Medicare cost the federal government $528 billion in 2010.  Current projections place that funding level above $1 trillion in 2020, and that’s after deducting $45 billion in payment cuts per year to providers and Medicare Advantage plans during that period, as ordered by the federal Patient Protection and Affordable Care Act (PPACA).

The PPACA contains some important pilot programs to test methods for reducing Medicare costs.  One program aims to reduce the nearly one-in-five Medicare patients who are readmitted to hospitals within 30 days to one-in-ten or fewer.  Another would pay hospitals a lump sum for taking care of an episode of a patient’s medical care needs in lieu of per-treatment fees.  The episode would cover a set number of pre- and post-acute care days surrounding a hospital admission.  Still another program encourages groups of health care providers to form Accountable Care Organizations (ACOs) to deliver team-based care to Medicare beneficiaries on an at-risk payment basis.  With more coming, over 250 ACOs covering more than four million Medicare beneficiaries have been approved by the federal government.  Nonetheless, few analysts believe that these payment and delivery system experiments will do much to retard the growth in Medicare costs.  So, what will?

According to President Obama’s health care adviser, Dr. Ezekiel Emanuel, reducing “overutilization” and “unnecessary utilization” is the only real tactic that will rein in our nation’s rising health care costs.  Few would argue his point, but to make this happen someone will have to decide what constitutes excess versus what is truly needed to treat patients.  That, dear readers, is where this conversation starts to get ugly.

Comparative effectiveness research is the first of two silver bullets loaded and aimed at health care’s “utilization problem.”  The federal government will mine health care performance and outcomes data to determine the modalities most effective at treating high-cost medical conditions.  The second bullet is the creation of a panel authorized to use this data to set payment rates for Medicare. The Independent Payment Advisory Board (IPAB), comprised of 15 appointees nominated by the president with the advice and consent of the Senate, will make recommendations starting in 2015 that will become binding in 2018 and beyond unless Congress overturns its decisions with a three-fifths super majority vote.

An important side note related to this is the agreement Wellpoint entered into with IBM in September 2011 to create the first commercial applications of the IBM Watson supercomputer technology.  Under the agreement, WellPoint will develop and launch Watson-based solutions to help improve patient care through the delivery of up-to-date, evidence-based health care for millions of Americans. 

Make no mistake about it.  Soon someone will be whispering “no, don’t do that” in your doctor’s ear when he or she is considering how best to treat you.  Many believe that this type of guidance will rein in our ever-increasing health care cost inflation, and that it will improve the overall quality of care and outcomes delivered in our nation to boot.

For the record, the Hospital Association of Southern California, the California Hospital Association and the American Hospital Association are opposed to implementing the IPAB.

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