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Archived: Program on Medicare's Future

This program is now closed.

Program Goals:

For more than 40 years, Medicare has helped the nation's elderly and disabled obtain the health care they need, while protecting the most vulnerable among them from financial hardship. Medicare faces significant challenges as it begins its fifth decade, as program costs continue to rise and its beneficiaries' needs continue to evolve. Through its Program on Medicare's Future, The Commonwealth Fund works to:

  • enhance Medicare's ability to protect access to care for disabled, low-income, chronically ill, institutionalized, and other vulnerable beneficiaries
  • increase the effectiveness of traditional Medicare, the new Part D prescription drug benefit, and the private plan option under Medicare Advantage in providing beneficiaries with access to the care they need while maintaining the program's viability
  • design and implement improvements in Medicare that can be leveraged to improve the efficiency and quality of the health care system as a whole.

The Program on Medicare's Future is led by Assistant Vice President Stuart Guterman, M.A..

The Issues:

The Medicare Modernization Act of 2003 (MMA) added a prescription drug benefit under Medicare Part D effective to fill a major gap in essential coverage for Medicare beneficiaries, particularly for those with low incomes or chronic illness. The legislation went into effect in 2006. As of January 2008, 25.4 million beneficiaries had obtained coverage through the new Part D plans, and another 14.2 million had comparable coverage through an employer or union plan or an alternative source. Still, 4.6 million beneficiaries lack prescription drug coverage. The ability to address the needs of vulnerable groups of beneficiaries will be key to the success of the new program. The MMA also expanded the Medicare Advantage (MA) program by increasing their payments to encourage enrollment and adding several new types of plans. These include special needs plans, which are targeted to specific groups of beneficiaries, including beneficiaries who are dually eligible for Medicare and Medicaid and those with specific chronic conditions, and those who are institutionalized.

Medicare faces increasing pressure to improve the quality, appropriateness, and efficiency of the care provided to beneficiaries. With the addition of the drug benefit, program spending rose by 28 percent in 2006, and Medicare's share of the nation's gross domestic product has tripled in the past 30 years. Despite high program spending and coverage, health care costs can be burdensome to Medicare beneficiaries, especially to the most vulnerable among them—overall, 20 percent of beneficiaries' incomes are spent on out-of-pocket health care costs, while those with low incomes spend over 50 percent.

Recent Projects:

Improving Medicare Part D for Vulnerable Beneficiaries. Many Medicare beneficiaries still lack prescription drug coverage. Georgetown University's Laura Summer, M.P.H., and colleagues gathered data from people who work with beneficiaries across the country and identified additional areas in which the Part D benefit and its implementation could be improved. Two Fund issue briefs published in May 2008 by Dr. Summer report her findings: Medicare Part D: How Do Vulnerable Beneficiaries Fare? and Medicare Part D: State and Local Efforts to Assist Vulnerable Beneficiaries

Extra Payments to Medicare Advantage. Private MA plans received payments from the government in 2008 that exceed average local fee-for-service costs by 12.4 percent, or $986 per MA plan enrollee, according to Fund-supported analysis by George Washington University's Brian Biles, M.D., M.P.H., and colleagues. Since 2004, extra payments to MA plans totaled more than $33 billion, and over the next 10 years, MA extra payments are projected to add $150 billion to Medicare costs.

Improving Choices. A significant number of beneficiaries have reported that Medicare is too complicated. Jack Hoadley, Ph.D., and Ellen O'Brien, Ph.D., of Georgetown University examined ways of simplifying choices among private plans in MA and Part D, publishing two Fund issue briefs: Medicare Part D: Simplifying the Program and Improving the Value of Information for Beneficiaries and Medicare Advantage: Options for Standardizing Benefits and Information to Improve Consumer Choice.

Improving Value. The Fund is supporting efforts to improve the value Medicare gets for the money it spends. In April 2005, the Centers for Medicare and Medicaid Services launched the Physician Group Practice Demonstration, Medicare's first pay-for-performance initiative for physicians. The program provides incentives for large, multi-specialty group practices to improve the coordination of care for their fee-for-service beneficiaries. The Fund has sponsored two meetings of the 10 demonstration sites to share their experiences and identify strategies that can be disseminated more broadly. A report by Michael Trisolini, Ph.D., M.B.A., of RTI International summarizes the first of these meetings, which took place in April 2006. The second meeting took place in November 2006, and is summarized in a second report: The Medicare Physician Group Practice Demonstration: Lessons Learned on Improving Quality and Efficiency in Health Care.

Chronic Care Coordination. In invited testimony before the U.S. Senate Special Committee on Aging in May 2007, the Fund's Stuart Guterman emphasized the need for chronic care coordination within Medicare.

Lowering Out-of-Pocket Costs. Although low-income seniors have lower medical costs on average than other seniors, these costs account for a far greater percent of their annual income. In a March 2008 Fund report: Medicare Out-of-Pocket Costs: Can Private Savings Incentives Solve the Problem? Metropolitan Jewish Health System's Eliot Fishman, Ph.D., and his colleagues found that while private savings may seem to be the most realistic path for addressing the growing problem of post-retirement medical expenses, enhanced savings offer only a partial solution to this problem, especially for low-income seniors.

Future Directions: The Fund is continuing to conduct analyses and develop policy recommendations to ensure that Medicare beneficiaries receive appropriate, effective, and efficient health care. Upcoming projects include an examination of policy options for improving Medicare's performance. The Urban Institute's Stephen Zuckerman, Ph.D, will evaluate options such as improving the structure of Medicare's benefit package and improving access to the Medicare Savings Plans for low-income beneficiaries.

Marilyn Moon, Ph.D., of the American Institutes for Research, is analyzing the potential impact of providing a comprehensive benefit under traditional Medicare that would include drug coverage, a uniform deductible across all covered services, and an out-of-pocket spending limit. The Fund will continue to support research on the role of private plans in Medicare.

The Fund is also supporting an investigation of the impact that Medicare Part D drug plans have had on beneficiaries thus far. Using data on 3.7 million beneficiaries enrolled in Kaiser Permanente and Humana plans, John Hsu, M.D., M.B.A., M.S.C.E., and his colleagues at the Kaiser Foundation Research Institute, is producing empirical evidence on the impact of Part D coverage on utilization and spending. Their results will inform policymakers as they consider how to improve the Part D program. Bruce Stuart, Ph.D., at the University of Maryland Baltimore, is investigating whether targeted prescription drug regimens focused on specific beneficiary populations could lead to more appropriate utilization and program savings.

Other projects underway are examining the patterns of care provided to chronically ill elderly veterans based on the source of care (Veterans Administration vs. Medicare), the measurement of quality in acute care hospitals, issues in establishing an entity to produce information for better health care decision-making, and the implications of eliminating the Medicare waiting period for people with disabilities. These and other Fund–supported projects will demonstrate how changes to Medicare are affecting beneficiaries and the program's overall efficiency, and will help point the way to additional changes that could strengthen the ability of Medicare to serve America's elderly and disabled.