Wholesale cuts in the Medicare program have no political support and will backfire because that will merely shift health care costs elsewhere if implemented, several senators and health care policy experts agreed Wednesday at a Senate hearing on the issue.
Instead, the most effective way of reducing federal health care costs is moving across-the-board away from the current fee-for-service reimbursement system.
That comment, by David Blumenthal, M.D., president of the Commonwealth Fund, appeared to represent a consensus of opinion of those who testified at the hearing.
Fee-for-service reimbursement policies, he said, “encourages volume rather than value.”
Instead, what should be done is “put in place policies to reduce unnecessary utilization, increase care coordination and improve outcomes.”
Blumenthal said that would align “incentives for providers, consumers and payers to reward choices that lead to better patient outcomes and use resources wisely.”
Blumenthal also testified that cutting Medicare spending was not a cure-all to the country’s health care cost problems.
“Solutions to the larger health spending problem are not likely to be effective if pursued only in one part of the health care system rather than system-wide,” Blumenthal said.
For example, “drastically cutting reimbursement rates in public programs could shift costs onto private payers and do little to solve the underlying problem,” Blumenthal said.
Indeed, consistent with that analysis, even the much-criticized Medicare Advantage system, which is currently facing serious cuts, was supported.
Kenneth E. Thorpe, Ph.D, and chairman of the of Health Policy and Management Department at Emory University, said research conducted through the experiences of the Medicare Advantage program as well as other research shows that care coordination and prevention play a key role in reducing spending and improving quality of health care.
The testimony took place at a hearing of the Special Committee on Aging on Strengthening Medicare for Today and the Future.
Juliette Cubanski, Ph.D., associate director, the Program on Medicare Policy, at the Henry J. Kaiser Family Foundation, testified at the hearing that “While Medicare faces long – term financial challenges, it is also important to remember that Medicare is a vital source of financial and health security for 50 million people today, and the vast majority of seniors say that Medicare is working well for them.
“Therefore, moving forward it will be important to assess the implications of proposed changes to the Medicare program for current and future beneficiaries,” she said.
At the same time, Cubanski cautioned that one of the issues Medicare beneficiaries face is significant out-of-pocket costs for both premiums and non-premium expenses to meet their medical and long-term care needs.
Another is that spending on hospital costs, Part B of Medicare, and Part D, prescription drug costs, are soaring. Blumenthal said that premiums and cost sharing as a share of annual average Social Security benefit payments has increased from 6 percent in 1970 to 26 percent in 2010.
“Overall, beneficiaries’ out-of-pocket health spending has risen faster than their incomes in recent years, from around 12 percent in 1997 to more than 15 percent in 2009, and Medicare households spend three times as much of their household budgets on health care compared with non-Medicare households,” Cubanski said.
Cubanski testified that recent polling by the Kaiser Foundation found that “While policymakers weigh potential Medicare savings options to reduce the deficit, the public does not perceive a need for significant cuts.”
She said the polling shows that a majority of the public (75 percent) believes that deficit reduction can occur without major reductions in Medicare spending. “In fact, 58 percent of Americans say they would not be willing to see any reductions to Medicare as part of deficit reduction discussions.”
She said when asked about specific proposals to reduce Medicare spending in the context of deficit reduction, a majority of Americans expressed support for two proposals:
- Requiring drug companies to give the federal government a better deal on medications for low-income people on Medicare; and
- Requiring high-income seniors to pay higher Medicare premiums; these proposals were supported by 85 percent and 59 percent of Americans, respectively.
“Notably, the survey also shows that relatively few Americans (roughly 20 percent) are aware that wealthier Medicare beneficiaries already pay higher premiums for their Medicare coverage,” she testified.
Cubanski testified that other proposals are opposed by a majority of Americans, including:
- Requiring all seniors to pay higher Medicare premiums;
- Increasing the payroll taxes workers and employers pay to help fund Medicare;
- Reducing payments to hospitals and other health care providers for treating people covered by Medicare; and
- Gradually raising the age of Medicare eligibility from 65 to 67 for future retirees.
These proposals were opposed by 85 percent, 55 percent, 51 percent, and 51 percent of Americans, respectively, Cubanski testified.
Sen. Bill Nelson, D-Fla., chairman of the committee, said he had learned from visits last week to care centers in Florida, his home state, added to that by saying that incentives to increase care coordination “offers more than just savings in dollars, it saves hours of time in a Medicare beneficiary’s life. Reducing hospital readmissions will not only save the Medicare program billions, it will save beneficiaries from potential infection and further out-of-pocket expense.”
The issue of vouchers, a key feature of presidential candidate Mitt Romney during last fall’s presidential campaign, did not come up at the hearing.
Nelson acknowledged that “Congress faces a budget crisis that once again puts the debate on exploding health costs — and by association the Medicare program — front and center.”
But he said that a recent report by the Congressional Budget Office had provided some “good news,” that federal spending on Medicare has been significantly lower than predicted over the past three years.
He said that Medicare spending in fiscal year 2012 grew by just 3 percent to $551 billion, according to CBO. “That represents the slowest rate of growth since 2000.
“While this is great progress, we all know financial challenges lie ahead. As more and more baby boomers retire and health care costs continue to rise, Medicare spending could reach $1 trillion by 2023. We’re making progress, but we know we can do better.”
Sen. Susan Collins, R-Maine, ranking minority member of the committee, also did not talk about vouchers.
She said she has opposed efforts in the past to restructure Medicare “in a way that could be harmful to the 50 million American seniors and disabled individuals who rely on the program.
“The real key to getting Medicare costs under control is to get health care costs under control. Today, the United States spends 18 percent of its gross domestic product on health care, more than any other industrialized country.”
Yet, Collins said, “We lag behind other nations on many measures of quality. In health care, quantity does not always equal quality, and clearly there is more that we can do to reward value rather than volume and quality rather than quantity.”