Gem of the Week: Overhauling the Medicare Payment Model

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In this blog post I highlight an illuminating or groundbreaking news article or report on the environment or health from the past 5 days. This week’s gem goes to… the National Academy of Science’s Institute of Medicine for revealing deep weaknesses in the way Medicare determines how much to pay doctors and hospitals for covered expenses. The report also outlined ways to fix these weaknesses.

For example, as found in the NAS report, Medicare uses geographical market areas to help determine how much a kidney transplant will cost a hospital to perform. However, Medicare divides the US into only 89 geographic markets, and some of those markets are an entire state or a large city. So even though an independent hospital in rural Nebraska incurs more costs to provide an organ transplant, it would be reimbursed the same as a better-funded, corporate-owned hospital in downtown Omaha. The authors recommend revising how these geographical areas are determined, and integrating them other parts of the Medicare payment model.

Another large flaw the report found was the wage index Medicare uses to help determine how much it should pay doctors and staff for procedures. Instead of using survey data from the Centers for Medicare and Medicaid Services, the report’s authors recommend using the Bureau of Labor Statistics’s data because it’s independent and more accurate.

The report is just phase I in a two-part investigation: the final report will be released in 2012. Amid discussions of cutting Medicare entitlements and aging Baby Boomers, the report’s recommendations are vital information. Currently Medicare covers 47 million seniors and 8 million people with permanent disabilities. With so many subscribers, making payments more accurate could go a long way toward cutting waste (where it occurs), and making sure all hospitals and staff are fairly compensated Medicare services.

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Which is also a pretty great way to describe Mother Jones' mission: People coming together around the truth to hold power accountable.

And right now, we need to raise about $400,000 from our online readers over the next two months to hit our annual goal and make good on that mission. Read more about the information war we find ourselves in and how people-powered, independent reporting can and must rise to the challenge—and please support our team's truth-telling journalism with a donation if you can right now.

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