Medicare: 'Where Is That $716 Billion Going, Anyway?'

To those who are recently new to the discussion of health-care reform within the last few years, the topic of Health-Care Reform may seem like the battle just started from this last Administration. That is not true, of course. It has been a long-term battle, and it’s not just about Health Insurance or rising Medicare costs. 

The problems we face both as a nation, and as families or individuals with medical care is greater then we think, and many would agree that more should have been done to update it previously, but politics often get in the way. The US private health insurance system is a tool to how we pay for our health care, but it is only one weak leg of many, trying to hold up the table.

'Millions of Americans Fail to Receive Effective Care'
To quote part of an important report from 2001, “Crossing the Quality Chasm: A New Health System for the 21st Century,” by The Institute of Medicine’s Committee on Quality of Health Care:

“The performance of the health care system varies considerably. It may be exemplary, but often is not, and millions of Americans fail to receive effective care. … The health care system as currently structured does not, as a whole, make the best use of its resources. There is little doubt that the aging population and increased patient demand for new services, technologies, and drugs are contributing to the steady increase in health care expenditures, but so, too, is waste.”

The kind of health care we receive is important as well, and often isn't addressed. An often-used, good example of outstanding medical treatment for patients is Mayo Clinic/Hospital. A place where doctors are paid by salary, and are not geared towards fee-for-service model. It is actually a really good example of “patient focused health care” that ACA keeps referring to. 

47 Cents to the Dollar
The U.S. medical care costs are very high when compared to other countries. Some suggest that this is because our medical care is better. Doing a little research on this topic, I found that is certainly not the case. One example I found was from “The Business Roundtable”. Its 2010 Health System Value Comparability Study ...

“compared the United States with its five largest trading partners on both quality and cost of care. The report found that for every dollar spent on health care in the United States, other major competitors spent just 47 cents. Despite this increased spending, evidence suggests United States health care quality is no better, or in some cases worse, than other countries."

This chart shows how much more the United States pays for certain Medical services.

Advantage?
Medicare Advantage, previous system: This program allows seniors to join a private health insurance, with the federal government paying the bill. It was designed to help reduce and save money with the idea that by allowing private insurance companies to compete for senior’s business. That is not what happened however, instead of driving costs down, the bill to the government was actually average a rate of 117 percent by 2010. The amount that was being paid to these Medical Advantage were actually costing the Medicare program more and causing a much larger solvency problem for Medicare.

(Information above was taken from a 2008 Medicare report from the Kaiser Foundation here.)

Where does that $716 billion come in? Keep reading.

ACA savings from the private Medicare Advantage plans: It gives those private plan carriers a bit of trim and places guidelines for reimbursement levels to the quality of care administered, and patient satisfaction.  (Also known as “patient focused care”). 

Hospital Savings: There is another part of focus of these savings that includes Hospitals. ACA has taken steps to reducing the hospital payments through Medicare Advantage slowly over time. Under ACA, Hospitals will actually be seeing many more of those who come in for services that are now insured.

Other savings: There are actually other smaller parts of cost savings that help make up about a third of $716 billion in savings, but beyond that, there has an obvious large effort to reduce, and recover money from Medicare fraud.

There are many examples of fraud that results in billions of wasted money from Medicare fraud. Fraud from practices such as double billing, billing for services not given, or billing for a medical device the patient did not get. These are just a few of many examples of fraud practices found.

For the fiscal year of 2011, almost $4.1 billion was recovered from fraud alone. The “Health Care Fraud and Abuse Control Program” is a joint operation between DOJ, HHS and state and local partners. The health-care reform enforcement of ACA made much greater efforts towards pursuing fraud practices. 

Approxitmately one out of seven dollars goes to recoup those loses from fraud. That sounds like a very good return on those efforts. There has been more recent cases this year investigated and charged.

Bleeding the Program
You can call $716 billion “savings” or “cuts”, but that $716 billion adjustment from the efforts of ACA does not show a “take away” from Medicare beneficiaries. The purpose, as it is intended, seems to have added value by restructuring, trimming and recouping from the sources that had either directly or indirectly bleeding the Medicare program.