April 28, 2014
Can We Sustain Medicare While Making Health Care Affordable?
BY Mary Mahoney
Medicare became law in 1965 to provide health security for the nation’s elderly. About 19 million enrolled during the first year. Nearly half a century later, millions and millions of baby boomers are following in their footsteps at a time when rising costs put health care out of the reach for many younger citizens.
This raises a fundament question: Can this United States sustain both Medicare and provide affordable care to everyone else?
According to the Congressional Budget Office, annual Medicare costs will reach over a trillion dollars by 2022, up from $556 billion in 2012. The Congressional Research Service forecasts Medicare will run out of money after 2024. Medicare costs already rob 15 percent of the federal budget, a share that has been increasing steadily.
Attempts to rein in Medicare have proved inadequate. The 1997 Balanced Budget Act included a provision to save $393.8 billion in health costs over 10 years by controlling growth and physician payments and expanding the role of private plans. That act kept Medicare somewhat in check, at least until 2007.
President Obama’s key domestic initiative, the Affordable Care Act of 2010, aims to ensure the Medicare Trust Fund’s solvency, which is believed to have been assured until 2029 thanks to an initiative to reduce Medicare’s waste, fraud and abuse.
“While the ACA retained Medicare’s structure as an entitlement to a set of defined benefits, the law contains several provisions and changes to reduce projected Medicare spending by $716 billion over 10 years,” said the Kaiser Family Foundation in a report entitled “Policy Options to Sustain Medicare for the Future.”
The report suggests a number of policy options to sustain Medicare for the future including adjusting existing payment rules for providers and plans or raising beneficiary cost-sharing requirements for specific services. This option is detailed in the PBS Need to Know article, “Medicare: Past, Present and Future.”
Bipartisan health-care reform reappeared in Congress at the end of 2013 when the Senate Finance and House Ways & Means committees releaseda framework to reform the Sustainable Growth Rate formula for physician payment in Medicare. The proposal builds on an earlier bipartisan bill passed by the House Energy & Commerce committee this summer.
“Permanent reform of Medicare’s physician payment system is urgently needed,” said Mark McClellan, MD, PhD, director of the Engelberg Center for Health Care Reform and Leonard D. Schaeffer Chair in Health Policy Studies at the Brookings Institution, in a Health Affairs blog, “Medicare Physician Payment Reform: The Bipartisan Congressional Proposal and How To Strengthen It.”
“No provider is more important than physicians in determining how patients are treated, yet Medicare’s physician payment system is based on a (Sustainable Growth Rate) formula that is not focused on quality of care and has not worked to reduce overall health care costs,” he said.
One of the bipartisan organizations dedicated to ensuring the long-term security of Medicare is the Partnership for the Future of Medicare, which also released reform recommendations last year for transitioning away from Medicare’s outdated fee-for-service payment model.
“It is well understood that traditional fee-for-service does not effectively support and incentivize high-quality care and it leads to costly care,” said PFM Co-Chair Doug Holtz-Eakin, Ph.D., in the organization’s report. “Replacing it is the right place for us to begin. It is central to reform and provides the opportunity for bi-partisan consensus.”
Kavita Patel, fellow and managing director at the Engelberg Center for Healthcare Reform at the Brookings Institution, commented on recent fee for service payments in a blog post, “How the Real World Can Influence Medicare Payment Reform.”
“Recent developments in Congress around reform of the Medicare Sustainable Growth Rate have allowed for a broader dialogue on changes to physician payment,” he said. “This year’s looming physician payment cuts, approximately 24% and triggered by the dysfunctional SGR caps to Medicare spending, again threaten access to care for millions of patients across the country.
“Bipartisan and bicameral legislation has now emerged to repeal the Sustainable Growth Rate, replace it with stable updates, and provides incentives to move physicians away from fee-for-service payment into alternative payment models such as Accountable Care Organizations.”
If you are a baby boomer or just want to stay current on Medicare, I highly recommend the Kaiser Family Foundation website and Kaiser Health News and its Daily Report, which summarizes health policy coverage from more than 300 news organizations.