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Medicare Compliance & Reimbursement

LEGISLATION:

Broad Assault Coming On Health Costs - Or Else

Published on Thu Jan 13, 2005

Find out what budget-saving tricks are up CMS' sleeve

Neither Medicare nor the American healthcare system as a whole will look fiscally sustainable in a few decades unless a variety of cost-containing, value-producing changes come into play. That was the message of an expert panel of economists Jan. 31 at the World Health Care Congress of healthcare businesspeople in Washington, DC.

What does that mean to providers and others with a stake in Medicare? "Big changes are coming," said Congressional Budget Office Director Douglas Holtz-Eakin, "No matter what you might think at the moment."

While most current talk is about how to ensure that Social Security has adequate financing, in fact the most difficult fiscal issue is health care, said the director of Congress' non-partisan economic-analysis arm. As the years go on, the U.S. population will be older and richer, so devoting a hefty proportion of the gross domestic product to health spending "is an entirely sensible economic outcome," since health care is what older, richer people care about, said Holtz-Eakin. That means the key issue is identifying high-quality care and making sure that dollars flow toward it, he said.

A variety of tactics can help to rein in cost growth and implement value purchasing. But "there are no single answers that are going to work," said Project Hope Senior Fellow Gail Wilensky.

That said, look for Congress to take an "incremental" approach to Medicare revisions, implementing bits and pieces of many different strategies, the economists predicted. The panel commented on some tactics likely to be on the table for Medicare, including the following:

  • Require higher-income beneficiaries to pay more. The Medicare Modernization Act already stepped in this direction, income-relating Part B premiums for the highest-income beneficiaries. When baby boomers retire, the greater number of women who've been in the workplace will help increase federal revenues, Wilensky says.

  • Require all beneficiaries to pay more. "If consumer-directed health plans such as health savings accounts succeed in trimming costs for the under-65 population, it may  gradually enter Medicare's bag of tools," said Reischauer.

    But he cautioned that even without shifting more costsonto beneficiaries, by 2025 the average 65-year-old could face premiums, cost sharing, and deductibles totaling more than 100 percent of his or her Social Security benefit check, according to Medicare actuaries' estimates, he said.

  • Revise the entire retirement system to keep seniors working longer. People are living longer and, consequently, also living longer on the taxpayer-funded Medicare dole, said Wilensky. That makes changing "both fiscal policies and cultural expectations" to "encourage older workers to stay in the workforce" at the age of 65 and even 70 a must, she said. Catch: Employers may not be so willing to foot the heftier health-coverage bill.

  • Make the provision of health care more efficient.  Studies by Dartmouth Medical Schools' John Wennberg, MD, and others have shown that areas where more services are provided often have worse outcomes. But cutting the volume of low-value services is "likely to be a long and difficult row to hoe," said Reischauer.

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