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HealthBiz: Plans Share Inflation Worries

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WASHINGTON, Mar 23, 2004 (United Press International via COMTEX) -- The rate of increase for medical cost inflation has eased somewhat, but it still surges ahead of other U.S. industry sectors and therefore remains on the radar screen of healthcare executives around the country.

Thus concludes a survey by Cap, Gemini, Ernst & Young that also finds executives very concerned about the 43 million uninsured Americans and the effect they have on healthcare costs, Dr. Peter Kongstvedt, Cap Gemini's health practice vice president, told UPI's HealthBiz.

Kongstvedt's report on the top issues facing managed care said evidence supporting a slowdown in medical cost inflation is the Office of the Actuary of the Center for Medicare and Medicaid Services projections that spending growth tallies for 2003 will be 7.8 percent, a decrease from 9.3 percent in 2002

"The reasons for this moderating trend have not become apparent and it is far too soon to know if this represents a long- or even medium-term trend, so underwriters remain cautious when creating rates; however, some modest relief may lie ahead," the report said. "It is not unreasonable to expect that the moderation will continue, at least for the short term, and (that) healthplans continue to apply new medical management techniques, particularly advanced disease management, as well as modifying benefits design ..."

Kongstvedt said, however, it is important there be "no villains" in the medical cost debate. He said hospitals face real financial concerns over capital needs and labor costs; doctors also have been "taking it on the chin" regarding payments. He said though hospitals and health plans have had a couple of good financial years, there is no catching up in this industry because you cannot catch something that is a continually moving target.

Any real changes in healthcare, however, are farther down the road.

"I'm guessing now ... five to seven years," Kongstvedt said, before the prospect of major healthcare changes becomes realistic. "It probably will have to involve addressing the issue of the uninsured and finding ways to level out the access and financing problems that are getting worse."

He said in talking with executives there is support for universal coverage but no consensus on the best way to do it -- a single payer Medicare-like system, a mandatory participation program using employers and private insurers are two possibilities.

He said, however, only when problems of the uninsured hit middle-class America, politicians and the media in a real financial way - will there be enough of an outcry, leading to discussion, decisions and change. We're just not there yet.


The Medicare public trustees released their annual report Tuesday, pushing the program seven years closer to insolvency -- to 2019 -- from last year's predictions of doom.

The report spells out just how those years are eaten up:

-- Two years get the ax because of higher healthcare spending and lower tax revenues in 2003.

-- Two years come off because of higher costs associated with the new Medicare Modernization Act. One year of that is due to higher payments to rural healthcare providers.

-- The trustees took off 1.5 years for healthcare predictions and estimates didn't pan out and cost more money, plus a half-year for refinements made to non-DRG hospitals - such as rehab hospitals and mental institutions.

-- Another one year comes off because the Centers for Medicare and Medicaid Services got better data on the health status of beneficiaries in health plans, which ended up costing more.

Former trustee and Medicare expert Marilyn Moon, of the American Institutes of Research, told reporters Tuesday "there will have to be some type of (payroll) tax increase" to keep the program solvent because "I don't think that most people would like to see the benefits cut in half."

Medicare spent more than $280 billion in 2003. Just wait until the 76 million baby boomers retire.


The Centers for Medicare and Medicaid Services is exempting certain hospitals from its specialty hospital moratorium -- which is part of the new Medicare law.

The moratorium prevents physicians may not refer Medicare patients to a specialty hospital -- such as a cardiac or orthopedic facility -- in which he or she has part ownership or an investment interest. The moratorium expires June 8, 2005, but came after concerns voiced by, among others, community and teaching hospitals, which rely on big revenue numbers from their own cardiac and orthopedic departments. There is fear specialty hospitals could adversely affect mainstream hospital finances.

On the exemption list are psychiatric, rehabilitation hospitals, long-term care and children's hospitals, as well as cancer hospitals not paid under the inpatient prospective payment system.


Sen. Trent Lott, R-Miss., recently said he has changed his views on reimporting drugs from Canada and Mexico and will now support it.

Lott told a hearing the reason was, "I cannot explain to my mother any longer why she should pay twice or

two-thirds more than what is paid in Canada and Mexico."

Dr. Gilbert Ross, executive director of the American Council on Science and Health -- which takes the free market stance -- offered some advice in a letter to Lott.

"It pains me to hear that your concern for your aged mom has caused some confusion on your part about the risks and benefits of importing drugs from Canada and elsewhere," the letter begins. "You have previously been known as an ardent supporter of free-market enterprise. Now it seems as though you have joined the list of populist officials seeking to justify the importation of drugs from Canada, where even American-made pharmaceuticals are subject to price controls."

Ross goes on to write importing cheaper drugs from Canada and Mexico might seem to make sense in the short-term but in the long-run it will "squelch drug innovation and have devastating consequences for the future availability of life-saving pharmaceuticals."

"The high price of many drugs is a serious problem -- especially for the elderly and others on fixed incomes. But it's beneath you, as a senator, to beat up on the pharmaceutical companies for the price of prescriptions," Ross said.


Ellen Beck's e-mail is

Copyright 2004 by United Press International.

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