical errors, The New York Times notes a study in the Journal of the American Medical Association finding that Medicare pays hospitals more money for patients who get infected in hospitals than for patients who make it in and out of the hospital without complications.

The study focused on urinary tract infections, which affect 1 million people at a cost of $400 million annually. And given the financial incentives in place, it's easy to see why those numbers are so high: One Colorado Hospital cited in the study, for example, received a 63 percent increase in reimbursement for heart attack patients who had complicated infections over the repayment for a heart attack patient who recovered without complications.

Of course, as the study's authors note, doctors and health care workers don't set out to make people sick just to earn a buck. And certainly, some errors can't be prevented. At the same time, as the New York Times quotes the study's authors as saying, "When properly designed, financial incentives should provide rewards for desired clinical outcomes, not hospital-acquired harms.''

An Indiana pilot program will offer low-income insurance that couples higher-deductible coverage with a subsidized savings account in place of a traditional Medicaid plan. Specifically, the program will provide participants with income-adjusted subsidies to a Personal Wellness and Responsibility account to cover expenses up to an $1,100 deductible, at which point the state insurance plan will cover remaining costs. In addition to providing major coverage, Indiana will also make an income-adjusted contribution to the Personal Wellness account, and individual expenses will be capped at 5 percent of gross income.

U.S. News and World Report mentions Vimo in this article on how to keep medical costs low. And judging by recent media coverage of health care pricing, consumers need all the help they can get.   

This Wall Street Journal story focuses on a man who, through a series of unfortunate events, wound up hospitalized for a staph infection that spread throughout his body. He wound up with more than $1 million in debt, in part, because his hospital demanded a $791 payment for a $12 pair of stockings that could improve circulation. This was hard information to come by, since the hospital charged the patient and his wife $1,030 to get an itemized copy of his bill.

The New York Times has a devastating story about the difficulties of keeping Medicare costs low. The story focuses on delivering oxygen to patients, a necessary service, but one for which, "The total cost to taxpayers and patients is… more than double what somebody might spend at a drugstore." Although Medicare administrators are well aware of the problem, any time they attempt to lower payments for oxygen tanks, oxygen companies rally senior citizens to flood congressional offices with calls.

New Hampshire Senator Judd Gregg has sent a letter to Health and Human Services arguing that the agency should release Medicare claims data to the public. Writing in response to a recent Health and Human Services decision to refuse to release Medicare claims data to the public, Gregg argues that "In order for America's health care system to improve, we need to understand the quality of the care we are purchasing."