Medicare 2014 has achieved the main goal of Medicare 1965: Access to medical treatment for older Americans. That, and advances in medicine, public health, and technology, have led to long lives and better health. Nevertheless, the system designed for the priorities of 1965 does not match the needs of 2014, and beyond.

What very old and frail people need — whether to ease the fears of a 90-year old woman living alone in a second-floor walk-up apartment or the burdens on the family of an 85-year old slowly drifting into the haze of dementia — goes without Medicare coverage.   Addressing those needs and correcting course to change habits of overtreatment and cost inflation for older people living with multiple chronic conditions is a historic opportunity — to build Medicare 2030.

With what we know today, we could actually right-size the medical services, generate the savings, and re-design the delivery system to ensure reliability and supportive services. And more: we could pay for all or most of that vastly improved system with the savings we achieve from optimizing medical care.

But will the nation pursue that reinvestment? Will policymakers insist upon it? Will the public demand it? To do so would mean major changes in how we operate health care.

Three Questions

First, can we change practice patterns enough to realize the savings that dozens of research projects and demonstrations have characterized? Answer: Dramatic savings are being achieved by well-capitalized private enterprises that create lean delivery systems for elders discharged from hospitals, what I will call “efficiency contractors.”

Second, who will keep those savings? Answer: At present, the savings (perhaps 5 percent of Medicare expenditures) go to these private efficiency contractors and the clinical providers or insurance organizations that hire them.

So, the third and key question is whether that course is in the public interest? More to the point:  Should the public see this new manifestation of “business as usual” as a good outcome, or should we insist upon a lean care system that puts the savings to public use?

Medicare-covered services in the period after hospital discharge show remarkable regional variation; elders living with serious and, for the most part, multiple chronic conditions and disabilities, routinely receive a variety of treatment approaches of limited value. Indeed, a large Medicare demonstration project, the Post-Acute Care Payment Reform Demonstration, showed that most of the differences in settings of care (between home, skilled nursing, inpatient rehabilitation, long-term acute care, and combinations) made little difference in terms of patient health within a few months. Experience elsewhere, in other countries and in our own Veterans Health System and in PACE (Program of All-Inclusive Care of the Elderly) shows that excellent care can be had, even sometimes with dramatically reduced costs.

And yet, achieving such cost reductions on a broad scale has been quite elusive.  Our bias toward trying a treatment and our cultural reticence to acknowledge the realities of aging and dying makes it hard for older people, family members, and clinicians to accept the situations where there is simply no remedy.

This effect is magnified by our fee-for-service payment tradition, which yields all the usual incentives for over-use, here applied to people for whom and to whom so much can be done—with so little benefit.  Our extant standards of care have often simply carried over from younger and more resilient populations. For younger people, deciding not to diagnose a cancer or fix an orthopedic injury would be unconscionable. For frail elders, those decisions require careful consideration of preferences and outcomes, an exercise that is often simply not undertaken.

Frail elderly people and their families often urgently need services that Medicare does not directly cover: e.g., support for housing, food, and activities of daily living (ADLs). So, clinicians and families have quietly found it expedient to provide some supports, such as skilled nursing facility care, usually just a couple of weeks so the family can rearrange things and the patient can stabilize and so that in-home care becomes easier to do.  However, this also adds impetus to the remarkable over-use of medical care, with no clear incentives to be more efficient.

Managed Care Plans And Efficiency Contractors

Into this profoundly dysfunctional system have come some unusual reformers: strong for-profit enterprises that step into the course of care and establish expectations of getting only the medical care and rehabilitation that have been shown to be effective in achieving better outcomes a few months downstream.  These programs deploy nurses with charts and graphs and settled plans that organize patient and family expectations, though they generally do not adjust for the adequacy of the home or the patient’s desire to be in a rehabilitation facility rather than a nursing home.

The programs have the evidence, and they are working to the rule.  They can save a lot of Medicare expenditures by rigorously staying in the “acute care and rehabilitation” mode, setting aside long-term supports and services.  One report claims nearly halving the costs of after-hospital care. Geriatricians will attest to the believability of such claims.

