The June 22 release of the annual Medicare Trustees Report has, as usual, elicited conflicting responses. Some have focused on the positive—Medicare spending per enrollee has continued to grow at a historically slow rate—while others have emphasized the negative — the Medicare Hospital Insurance Trust Fund is now projected to run out of resources in 2028, two years earlier last year’s projection. Both of these responses are legitimate, and both are incomplete representations of the situation the program faces.
As it enters its second 50 years, Medicare has been successful in assuring the health and economic security of the nation’s elderly and disabled. It has been influential in shaping the U.S. health system, improving the quality of care, and contributing to medical progress.
At the same time, Medicare faces considerable challenges. In Medicare—as in the rest of the health system—rising costs are an ongoing concern. Medicare’s benefit package, while rated highly by beneficiaries on access to care and protection from financial hardship and medical debts, falls short on financial protection for beneficiaries with low incomes and serious health problems. Fragmentation of coverage into different plans for hospital, physician, and prescription drug benefits is confusing for beneficiaries and undermines coordination of patient care; and because Medicare covers only a portion of medical expenses, most beneficiaries supplement Medicare with other coverage, adding to complexity and administrative costs.
Better strategies are also needed to serve the growing number of beneficiaries with complex care needs, physical and cognitive functional limitations, and multiple chronic conditions — symptoms of an aging population.
Although these challenges are daunting, they do not mean that Medicare is doomed. What they do mean is that we need to continue to improve the program to preserve its viability, while at the same time taking care not to hinder its effectiveness in providing access to needed health care for a growing number of vulnerable aged and disabled Americans. The slowdown in Medicare spending has given us more time to address these challenges, and there is evidence of progress.
Medicare As An Evolving Program
Concern about Medicare’s viability in the face of its challenges often is based on its portrayal as an outdated, inflexible system, mired in a 1960s-era benefit and payment structure while the rest of the health sector has left it behind. That portrayal, however, both understates the degree to which Medicare has evolved over its first 50 years and overstates the development of the rest of American health care.
Medicare, in fact, has evolved considerably over the years, expanding eligibility by including not only seniors but also the disabled who are under age 65. It has added a voluntary prescription drug benefit and more recently has expanded its coverage of preventive care. It has increased choice by offering beneficiaries the option of obtaining benefits from private health insurance plans.
Medicare also has over time put greater emphasis on the need to improve health care quality through measurement and payment. The program has implemented a series of initiatives aimed at providing information on quality measures to empower beneficiaries in choosing providers and to enable providers to identify areas in which their performance could improve; these initiatives include quality measures for hospitals, physicians, nursing homes, home health agencies, and dialysis facilities.
In particular, the connection between quality and payment, which initially were considered separate issues, has become a major focus of Medicare policy. The Affordable Care Act of 2010 (ACA) includes an array of provisions that link payment to both cost savings and patient outcomes and experiences of care; the ACA created the Center for Medicare and Medicaid Innovation to develop, test, and evaluate new models of organizing, delivering, and paying for health care. The Medicare Access and CHIP Reauthorization Act of 2015 pushed Medicare payment reform further by providing incentives for high performance and for providers to participate in alternative payment models that reward value.
Addressing Medicare Cost
Perhaps the most daunting challenge facing Medicare is the cost of the program. Although spending per beneficiary has been growing slowly in recent years, and is projected to grow relatively slowly for the immediate future, the increasing number of beneficiaries will drive Medicare spending to grow substantially faster than the economy as a whole.
Exhibit 1
However, the fact that Americans are living longer should be considered a success. It is difficult to accept the argument that, in one of the richest countries in the world, we cannot afford to live longer lives. Almost every European country has a greater proportion of elderly people, and they all spend much less on health care. Instead of looking for ways to shift a greater share of health care costs onto the elderly and disabled, we should be devoting our resources to make Medicare—and the health system as a whole—more effective.
As described above, recent legislation has greatly enhanced efforts by Medicare—as well as Medicaid and the private sector—to improve health system performance. Numerous pilots, demonstrations, and other initiatives have been developed in the past several years, and the trajectories of both Medicare and total health spending have, in fact, shifted substantially:
- Comparing the Congressional Budget Office’s (CBO’s) 10-year projection as of January 2010—before enactment of the ACA—with their most recent projection indicates that projected spending for 2020—the latest year for which the two projections overlap—has decreased by $189 billion, or 18 percent.
Exhibit 2
- Comparing the Medicare Actuary’s March 2010 projection of total national health expenditures—again, before enactment of the ACA—with their most recent actual and projected numbers for the same 10-year period (2010-2019) indicates that the latter number is $1.9 trillion (6 percent) lower.
