Trump is Improving Medicare – Part II


In Part I of this series, I began a discussion of the many ways the Trump administration is improving Medicare. This new Trump policy is based on the idea of promoting choice, competition, and market prices.It seeks to do that in Medicare by:

  • Liberating telemedicine
  • Liberating Accountable Care Organizations (ACOs)
  • Ending payment incentives to hospital-based physicians
  • Promoting hospital price transparency
  • Deregulating paperwork
  • Increasing transparency in the market for prescription drugs

In Part I we discussed Liberating telemedicine. Today we’ll continue this discussion.

Liberating ACOs

Accountable Care Organizations were created by ObamaCare to encourage the private sector to find innovative ways to reduce costs and improve quality – generally through integrated, coordinated, managed care. It sounds good on paper but has largely failed in practice.

John C. Goodman, writing in The Wall Street Journal, says the original plan for ACOs was one of progression – evolving from shared savings to more savings for plans that take more risks to fixed payment for each patient in return for delivering all medical care. The Trump administration is making changes to facilitate this end goal. It is allowing Next Generation ACOs:

  • More freedom to communicate with patients
  • Rewarding patients for meeting compliance measures
  • Offering additional benefits patients must forgo if they go “out of network”
  • Broad freedom to utilize telemedicine
  • Full capitation in some cases


Equalizing Physician Fees

There has been a recent rush by hospitals to employee physicians. In 2010, 27.7% of primary care physicians were employed by hospitals. In 2016 the number jumped to 43.5%. Current numbers are unavailable but could be significantly higher.

The reason for this change is simple – physician fees for the same service are paid much higher by Medicare if performed in a hospital setting.

According to the Ambulatory Surgery Center Association, Medicare pays almost twice as much for hospital-based outpatient services as it pays for the same services in a free-standing facility. For example, Medicare pays hospitals $1,745 for outpatient cataract surgery but pays surgery centers only $976. There is no rational reason for this discrepancy.

The Trump administration says Medicare will be moving toward parity over the next two years for billing codes covering about 50% of outpatient services. According to CMS, current Medicare payment for a typical hospital-based clinic visit is approximately $116, with an average beneficiary copayment of $23. After two years, the payment rate for the clinic visit will fall to $46 and the beneficiary copay to $9, thus saving patients an average of $14 each visit.

As expected, the American Hospital Association is suing to block the rule change. Goodman points out this illustrates the influence of powerful special interests. Many of the reforms described here would have been done by Congress – except for these special interests. When Congress tries to reform healthcare institutions, these special interests stop the reforms in committee. But the Trump administration is pushing forward with these needed reforms, forcing the special interests to resort to the courts.

(More on the changes to Medicare next week in Part III.)

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