So, strong evidence and early and strong intervention in the course of care is very likely to be effective in trimming the overuse.  What remains is that third question: Should the public be happy with this situation, or should we be demanding better use of public funds?  Should we be accepting of a set of arrangements that creates the opportunity for substantial amounts of Medicare funds to go to managed care plans (and their near-neighbors, the Accountable Care Organizations, or ACOs) and their efficiency contractors?

Obviously, eventually Medicare might recalibrate the payments so as to continue the leaner delivery system but to close this business opportunity, but the recent retreat from reducing managed care payments could well give a citizen reason to believe that this response will be slow in coming.  Long before Medicare recalibrates the rates, the managed care companies will surely learn to do this work on their own, closing off the business opportunity for the efficiency contractors but still taking the same profits.  The limit on the medical-loss ratio gives a ceiling to this effect, returning profits above this range back to the managed care members as services or cash, but this medical loss ratio limit does not apply to the ACOs and can be evaded by continuing to contract for the efficiency services.

What will be the likely effect of dramatically trimming the services available after hospitalization?  One predictable effect will be substantially increasing the burden on families, as they need to provide care more suddenly and to less stable family members.  Presumably, many will need supplemental services at home, some of which will be paid for by the patient or family, since they will not meet Medicare requirements and limitations.  Elderly people will spend down to Medicaid more quickly.  The comfortable arrangements for follow-up that many hospital-based practitioners have had will be disrupted: e.g., the orthopedist who could count on the skilled nursing facility or inpatient rehabilitation facility to implement shared protocols will now have patients going home more quickly and to a more varied set of caregivers.

Perhaps the imposed necessity to deal with sicker and more unstable family members at home, and for the patient to rely upon those family members, will create more opportunity to talk about preferences toward the end of life and to accept less aggressive medical care.  Maybe there will be fewer adverse effects from institutional care. Likely, though, many facilities will close and others will find that post-acute care no longer subsidizes long-term care.

Moreover, many elderly people will not have homes and families able to take them in right away.  For them, having Medicare-covered residential care options for a short time after hospitalization was a way to try to get back home, or a bridge to a considered decision to accept long-term residential care in assisted living or nursing home settings.  With the efficiency contractors, the choices will be moved to an earlier time in the course and mostly will have to be privately paid; or for those without assets, Medicaid will pay for services like housing, food, transportation, and personal care.  Again, Medicaid will pay more.

At its core, the problem here is that Medicare’s boundaries do not make sense when dealing with the tenth of the elderly population who are living with the multiple chronic conditions and disabilities associated with the last years of life.  Medicare’s open-ended entitlement makes $100,000 drugs and treatments readily available, even when the prospects for improved outcomes are very slim.  However, Medicare’s non-coverage of most supportive services makes it impossible, for example, to get a substitute caregiver when the regular caregiver is ill.  While Medicare’s costs keep rising, the sequestration imposed by the budget deal last year cut millions of meals from Meals on Wheels nationwide, and few protested. Federal support for elder-adapted housing has declined, and caregiver support is not really a visible part of Medicare.

A Better Model

Consider whether, instead of having savings go to private investors, insurers, and health system providers for a very long time, the nation could decide that savings should go toward the social supports that are so desperately needed.  Using these savings well could actually slow the rate of spending down to Medicaid and buttress family caregiving by providing stipends, respite care, and training.  Elderly people could count on food and housing.  We could either allow the efficiency contractors to implement the changes broadly enough to create irrevocable change, and then build the new system on their success; or we could aim to build the new system that generates the efficiencies and re-invests the savings from the start.  Both strategies would keep public funds working in the public interest, at least eventually.

Thus, the answer to the third question, whether the public should accept privatizing substantial savings from Medicare, is a resounding “No!”  The public should revolt, not to insist upon continuing the waste and chaos in the current system, but to demand a thorough redesign for the last years of life.  The model should require reinvesting much of the savings in supportive services, with local monitoring and management – making an Accountable Care Community for the last years of life.