Exhibit 3
There is controversy about what is driving these changes. Some analyses have attributed the change in the cost trend to the economic slowdown in the late 2000s. A CBO study done several years ago was not able to link the slowdown in Medicare spending growth to any specific policy. Clearly, however, there are important changes going on in the financing, organization, and delivery of health care, and those trends should be viewed by policymakers as an opportunity to pursue the triple aim of better care, better health, and lower costs.
It is important to rigorously evaluate policy initiatives to identify those that best support system goals, but an appropriate balance must be struck between methodological rigor and policy rigor mortis — that is, the inability to act constructively to improve the health system because the desired changes, even when they are being observed, cannot be attributed to any individual policy initiative.
Action Items To Ensure Medicare’s Viability
The future of the Medicare program and its ability to continue to provide access to high-quality care to its beneficiaries will depend on how policymakers, health care providers, and beneficiaries themselves respond to the challenges Medicare faces — but success will require changes not only to Medicare, but across the health system. Here are a few issues that should be addressed.
Reducing Variation in Cost and Quality
By now, the wide variation in both Medicare and private sector spending is well-documented. In Medicare, particularly, the lack of association between high spending and better quality and outcomes indicates that there should be ways to control spending while maintaining or even improving quality. Comprehensive payment and delivery system changes—including many already being developed and implemented throughout the health system—should be pursued to lower costs and increase value in Medicare and across the entire health system.
Aligning Benefit Design with System Goals
Currently, Medicare beneficiaries who enroll in traditional Medicare must patch together coverage from multiple sources in an attempt to obtain adequate financial protection and prescription drug benefits, resulting in complexity and confusion and higher administrative expenses. This also makes it difficult for Medicare to provide effective incentives for beneficiaries to seek high-value care and compare alternative treatment choices.
Moreover, by offering separate medical and drug coverage, Medicare’s current design dilutes the incentive to achieve hospital and specialty care savings through appropriate medication management. A more comprehensive Medicare benefit design that rewarded beneficiaries who seek care from high-value providers could both strengthen beneficiary protection and complement the provider payment and system reforms that are needed to control costs and improve value.
Improving Care for Beneficiaries with Complex Conditions
As both medical science and health care delivery have changed, so have the needs of Medicare beneficiaries. Medicare increasingly has focused on improving the coordination of care across providers and settings, and new approaches are being developed—including both medical and non-medical services—to serve the needs of these beneficiaries more effectively and efficiently.
A notable gap in almost all proposed Medicare reforms is the absence of practical, affordable ideas for covering long term services and supports (LTSS), an increasingly important need for the aging Medicare population. While Medicaid pays for such care for impoverished beneficiaries, no comparable support is available for non-poor older and disabled Americans. Further, the fragmentation of acute care and LTSS makes it difficult to finance and deliver coordinated care across settings. Solutions will likely require new sources of revenue, but adequate revenue has been difficult to find from public sources, and private insurance has struggled to fill the gap.
Balancing the Roles of Traditional Medicare and Medicare Advantage
A goal of the Medicare private plan program since its inception has been to provide a more efficient model of care to beneficiaries than the unorganized, fee-for-service based payment system used by traditional Medicare. But despite recent changes, plan payments overall still exceed traditional Medicare spending in much of the country, diluting and distorting incentives for plans to achieve the efficiencies and effectiveness of which they should be capable.
Moreover, the relationship between Medicare Advantage and traditional Medical payments varies not only by geographic area but also by type of private plan. With more than 30 percent of Medicare beneficiaries enrolled in private plans—a growing number, but still a minority—it becomes increasingly important to determine the appropriate balance between traditional Medicare and Medicare Advantage, and to develop policies that bring out the best in both programs.
Looking Forward
Medicare has been successful in achieving its basic mission — providing access to care and stable coverage to aged and disabled Americans. But, as the country’s largest purchaser of health services, it can do more to improve quality, promote coordinated care, and control costs — both within the program and throughout the health system. Medicare can be an important testing ground for cost and quality innovations that can improve Medicare itself and provide examples for the private sector as well. Policies have been put in place that encourage this, including expanding the power of the Secretary of Health and Human Services to put payment reform pilot programs on a fast track and to work with private payers and providers to establish multi-payer initiatives.
Medicare, indeed, is not doomed. But to ensure its continued success, and the success of efforts to improve performance across the health system, we must preserve and strengthen the program, rather than weaken and diminish its effectiveness by shifting costs onto the very population it was created to serve.
from Health Affairs BlogHealth Affairs Blog http://ift.tt/2a6sLG9
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