Medical Industry Can’t Endure Losses Forever

If there’s one recurring theme throughout this issue of The Healthcare News, it’s this: medical costs are rising, and everyone is paying the price. To wit:
Hospitals continue to trumpet the fact that public payers — which, in many cases, total two-thirds of all reimbursement — don’t come close to covering the total cost of care, particularly in the case of Medicaid, which reimburses 71 cents on the dollar in the Commonwealth. At the same time, hospitals must deliver the top-notch programs that patients — and their insurance-paying employers — want, even if they don’t make money, to gain needed leverage in negotiations with managed care companies.

At the same time, Massachusetts’ major pharmacy chains were so annoyed with an 11{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} reduction in their state reimbursement in the FY 2003 budget that they threatened to walk out of Medicaid altogether — a threat lawmakers took seriously enough to hold a public hearing and possibly overturn the budget cut in October.

Meanwhile, the federal government, to hear health management organizations tell it, has dropped the ball on funding the Medicare product delivered through private insurers, increasing funding by about 2{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} a year over the last three years — about 10{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} less than medical treatment costs have been rising in Massachusetts. Who will bear the brunt of the increase? Senior citizens themselves.

No one, it seems is immune to rising health costs. To some degree, all the entities involved, from patients and physicians to pharmacies, hospitals, and health plans, will have to pick up the slack.

And, when it comes to the government, slack might be the right word.

We in America, and particularly in Massachusetts, with its economic emphasis on health care and research, are living in a perhaps unprecedented time of medical advances, an era which might continue for some time.

As a result, medical costs are rising faster than ever — by some accounts, between 10{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} and 15{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} per year. That takes into account new drugs, new technology, and the research and education required to deliver those products to the medical marketplace. Inflation in the business world is a given, but medicine, as an industry, is far outstripping the general inflation rate in other sectors.

As Arianne Krumholtz, managed care director for the Sisters of Providence Health System, told The Healthcare News (see story, page 18), working with cost-conscious health plans has forced hospitals to become more efficient. The administrators we talked to in another story about health management (see page 19) insist that no matter how well-run a hospital is, the realities of the medical industry will still pose major roadblocks to breaking even.

In short, those realities must change — at least the ones the state and federal government have some power over. Medicare funding to its HMO-delivered product, Medicare + Choice, isn’t likely to increase by 15{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} a year, but 2{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} just isn’t cutting it. And, while the state has made some progress on properly funding Medicaid and the Uncompensated Care Pool which helps hospitals deliver treatment to the uninsured, there seems to be much more talk these days than action.

Of course, a $2 billion-plus budget shortfall is going to alter any state’s budget plans, and program cuts — as well as more than $1 billion in tax and fee increases — were, to be fair, spread across the board this summer. But as long as the numbers stay where they are for health care, patients will be the ones to feel it — if not in their wallets, perhaps in the quality of care they receive.

Perhaps there’s hope in next year’s budget. Already, lawmakers have shown themselves willing to budge (or at least consider budging) when threatened, as the pharmacies have shown. But hospitals can’t walk away quite as easily. They have to continue to do what’s right by patients.

The state has the same obligation to do what’s right. It’s time to pick up the slack.