The mistake policymakers have long made in debating Medicare (and Medicaid, though that’s a topic for another day) is that they talk about Medicare the same way they talk about Social Security.  It’s understandable at some level, since these two programs are the country’s largest entitlement programs and serve similar populations.  However, the two programs could not be more different.

Social Security is a relatively simple program of transfer payments.  The fundamental issue for Social Security is how to manage the inflow and outflow of funds.

Medicare is an entirely different animal.

Historically, legislative changes to the program have attempted to mimic the Social Security focus on budgetary inflows and outflows by adjustments to benefits and provider reimbursements.  While expanding coverage has largely been an attempt to be more inclusive of vulnerable populations and allow access to needed services to improve overall health (while simultaneously lowering beneficiaries’ cost burden), it has always come at a price, literally.  Similarly, while provider payment cuts — and in some cases increases — have often been critical to increasing access or controlling spending in the near-term, they have done nothing to address the structural reforms desperately needed to sustain the program over the long-term.

Unfortunately, while there remain budgetary questions to consider, the opportunities and demands inherent in future structural changes to Medicare are an order of magnitude more challenging.

Reforming Medicare requires applying the same sort of sophisticated data analytics, care models, incentives, and behavioral science that some of the efforts from the Centers for Medicare and Medicaid Services’ Center for Medicare and Medicaid Innovation (CMMI), as well as the best private sector health plans, are applying today.  The future of Medicare is fundamentally about changing behavior and outcomes — the behavior of medical technology firms (drugs, device, diagnostics, etc.), providers, and patients, and then by extension improving health outcomes.  This is a much more complex undertaking than anything ever contemplated in Social Security, and if policymakers want to get serious they need to move beyond simply talking about “cutting entitlements” and actually move to talking about making them smarter.

Only these kinds of reforms can ensure the long-term sustainability of Medicare. Spending on Medicare and Medicaid represents 21 percent of all federal expenditures.  Medicare, in line with overall health spending, continues to represent a growing share of Gross Domestic Product each year, a trend that is expected to continue in the years ahead.  These figures are daunting, and for a government facing extraordinary pressure to reduce expenditures, real reforms are needed to achieve financial solvency for Medicare and maintain the integrity of the program.

As history shows, following the tried-and-true approach of cutting payments to Medicare providers such as doctors, hospitals, durable medical equipment manufacturers, and Medicare Advantage plans does not lead stakeholders to devote time and resources to proactive solutions; instead, it leads them to stay busy spending precious resources and countless hours lobbying Congress to avoid specific cuts.

Engaging in the right debate and achieving comprehensive, structural Medicare reform will require attention to the unique characteristics of the program and its beneficiaries in the context of the larger environment.

There are real opportunities to make changes to Medicare that will protect and enhance the program. Despite coming from very different perspectives, there are a number of principles that people on both sides of the aisle can agree on.  As advisory board members of the bi-partisan Partnership for the Future of Medicare, we have devised a set of principles to serve as “guard rails” to help policymakers chart a productive course for Medicare changes.  Our group agrees that there is an opportunity for progress and that these principles can be helpful to the policy process.  Our guard rails stipulate that any serious debate about Medicare reform must consider the following factors:

  • It must address our antiquated fee-for-service (FFS) payment model and move forward with a modern delivery model.  While the FFS model has dominated the program over the years, the time has come to move forward with a modern delivery model that changes economic incentives from volume to value and introduces accountability.
  • It must encourage competition and innovative ideas, taking advantage of best practices from both the private sector and government. We need models of care that embrace innovation and take advantage of best practices and knowledge from both sectors allowing efficient use of resources to offer beneficiaries better access to comprehensive coverage that can improve care coordination and overall health outcomes.
  • It must improve transparency and availability of data, which are critical elements to empowering beneficiaries to make informed decisions about their care.  For example, the Affordable Care Act (ACA) continues to implement Medicare Advantage rating systems and reward plans for achieving high-quality standards, using over fifty scoring measures, providing consumers with the tools they need to choose their health care options.
  • It must support vulnerable populations and address the increasing prevalence of chronic disease.  For example, it is imperative that we improve efforts to serve vulnerable populations like those dually eligible for Medicare and Medicaid and those who have special needs.  Coordinated care efforts that increase quality and accountability of care for these populations will improve outcomes and lower costs, and we need to insure we include better efforts to avert the rise in preventable chronic diseases such as diabetes, etc.
  • It must find ways to increase accountability, transparency, and better use of data in order to adequately address fraud, waste and abuse and strengthen program integrity. Fraud, waste and abuse continue to be a challenge to the Medicare program with $20.68 billion in recoveries since 1997. To address these challenges, we will need increased funding for initiatives that will help detect and recover improper payments.

We believe that this debate is both needed and possible.  As mentioned, there has been a bright spot in the past few years with the recent surge in innovation across both the public and private sectors.  The public sector is seeking to make great strides with the development of the CMMI.  As enacted under the ACA, CMMI is charged with testing innovative payment and service delivery models to promote methods that are proven to work, and to begin the transition towards a more integrated, coordinated delivery system.  The private sector, including Medicare Advantage plans, continues to offer health plans that provide greater coordinated care, medical homes, expanded benefits, and new methods for reimbursement.  These types of innovative models are precisely what we need if Medicare is to truly develop into a program that provides seamless care, improves beneficiary health, and lowers costs.

As advisory board members of The Partnership for the Future of Medicare, we are committed to engaging in this debate and believe that these factors serve as important broad principles within which substantive Medicare debate can begin.  It is our hope that the current focus on Medicare and our national debt will be the catalyst for serious conversations about improving the program’s long-term trajectory, and not just another predictable budget battle that will further threaten the sustainability of the program.

Note: Doug Holtz-Eakin, the president of the American Action Forum, and Ken Thorpe, the Robert W. Woodruff professor and chair of the Department of Health Policy and Management at Emory University, are co-chairs of the Partnership for the Future of Medicare (PFM).  PFM recently released its “Guard Rails” document regarding the parameters between which PFM suggests any successful Medicare debate must take place.  This post is an extension of that document.  The Partnership for the Future of Medicare is a bi-partisan organization focused on ensuring the long-term security of Medicare.