Health care reform will involve fewer dollars going to different places

No one yet knows what the final version of health care reform will be, but two things are certain: government reimbursement rates will be reduced and money already in the system will be redistributed.

Redistribution could start as early as next year, said Lucia Guidice, director of the health industries advisory council for PricewaterhouseCoopers.

As part of a bill sponsored by Sen. Max Baucus, money would be moved from current government plans into other areas.

“But all sectors would be expected to gain billions in revenue from newly covered Americans,” Guidice said. “However, the health industry will have to absorb new fees in 2010, and payers will have to recoup cuts over time.”

Guidice said that providers would see $155 billion in cuts, including $47 billion to hospitals that treat uninsured patients, now known as disproportionate share payments. Cuts to hospitals with high readmission rates would be about $2 billion.

There also would be a $458 billion in cuts to payments made to insurers, a tax on the highest benefit plans and a reduction in Medicare Advantage payments.

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“All the proposals include cuts in government reimbursement,” Guidice said. “And Medicare is already moving from the current model. They’ve announced they will not pay for events that should never occur — serious medical errors.”

Quality care and outcomes are the focus of new payment plans. Currently, Medicare and Medicaid operate on a fee-for-service basis. But that’s changing — and could change more quickly with health care reform.

“Payments are adjusted for quality reporting,” Guidice said. “Plans that coordinate care will receive potential bonuses.”

The Baucus bill has several components related to paying for outcomes.

“Imaging devices, for example, would be cut because they are very high-cost, and often not used in the correct way,” said Brad Bowman, director of the PricewaterhouseCooper’s health industries advisory practice.

Both the Senate bill and House Bill 3200 would expand Medicaid, lead to new insurance rules and an insurance exchange. Part of paying for those programs includes redistributing Medicare payments, lowering payments to doctors and negotiating Part D of Medicare.

In addition, the bills include switching payments made for uninsured care from hospitals to health plans.

“There is a bubble of excessive costs going on,” Baucus said. “It’s like the bubble that was in real estate. There’s an analogy here. Like most bubbles it can’t last forever. Costs are just way out of control.”

Editor’s note: PricewaterhouseCoopers is conducting a series of five seminars during the next 10 weeks about health care reform. Amy Gillentine, who covers the health care industry for CSBJ, will provide bi-weekly updates about the seminars and their findings.


  1. In what media accounts are casting as a serious setback for President Barack Obama and lawmakers who back the “public option,” the Senate Finance Committee Tuesday voted against including the provision in the bill. Reports also remark on GOP unity against the provision, which they compare to the Democratic split apparent in Tuesday’s committee votes. Where I am a health insurance agent with . I find this frustrating somewhat. I don’t agree with the design of the “public option” where it works against a health system in place now and causes a financial burden on tax payers. But, I think we need one out there. I need the ability to get my clients a insurance policy that won’t decline them for pre-existing medical conditions. See Utah’s response to health care reform and health insurance reform.
    Perhaps the feds should look at the only second state case attempt for reform as a model. What about TORT reform? That honestly impacts doctor insurance costs as well as health insurance premiums by 13% See study in prior link.

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