NEJM Health Policy Series Profiles Medicare Problems and Potential Solutions
Lawmakers are weighing several proposals designed to fix Medicare's "inadequate" benefit package and prevent further "fiscal crises" in the program, but opinions on how to resolve these problems are "conflicting," Urban Institute health economist Marilyn Moon writes in the fourth installment of the
New England Journal of Medicine's Health Policy 2001 series. Stemming the growth of Medicare spending has been a "high priority" for lawmakers since the 1980s, although the "urgency has diminished in recent years," Moon writes. The article outlines the various problems facing Medicare, some of which are listed below:
- The Medicare+Choice program has continued to be "problematic," Moon writes, adding that it has neither reduced federal spending nor provided "stable coverage" to its enrollees. Increased payments to the program are not likely to solve these problems, she states, since the participating plans have "resisted efforts to obtain data on the quality of care and to adjust payments in order to discourage adverse risk selection."
- The Medicare restructuring plan developed by the National Bipartisan Commission on the Future of Medicare, which would require Medicare beneficiaries to choose among a variety of private plans and the traditional Medicare program, "might lead to adverse risk selection," Moon writes. She adds that the traditional Medicare program will become more expensive, possibly even "unaffordable," since it will serve "the patients with the most serious medical disorders." This would "forc[e]" many current beneficiaries to enroll in managed care plans, she states.
- Some have proposed raising the age at which individuals become eligible for Medicare or setting maximum income eligibility levels as a way to control the program's costs. These proposals are "controversial," as advocates of universal coverage protest that means testing would "undermine support for the entire program."
Suggesting several measures that could improve the efficiency and cost-containment of Medicare, Moon writes, "No proposed reform of Medicare will magically lead to lower costs. What ultimately matters is changing the main determinants of cost: the prices charged for services, administrative costs and the number of services delivered." For example, the program needs "more flexibility," and lawmakers should consider adopting management techniques used by private insurers, such as contracting with a limited number of specialized providers. To "ensure the effectiveness of competition," Moon states, lawmakers should adopt better payment methods for private plans and should develop "reasonable requirements" for reporting on the quality of care. Simply adding a prescription drug benefit to the program "is unlikely to be enough to encourage beneficiaries with traditional Medicare coverage to forgo supplemental insurance," especially since the current Medicare benefit package "leaves beneficiaries liable for nearly half the cost of their acute care," she writes. Moon adds that other changes, such as establishing an upper limit on cost sharing and reducing the deductible for hospital services, are also needed to move seniors away from supplemental coverage. However, Moon warns, Medicare's "improved financial outlook" and President Bush's campaign promise to give seniors prescription drug coverage "probably mean that cost containment will get little attention," and Medicare spending will likely rise as "hospitals and HMOs see[k] yet another round of increased payments." Moon continues, "An approach to reform that kept the current system largely intact but established a better way of paying private plans could generate savings and protect the traditional program," adding that Medicare will eventually need additional public funding to remain solvent. She concludes, "Reducing the number of beneficiaries or the scope of coverage would shrink the federal liability but do little to reduce the societal costs of financing health care. The basic issue will be how to share that burden" (Moon, New England Journal of Medicine, 3/22).
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