June 02, 2015 | FAH Hospital Policy Blog Team
Category: Medicare, Spending Slowdown
Earlier this week, CMS released its annual update of Medicare hospital charges data. This update by CMS virtually is the same type of charges data dump it released last year, and the year before that.
In releasing the hospital charges data, CMS asserts that “data transparency facilitates a vibrant health data ecosystem, promotes innovation, and leads to better informed and more engaged health care consumers.” This axiom generally is true, and it is one with which the FAH agrees. However, we would add an important qualifier – that the data should be relevant, meaningful, complete and actionable.
CMS’s charge data release fails on these measures. First, hospitals submit bills to Medicare with a list of charges, but only because Medicare regulations require it. Actual Medicare payments to hospitals are disconnected from charges and instead are fixed, by law, in advance by the government based on the service performed. Second, what matters most to patients are out-of-pocket costs, not charges. For Medicare beneficiaries, out-of-pocket costs also are set by the government and are unrelated to hospital charges. Out-of-pocket costs, not charges, matter most for the vast majority of patients nationwide with private coverage, very few of whom pay full charges. Patients seeking information about their out-of-pocket costs should be able to obtain this information from their health plans. Third, in the interest of full transparency, CMS also should offer data about the cost of care that hospitals incur when treating patients. Cost is a much more meaningful measure of the state of the health care “ecosystem” than charges, which virtually no one is expected to pay.
In fact, the cost of care for Medicare services provided to seniors in a hospital is projected to be 9 percent greater than the fixed payment. This imbalance is unsustainable for hospitals, and is an important data point for seniors to know.
Finally, CMS should disclose data, as part of this release, about the phenomenal Medicare spending growth slowdown that has taken hold. In 2013, Medicare spending per beneficiary grew by 0.3 percent. Further, in March 2015, hospital prices for Medicare patients rose by 0.1 percent to negative 2.6 percent compared to March 2014, according to the Altarum Institute’s Center for Sustainable Health Spending. If charges truly mattered, we would not experience this historic slowdown in Medicare spending and price growth. A myopic focus on hospital charge data gives a misleading impression to consumers and policymakers alike.
The truth about what is happening in the rapidly changing health care system, and what matters to consumers, is much more complex and demands a more complete accounting than simply posting charges and checking the box on transparency.