Then a report comes out from the Institute of Medicine finding Medicare uses inaccurate, unreliable data to pay doctors and hospitals. Medicare is supposed to use geographic adjustments to Medicare payments to accurately and equitably cover regional variations in wages, rents, and other costs incurred by hospitals and individual health care practitioners. But according to the report, the system of paying doctors has “fundamental conceptual problems,” and the method of paying hospitals is so unrealistic that almost 40% of them have been reclassified into higher-paying areas.
On a side note, I believe that Medicare bases payments on the wrong factors, not just the regional differences but on unrealistic performance measures. These factors and measures prove no benefit to quality or efficiency of care.
At the same time, we are finding that an experiment to lower Medicare costs did not save much money. The program offered financial bonuses to 10 leading health systems around the country over 5 years if they could save enough by treating older patients more efficiently while providing high-quality care. A Washington Press article talks about this in more detail.
While I support entitlement programs like Medicare, these findings make me question the ability of the program (under the US Department of Health and Human Services) to improve health care costs as it is run now and, more importantly, how it soon will implement new reimbursement plans. How can we trust Medicare to ensure access to health care for the elderly if they cannot figure out how to pay the providers of that care?
See also this April 2011 report by the Robert Wood Johnson Foundation: Talking With Physicians About Improving Payment and Reimbursement.