A health-care disaster in the making

Federal missteps: Cuts in Medicare reimbursements are strangling medical-delivery systems.

July 07, 2000

CONGRESS, the president and federal regulations have made a mess of the health-care system.

However well-intended, their actions have lowered the quality of care for millions of Americans -- especially senior citizens -- and seriously eroded the viability of hospitals, nursing homes, home health-care companies and health plans for the elderly.

Much of the fault lies in Washington's myopia about the bottom line: Saving dollars wins out over spending more to deliver adequate health-care services to Americans.

The latest example is CareFirst BlueCross BlueShield's withdrawal from the federal Medicare HMO program, leaving 32,000 more older Marylanders without health coverage. CareFirst lost $12 million on its Medicare HMO last year and $4 million so far in 2000. By the time the not-for-profit company exits at year's end, its total losses will top $30 million.

Its announcement comes on top of similar ones from two of the three other Medicare HMO providers in Maryland. They all encountered the same problem: miserly federal payment rates.

What help did federal regulators give CareFirst when its executives urgently sought rate adjustments so the company could at least break even and remain in the program? None.

Cuts in Medicare payments to hospitals, nursing homes and home-care companies played a big role in turning the federal deficit into a surplus. But look at the cost.

Many teaching hospitals in other states are on the brink of collapse. (Maryland's two teaching hospitals, Johns Hopkins and University of Maryland Medical Center, have avoided this calamity because Medicare lets the state's hospital rate-setting commission decide reimbursement here.) The nation's largest nursing home chains are in bankruptcy. Many home health-care companies are on life support.

Back in 1997, the president and Congress decided to slow increases in Medicare reimbursements by $115 billion over five years to balance the federal budget. Their cuts went way too far: The lower payments actually slashed $227 billion from what caregivers were receiving.

These sharply reduced payments are proving the undoing of Medicare HMOs, designed to save the government money as for-profit companies competed for customers.

Older Americans liked the idea of joining these privately run HMOs because it often meant coverage for prescription drugs and a range of preventive care services not normally paid by Medicare.

But Washington has failed to provide enough money to keep these HMOs afloat. While inflation in the medical industry tops 7 percent, Medicare HMOs get just 2 percent more each year. CareFirst, for instance, is spending $607 a month on each of its 32,000 members, but receives only $535 per member from Washington. Not surprisingly, this gap has widened over the past three years.

The rising costs of medical care is one of this nation's most serious, long-term dilemmas. But it cannot be solved by penny-pinching in ways that deprive citizens of health plans, force hospitals to eliminate services and prompt nursing homes and home health-care companies to make Draconian cuts in their operations.

The system is seriously out of whack, and there's enough blame in Washington to go around, to Republicans and Democrats alike, as well as federal regulators.

President Clinton and Congress last year restored $16 billion to Medicare providers, and the president wants to add another $21 billion to that. That's too little -- far too little-- to rectify the damage Washington wrought. A major overhaul is in order, and the nation's ballooning surplus provides a partial answer.

This ought to be near the top of the list for both Democrat Al Gore and Republican George W. Bush in the presidential debates this fall. Yet the two candidates are avoiding a direct assault on this chronic problem. Too controversial. Too expensive to fix.

That's not good enough. Not for the next president of the United States. Americans, especially senior citizens, deserve a better health-care system. It's the obligation of our leaders to come up with ways to make this happen.

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