How to cut $9.4 trillion from Medicare, in 150 easy steps!

January 30, 2013

Legislators may struggle to build political consensus or popular support for Medicare reform, but as of Wednesday, they won't stumble because of a lack of policy options.

On Wednesday morning, the Kaiser Family Foundation released its most ambitious Medicare reform document: 150 cost-cutting policies that span 216 pages. If you enacted all of them in one fell swoop, you would cut $9.4 trillion in Medicare spending over the course of the next decade.

"We've had everyone from President Obama and Sen. John McCain to Alicia Keys in this room," Kaiser Family Foundation president Drew Altman told an audience of a few hundred health policy wonks. "We've never had a forum with a Talmudic document like this one, featuring every Medicare expert I admire most.

"We are so far gone, this is more exciting to us," he said.

The full document is available online here (although, be forewarned, you may need to give the large PDF a few moments to load).

For health policy wonks, the list of options won't be terribly surprising. The approaches break down into five broad categories: Eligibility, doctor payments, delivery system reform, program structure and, last but not least, administration.

In building the report, Kaiser spent a year reviewing literature and talking to dozens of health policy experts on both sides of the political spectrum. They seemed to find agreement on the fact that Medicare spending is a problem: It's going to eat up a bigger and bigger chunk of the federal budget over the course of the next decade.

Finding agreement beyond that point - one that can cross over political divides, even with 150 options on the table - could still prove elusive. Kaiser invited three former Medicare administrators to talk about the program's future.

They all liked the idea of changing the way that doctors get paid, so they'd be rewarded for quality rather than quantity. But they split on whether that would be enough to fix Medicare -- whether they'd need to ask seniors to spend a bit more, too.

Gail Wilensky, who ran Medicare under President George H.W. Bush, advocated for an approach that would push patients to think a bit more about the cost of their care.

"Whether there are ways to involve people more in better use of clinical services, or involve them financially in the consequences of doing things, it is much more prevalent in the under 65 population," she says. "It's rarely used for those over 65."

Bruce Vladeck, who held Wilensky's position under President Clinton, was skeptical. He worried that creating financial barriers to care would ultimately reduce quality.

"We have 30 years of data going back to the RAND study: Out of pocket payments reduce utilization," he said. "Most medicare beneficiaries are below median income and need more health care services than privately insured people."

I asked the former Medicare heads whether they could identify one area where they would agree on a reform policy to pursue. They pointed to reforming the doctor payment formula, the Sustainable Growth Rate. While that's one area where many hope to see reform, it is not generally thought to be a cost-saver: Congress would need to pony up the funds to keep doctor payments stable for the foreseeable future.

So, the options are now all on the table in one big report. Whether that helps boost them into the legislative realm remains to be seen.

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Ezra Klein · January 30, 2013