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The status quo can’t last

July 26th, 2010

By jeremy.engdahl-johnson

We have blogged before about how the status quo approach of shifting hospital costs from patients covered by Medicare and Medicaid to commercial payors simply can’t last, a view explained in a recent reform briefing paper. That dynamic deserves a closer look:

We can model entire systems, fully adjust for reform initiatives, anticipate provider fee movement for commercial business, etc., based on our healthcare reform modeling capabilities, but in order to calculate the status quo we have only modeled the demographic changes expected in the population as the Boomers enter Medicare and as Medicaid expands. We have not figured in differences by region, type of service provider, or other sources of variation, nor have we tried to anticipate changes to the status quo and how those changes would be reflected in various cost relativities. By their very nature, those changes are dynamic and highly variable, and will depend on a number of factors, including the eventual success of provider efforts to pursue efficiency instead of cost shifting…

If action is not taken to minimize status quo cost drivers, the yield on current equivalent billed charges is projected to fall by 2020 in our most likely scenario. Specific localized areas could see a shift significantly more detrimental based on current payor mix, an aging population, and/or a heavy percent of low-income newly Medicaid eligible members. Our projection in Figure 2 shows a 12% decrease in average yield over the next 10 years before the influence of trend by payer. With governments limiting increases and little or no room left for cost shifting, this mix issue will go straight to providers bottom lines over time.

The full paper is available here.

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  1. July 27th, 2010 at 09:05 | #1

    Great Points…Thanks

    I think your briefing paper clearly pointed out a situation that needs to be addressed by everyone – Healthcre Providers, Employers, Employee Plans, and Government Programs.

    The “Baby Boomers” – and I am one of them, are getting older and living longer. As someone who is very involved with all of the various groups, I see strong resistance to changing the “Status Quo.” Everyone wants better healthcare; but, everyone also wants to pay less or make more in overall profits. This equation does not work. The model needs to be changed and all of us need to be part of the process.

    I appreciate all of your contributions. Thanks again for the post…

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