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The Work Ahead

August 5, 2011

After the last several months of drama in Washington, it's clear that we are in a new world that demands new solutions. In the long term, how can we avoid cuts that, across the board, would hurt patients and reduce our investment in the future?

As my accountant tells me, sooner or later, we're going to have to raise taxes. It's how we go about raising the revenue that will help or hurt fragile economic growth. I hope we can get to an honest discussion about what we want from government and what we're willing to pay for it. For too long, we've avoided the conversation despite well-intentioned policymakers having very different views of what the appropriate role is.

Another conversation we've been avoiding centers around what should be the appropriate size, scope, and nature of programs like Social Security, Medicare, and Medicaid. Under the current agreement, a new joint committee can cut anything they want to reach the required $1.5 trillion in spending cuts over 10 years. If that proposal fails, Social Security and Medicaid would be protected, presumably for fear of hurting some of the nation's most vulnerable citizens.

That would mean that heavier cuts could fall to Medicare. So what about Medicare? Right now, trigger mechanisms target providers, and there are three basic approaches that have been floated.

We could change the number of people who receive benefits. This could be done by increasing the age of eligibility (which might be palatable if we were sure people could obtain coverage at a fair price, or could buy in earlier.) Or we could use means-testing—excluding the Warren Buffets and Donald Trumps of the world from getting highly subsidized care. But this approach makes liberals nervous about making Medicare a program for the poor who have a limited electoral voice.

Another option is to decrease the level of benefits and services. However, every time we have a discussion about this approach, cries about "death panels" surface and how impossible it is to help patients and providers figure out what makes sense for them.

So, what are we left with?

A third option would to cut payments to providers under the assumption that these cuts won't affect beneficiaries. Let's consider what this type of cut would really mean.

Some assume that, at best, such cuts would force providers to care for patients at lower costs ignoring either the higher input prices or the sicker patients that may be cared for. The more likely outcome, however, is that cuts across sectors will not achieve the ultimate goal of decreasing spending. Take, for example, physician payments. If already low Medicare reimbursements are cut, the average doctor has to increase the number of patients he or she sees to meet overhead costs.

If patients were widgets, we'd call that improved efficiency—but they're not. They're real people, more and more of whom are older with multiple medical problems that can't be treated in a 15-minute—or 12-minute—visit. Less time with patients increases the odds that they have to come back for another visit, which will potentially increase the cost to Medicare. The other possibility is that a doctor's schedule gets quickly filled by fewer, yet lengthier patient visits and other patients must wait for an opening or seek care at the emergency department. Some of the patients who can't get a timely appointment with their doctor might ultimately require a hospital admission for something that could have been addressed by their doctor early on.

On the other end, the hospital, also seeing its reimbursements cut, either needs to cut admissions of uninsured and underinsured patient (just look at some proprietary hospitals that have chosen not to have ERs) or to discharge patients more quickly—and sometimes before they are really ready—to address the same volume issues that the doctor's office faces.

We've already seen this happen in the Medicaid world, where patient care is often reimbursed at a level far below costs. Right now, teaching hospitals and their faculty physicians in hospital outpatient departments care for a disproportionately large number of these and other vulnerable patients. But access to other providers is increasingly difficult when reimbursements don't even come close to the cost of providing care. What's hard to figure out is exactly how far that envelope can be pushed, particularly if Medicare payments fall even further below the costs of delivering care.

Even discretionary spending decisions will inevitably affect patients. Decreasing our investment in medical research funded by the National Institutes of Health will slow discovery of new treatments and cures, potentially making the difference for patients whose now fatal diseases might be on the cusp of becoming chronic illnesses. Again, one could argue that there could be "savings" with less investment in discovery and slower development of life-saving technology. But what would these kinds of savings, in fact, cost our nation?

As the new super committee on deficit reduction gets down to work, I hope these policymakers will seriously consider these issues as they develop their proposals this fall. I hope they will be thoughtful about where they cut and by how much and recognize that cuts to providers and medical research will affect Medicare beneficiaries and patients everywhere. I urge them to consider all of the other options on the table, including ways to increase revenues. Because the fact is there are some public goods that only the government can provide. Just like building roads and bridges, training new physicians, investing in discovery medical research, and making sure critical services like trauma and burn centers always stand ready are essential priorities that depend on our government's support.

In the meantime, let's hope for a quiet August recess. It's going to be a busy fall.

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About the Author

Atul Grover, MD, PhD AAMC Executive Vice President

Atul Grover, MD, PhD
AAMC Executive Vice President

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For More Information

Peters Willson
Sr. Specialist, Policy and Constituency Issues
Telephone: 202-862-6029