Office Call? $75. Meds? $50. Insurance? Priceless.

By Scott R. Cooper, Crook County Judge
originally published in the Prineville Central Oregonian, May 2007

Medicare Is Nearly Broke, and Oregon Hospitals May Not Be Far Behind

Last week, for the second year in a row, the trustees of the federal Medicare system issued a grim warning: without intervention to save it, the Medicare program will be broke by 2019. The Social Security program will crash in 2041, if steps are not taken to save it. All of this is the result of the pending retirement of 78 million baby-boomers. Trustees called for an immediate increase of 16 percent in the payroll tax or, alternatively, a 13 percent reduction in benefits. As is obvious to anyone, the job of the trustees is to ensure the solvency of the program, not to get elected.

Coincidentally, last week, Pioneer Memorial Hospital in Prineville presented its annual report to members. The report showed essentially flat revenues from the prior year, and negative net revenues (meaning expenses exceeded revenues). The report also showed that the hospital loses 5 percent on every Medicare-funded procedure it undertakes—which is a lot considering that not quite half the procedures at the hospital are Medicare-eligible.

So that raises a concern: how much more loss can a local hospital sustain on a program that is already losing money?

One of those attending the hospital membership meeting was Jim Diegel, chief executive officer of Cascade Health Community, which owns St. Charles in Redmond and Bend. He explained the dilemma very succinctly. On a nationwide basis, policymakers are actually seeing most hospitals making modest profits for the first time in many years. Those profits are in the less-than-5-percent range, but they are profits nonetheless. In Oregon, the situation is just the reverse.

Oregon hospitals across the board are losing money on Medicare, in large part because the federal reimbursement rate for Medicare procedures is tied to the usual and customary reimbursement rates established in 1982. At that time, Oregon had a remarkably efficient healthcare system. The state’s one major insurance company was the physician-owned Blue Cross/Blue Shield. Physicians had a stake in the profitability of healthcare, so they tended to be conservative and cautious in ordering procedures. In addition, the reimbursement rates paid for procedures were carefully scrutinized and tended to be lower than those in other states. Thus, the rates to which Medicare reimbursement were pegged in 1982 were artificially low from the beginning.

Fast forward 25 years: physicians do not have a stake in the Medicare program. The expense of delivering medicine has ballooned as technology has advanced and as all of us have developed a habit of living longer and requiring more intensive procedures to combat our age-related issues. The system as it was designed in 1982 no longer serves Oregonians very well.

It does, however, serve some state: namely Florida.

Florida just happens to have the largest senior population in the United States, with 16.83 percent of its residents aged 65 or older. By contrast, Oregon’s senior population ranks 25th in the nation at 12.91 percent. Florida, unlike Oregon, also has a lot of political clout (remember the butterfly ballot mess in 2000?). Not coincidentally, it has significantly higher Medicare reimbursement rates than Oregon. A hospital in Florida performing the exact same procedure as a hospital in Oregon receives up to 2.2 times the reimbursement, all because of the outdated 1982 reimbursement schedule.

The message is clear, if you are going to get old, and provided you don’t mind alligators and hurricanes, it would be a good idea to move to Florida—at least as far as your healthcare is concerned.

For those of us who choose to take a pass on alligators and hurricanes, we face a serious dilemma. Do we stay right here in God’s country and watch the healthcare system wither away around us, or do we take our chances with reptiles and weather and move far away where we can at least find a doctor and hospital when we need one? It is a choice none of really want to make.

So what to do?

I don’t know what the answer is to the federal crisis. If, as has been suggested by some Oregon leaders, we advance a national universal healthcare agenda, one strong possibility is that reimbursement rates will be tied to Medicare rates. That would be a catastrophe for Oregon -- instead of Pioneer Memorial Hospital losing money on 40-some percent of patients, it would lose money on all its patients!

Some state legislators, notably former Gov. Kitzhaber and state Sen. Ben Westlund, of Bend, are pushing for an Oregon solution, along the lines of the original Oregon Health Plan. Unfortunately, history suggests that the Oregon Health Plan only works when times are good. When the economy tanks, as it inevitably does in this state’s up-and-down employment cycle, the health plan goes with it.

Still others have suggested more revenues are in order to support the healthcare system. A proposal to raise the cigarette tax (to match Washington’s) died in the Oregon legislature last month. A beer-and-wine tax increase has yet to come to the floor for a vote. Various presidential candidates have proposed raising either payroll taxes or income taxes to fund healthcare proposals. One popular idea is to copy the Massachusetts model and give all employers the choice of either providing health insurance coverage or paying into a state-funded system. The problem with any of these ideas is the potential impact on businesses—particularly small Mom-and-Pop businesses that make only small profits to start and that would be devastated by even the smallest increase in staffing costs.

So the ultimate solution to an enormous problem hasn’t emerged yet. In Crook County, it feels a bit like we are sticking chewing gum into the hole in the dam in order to hold back the water. One wonders how long our “fixes” will last. By bringing the Ochoco Community Clinic to Prineville, the community helped create a safety net for those who have no other source of medical help. By creating new space for the county health department and co-locating it with the Ochoco Community Clinic, we have expanded our ability to serve the public, especially those without other access to preventative care. Our local hospital has done a good job of recruiting additional physicians and augmenting their numbers with lower-cost skilled medical professionals such as physician’s assistants and nurse practitioners. Last year we hosted a forum in Prineville to help seniors get signed up for supplemental insurance coverage. Citizens of our community with no insurance or inadequate insurance have access to the state’s bulk purchasing discount program. The board at Pioneer is looking at a plan to lease the Pioneer Facility to St. Charles—effectively merging its operations with a bigger entity hoping for economies of scale. These are all good solutions dictated by the market and economics of healthcare, but they are, at best, Band-Aids.

We as residents of the United States, Oregon, and Crook County enjoy one of the best healthcare systems in the world. No country can beat us when it comes to the quality of medicine, the training of providers and the availability of life-saving technology. But there is a cost to continuing to enjoy this, and the Medicare Trustee’s report has starkly identified the choice before us: raise revenue or cut benefits.

Health and Human Services Secretary Mike Leavitt may have summed it up best in the Medicare Trustee’s report itself: Medicare reminds us of the great dilemma of health care – the things that are priceless are not price free.