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Testimony—Stabilizing and Strengthening Medicare in the Context of Broader Health Reform

Thank you, Chairman Nelson, Senator Collins, and Members of the Committee, for this invitation to testify on Strengthening Medicare for Today and Tomorrow. I am David Blumenthal, President of The Commonwealth Fund. The Commonwealth Fund is a private foundation that aims to promote a high-performing health care system that achieves better access, improved quality, and greater efficiency, particularly for society’s most vulnerable, including low-income people, the uninsured, minority Americans, young children, and elderly adults. The Fund carries out this mission by supporting independent research on health care issues and making grants to improve health care practice and policy.

Concerns about federal government spending and the budget deficit have focused discussion on so-called entitlement programs, particularly on Medicare. Although Medicare remains one of the most popular government programs in history, and costs in Medicare are rising more slowly than those in the private sector, it accounts for an increasing share of the federal budget and of our economic resources. With the number of beneficiaries projected to grow rapidly over the next two decades, the tenuous fiscal viability of the program and its effect on government spending have brought calls for changing how the program is structured.

This has brought policymakers to a figurative fork in the road. On one path, policies could be pursued that cut Medicare payments to providers, reduce the benefits available through the program, or restrict program eligibility. These policies could produce program savings, at least in the short run, but they would be both morally and politically difficult as they shift costs onto elderly Americans, renege on historic promises, and raise the prospect of second-class care for a group that is particularly vulnerable. Moreover, these policies generally do not address the underlying causes of the health spending problem, so the payment cuts, reduced benefits, and restricted eligibility would have to become increasingly severe over time.

An alternative—and far preferable—strategy would support comprehensive payment and delivery system changes that produce lower costs and better value not just in Medicare, but across the entire U.S. health system. This path builds on the Affordable Care Act and continues to lead away from our current fee-for-service reimbursement system with a set of initiatives that reward providers, consumers, and payers for choices that improve outcomes and use resources efficiently. We know this approach is viable, as many innovative changes of this type are already beginning to emerge on the health system landscape as the reform law is implemented and both public and private stakeholders act on the increasing awareness that reengineering health care is preferable to rationing it.

The federal government, largely through the efforts of the new Center for Medicare and Medicaid Innovation (CMMI), is undertaking innovative initiatives not only in Medicare, but also in Medicaid, as well as in partnerships between the two programs and between public and multiple private payers. Last week, CMMI announced $300 million in funding for 25 states working to reform their health care delivery systems and contain costs. Arkansas, Maine, Massachusetts, Minnesota, Oregon, and Vermont are at the leading edge of the movement to implement a health care innovation plan that utilizes multipayer payment reform and innovative service delivery models.

Many other state-level initiatives are under way and already beginning to return real savings to government programs and the patients they serve, including:

  • The Missouri Health Home initiative, a program that integrates behavioral health and primary care and has resulted in a 16 percent reduction in per-Medicaid-beneficiary costs.
  • The Illinois Medicaid Medical Home Program, which has reduced hospitalizations by 18 percent, lowered emergency room (ER) visits by 9 percent, and resulted in $569 million in cost savings by using primary care case management.
  • The Indiana “Right Choices” program, an initiative that focuses on improving care for frequent users of hospital emergency rooms and has reduced use by 72 percent.
  • The care transition model, a program deployed in more than three dozen states, including the Visiting Nurse Service of New York, which has reduced hospital admissions by 54 percent, 30-day hospital readmissions by 24 percent, and ER visits by 27 percent.

Meanwhile, several private sector organizations are also at the forefront of reengineering care to lower costs and improve outcomes, including:

  • Geisinger Health System in Pennsylvania, through its ProvenHealth Navigator medical home model, has realized an 18 percent reduction in hospital admissions, a 36 percent reduction in hospital readmissions, and significant improvement on several quality indicators related to chronic care management.
  • Appleton Medical Center and Theda Clark Medical Center in northeastern Wisconsin have redesigned acute care processes using Lean methodologies and achieved cost-per-case reductions of 15 percent to 28 percent and lower length-of-stay and readmissions rates.
  • Virginia Mason Medical Center in Seattle, a health care delivery organization, has partnered with health plans and employers to develop standardized approaches to common conditions, decreasing the use of advanced imaging by 23 percent, increasing the availability of same-day appointments, and achieving 91 percent patient satisfaction.
  • Blue Cross Blue Shield of Massachusetts has implemented an Alternative Quality Contract in which physician practices are paid a fixed rate, with bonuses for improved quality, leading to 3 percent savings in the program’s first two years.

To build on these initiatives and encourage further progress down a transformative path to a health system that works for all Americans, The Commonwealth Fund’s Commission on a High Performance Health System has released a report that recommends an approach to accelerating change across the health system. The three pillars of the Commission’s framework involve: using provider payment reform to promote value and accelerate delivery system innovation; engaging consumers with information and positive incentives to choose high-value care and care systems; and undertaking systemwide action to improve how health care markets function.

Policies conforming to this approach could reduce federal government spending by more than $1 trillion relative to current policy over the next 10 years, and the entire health system more than $2 trillion—if these policies are enacted now, aggressively implemented, and effectively carried out, with all the system’s stakeholders pulling in the same direction. Based on these projections, net Medicare spending could be $761 billion lower.

Publication Details



D. Blumenthal, "Stabilizing and Strengthening Medicare in the Context of Broader Health Reform," Invited Presentation, United States Senate Special Committee on Aging Hearing on "Strengthening Medicare for Today and Tomorrow—Controlling Costs and Improving Care", February 27, 2013.