Medicare is a government program that covers most health care costs for people 65 and older, as well as individuals undergoing dialysis treatment for kidney failure. Medicare covers over forty million Americans – around 13% of the U.S. population.
Medicare is so large that its decisions on what to pay for and how much to pay for it dramatically impact the business of healthcare in the United States. When Medicare increases the amount it reimburses doctors for a particular treatment, it can change medical practice, as doctors and hospitals favor more profitable treatments. As these practice patterns change, some companies stand to profit handsomely and others lose out.
The current trend of shifting patients from hospitals to home healthcare is giving rise to professional home healthcare service providing agencies and firms. The shift from conventional treatment to proactive monitoring is opening up new opportunities in the home Healthcare market. (http://www.transparencymarketresearch.com/home-healthcare-market.html) Patients prefer such services mainly because of convenience and cost effectiveness. Third party healthcare service is also in growing demand due to better quality of treatment provided by trained professionals.
As a result, Medicare's decisions around what to pay for and at what price are subject to intense political scrutiny. The pharmaceutical companies with the most at stake when Medicare reimbursement changes also tend to have the largest government lobbying teams.
In recent years, the Center for Medicare and Medicaid Services (CMS) -- the federal bureaucracy that manages medicare -- has come under increasing pressure to cut costs. Medicare costs the Federal Government nearly $300 billion a year, around 12% of the federal budget, and costs are growing faster than other Federal spending. Democrats have made a reduction in Medicare costs via cuts to reimbursement a key part of their platform, and Democratic victory in the 2008 elections could presage additional cuts to medicare reimbursement, negatively impacting companies who rely upon medicare reimbursement for their revenues.
Roughly, medicare's spending is divided into three main areas, and each area has been a target for cost-cutting at one point or another:
When Medicare decides to increase the amount it pays for a particular drug or treatment, companies that provide that treatment can stand to profit handsomely. The amount that Medicare reimburses doctors, hospitals, and third-party health insurance companies can impact these companies' profitability. It can also affect the incentive that health care providers have to offer certain treatments, biasing providers towards procedures that have higher Medicare payments.