Slow Spending, Improve Quality in Medicare: Commentary on the Health Care Opinion Leaders Survey

November 2, 2009

Authors: Gail Wilensky

"Medicare faces the same problems as the rest of the healthcare sector: unsustainable spending, patient safety and quality challenges."

Gail Wilensky Commentary on The Commonwealth Fund/Modern Healthcare Health Care Opinion Leaders Survey on Medicare Reform by Gail Wilensky, Senior Fellow at Project HOPE.

With so much attention being given to health care reform—which unfortunately seems to have morphed into health insurance reform—it's essential to remember the importance of reforming Medicare as well.

Medicare faces the same problems as the rest of the health care sector: unsustainable spending, and patient safety and quality challenges and the need for improved, clinically appropriate outcomes. The major problem that Medicare doesn't confront is the challenge of the uninsured. Medicare thus serves as a clear reminder that, important as it is to achieve coverage for all, universal coverage is far from being the only goal in health care reform and is, in fact, one of the easier challenges we face.

The major problem facing Medicare is the need to develop and implement strategies that will not only slow the spending growth rate, but also improve the quality and appropriateness of the care provided to seniors.

There is some debate as to the importance of medical prices—and therefore the importance of price controls—in explaining health care spending. It's not hard to understand why medical inflation is regarded as an important part of the problem, given the high cost of health care in this country compared with health care spending in other countries. As far as I can tell, the role of prices and the difference in medical prices between the U.S. and other countries help explain why the U.S. spends so much more, but not why it has unsustainable spending growth rates. Two recent studies—by Joe Newhouse and colleagues and Laurence Baker and colleagues—continue to indicate the importance of increased use and the mix of services used and the effects of technology on increased spending.

Slowing spending growth and improving the clinical appropriateness and quality of care provided will involve a complex set of changes that include changing the incentives that currently reward the use of more and more complex services, and also making available better information about the expected benefits of new technologies for various subgroups of the elderly population. Allowing Medicare to use information about comparative clinical effectiveness in setting its reimbursement policies is one strategy that may help it slow the impact of new technology on spending. Moving Medicare from a delivery system that is dominated by a la carte, fee-for-service physicians—working mainly in small groups of single-specialty physicians unaffiliated with hospitals—to a more integrated delivery system will be even more important, and more complex.

The need to move care delivery toward multispecialty physician groups that are better positioned to treat complex acute-care interventions as well as manage multiple chronic diseases is true for all of health care. It is just especially important for Medicare because of the greater use of medical services by the elderly population.

The health care reform proposals under consideration include many proposals and pilot programs that are focused on improving quality and health system performance. These include national strategies to improve quality, to develop and disseminate best practices in the delivery of care, to better coordinate care for dual-eligible populations, to develop valuebased purchasing programs for hospitals, home care and nursing homes, and to extend the Physician Quality Reporting Initiative.

There are also a large number of pilot programs that test various payment models to "bundle care" and to encourage the development of more accountable care organizations. Bundled payment pilots are geared to both Medicare and Medicaid. One pilot is directed to develop a bundled payment that includes acute inpatient care and post-acute outpatient care. The pilots allow physicians and hospitals to share savings that come from increased collaboration and coordination without being a formally integrated delivery system. Another pilot would fund hospitals and community-based organizations to develop services designed to lower preventable rehospitalizations. In addition, there are several provisions that are directed toward the development of quality measures and reporting systems that would be used for reporting and payment purposes.

There are at least two major challenges associated with the various proposals and pilots included in the reform proposals.

The most serious is that they further delay reforming physician reimbursement under Medicare. Physicians currently face more than a 20 percent reduction in fees in 2010 when the latest patch expires. An attempt to ignore the $250 billion, 10-year cost of  "forgiving" previous patches to current law was defeated by an unexpectedly large vote—as was appropriate. Not only is that a large amount to add to a deficit that has already tripled in the last year, but also it did nothing to fix the fundamental problem with how physicians are paid under Medicare.

Second, the history of demonstrations and pilots—even successful ones—being translated into broad-based change is discouraging, at best. Under current practice, most demonstrations and pilots require new legislative action to become permanent and to be expanded beyond the demonstration sites. Other strategies have occasionally been used, such as a diabetic shoe demo that was written to become law as long as various adverse outcomes did not occur. The language surrounding these pilots needs to be carefully crafted so that the Health and Human Services secretary will have substantial authority with regard to their use, including an ability to make midcourse corrections as needed and, ultimately, to put the pilot into widespread use if the outcomes meet a range of goals specified by Congress. Of course, Congress always has the ability to intervene and stop the pilots through legislation.

As we move into the end stages of our current round of health care reform—Health Care Reform 1.0 so to speak—we need to focus more clearly on how reforms in the rest of healthcare will affect Medicare. With a $40 trillion unfunded liability and a doubling of the population on Medicare in our future, it is important that we remind Congress and the American public to think of Medicare as more than just a major funder of universal coverage.

The views presented in this commentary are those of the author and should not be attributed to The Commonwealth Fund or its directors, officers, or staff.

Citation

G. Wilensky, Slow Spending, Improve Quality, Modern Healthcare and The Commonwealth Fund, November 2009.