From the President


Richard L. Clarke, DHA, FHFMA

What will the Medicare program look like in five or 10 years?

The answer to this question will have a profound impact on our nation's seniors, as well as the fiscal solvency of the federal government. In the past, Congress has only tinkered with the program, recognizing the political fallout of a drastic overhaul.

This point may have been evidenced by the election of Democrat Kathy Hochul over Republican Jane Corwin in a recent New York congressional district election. Political pundits debate the meaning of this election, but Medicare reform, as espoused by Rep. Paul Ryan's (R-Wis.) private insurance premium support model, was at the center of the election debate.

The Democrats' approach to solving this problem is outlined in the Affordable Care Act (ACA). Savings are achieved primarily by payment reductions, healthcare coverage expansion, and a variety of payment and other pilots to demonstrate potential new care delivery models. Although ACA was scored as helping the federal budget deficit, it is not expected to bend the overall healthcare cost curve and may cause expenditures to be even higher. Typical of government, the regulations surrounding the provisions of ACA are massive and convoluted. The Shared Savings Program/ACO proposed rules are a prime example.

The Republican approach is to shift the current government-run Medicare program to a defined-contribution plan of premium support and private markets. The approach relies on the markets to solve the problem without the heavy hand of government intervention. But a significant portion of our current overall healthcare coverage is provided by private health insurance, and there has been no evidence that private plans contain costs any better than the government. In fact, per capita spending for Medicare's private insurance alternative, Medicare Advantage, is actually higher than per capita spending for Medicare's fee-for-service plan.

Finally, neither approach addresses adequately the issues of administrative costs. Without some provisions to reduce regulatory burden, providers, payers, and purchasers will continue to incur significant costs of compliance with government regulations-a problem that would not be solved by shifting Medicare to perhaps hundreds of private payers, with their own payment and billing requirements.

The solution is neither a government-run nor a privatized approach. Rather, the solution lies in a private-public partnership that focuses on shifting payment systems from a fragmented hodge-podge that misaligns incentives and adds layers of administrative costs to one that is value-based. If private and government payers worked together to design systems that would standardize payment and shift to a value-based system, the current cycle of cost shifting and rewarding for volume would be ended or at least curtailed. Medicare's future is too important to leave to politicians or markets to solve. The key is to solve the root cause of excess Medicare and the overall healthcare spending and administrative costs. Reforming payment through a private-public partnership would be a good step in that direction.

Publication Date: Friday, July 01, 2011

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