Few commented on one chilling irony of the U.S. government's bailouts of General Motors and Chrysler. Not only are the carmakers grappling with shortsighted leadership and dated products, they've also shouldered massive costs for retiree health benefits. The United States has the same health care problem -- only bigger. Costs for the sprawling Medicare program for seniors are already unsustainable, with the biggest demographic group of all about to enroll. The first wave of baby boomers becomes eligible for Medicare in 2011.
On Capitol Hill and elsewhere, there's considerable debate over how and when to address health care reform. Some argue that a nation trying to get its economy on track and refocus its military operations needs to prioritize. Maybe health care can wait. But a recent financial statement from the Mayo Clinic should be treated as an alarming symptom of a critically ill health care system, one that can no longer be ignored.
The mighty Mayo -- with its gold-plated brand name, heavyweight donors and wealthy foreign patients -- barely broke even in 2008. While patient numbers held steady, income from patient care tumbled by a third. Medicare was a driving force in the decline; it almost always reimburses much less than private insurers.
Breaking even on core operations isn't good. But Mayo's financial health was far better than most health-care institutions, according to Jeffrey Bauer, a medical economist and health care futurist with ACS Healthcare Solutions in Chicago.
For many others, 2008 was a disaster -- a year in which the triple whammy of high-deductible health insurance, sharp declines in medical centers' investment portfolios and soaring numbers of people who lost their jobs and their health insurance delivered a staggering blow to an industry once thought recession-proof.
In this grim mix, overhauling Medicare becomes more of an issue than ever. Medical centers have been able to pass along to the privately insured some of Medicare patients' uncompensated costs. That's increasingly unrealistic; there are fewer people to absorb these costs. Mayo, which sees some of the highest percentages of Medicare patients in the country, estimates it lost $765 million caring for Medicare patients in 2008.
Simply spending more on this $432 billion-a-year entitlement program is not an option. Medicare costs already comprise a disturbing chunk of the nation's gross domestic product. And, where would the money come from in this age of trillion-dollar bailouts and deficits? Health care providers need to do far more to reduce costs. But Medicare's antiquated payment system also needs restructuring. There's already widespread agreement on steps to take.
Providers such as Mayo that deliver better outcomes at a lower cost should be rewarded, not those that simply do the most procedures. Medicare should not pay for drugs and procedures whose benefits are unproven -- heart CT scans or drugs such as Vytorin. Geographic disparities in reimbursements -- providers in Florida often get paid more than those in Minnesota -- need to be eliminated.
That won't solve all the ills of this ailing health care system. But it's a good start, one that will help the best providers to survive this grim downturn and make the technological investments needed to cut waste, reduce costs and improve care in preparation for the demographic tsunami about to arrive.