Fixing a Health-Care Colossus

Medicare—the federal government program that provides health insurance to Americans 65 and over—is facing crunch time. The program, a health-care safety net that some experts say has gaping holes, took a hit in July’s federal deficit reduction deal, which reduces payments to Medicare providers—hospitals, clinics and private physicians—by about $11 billion a year, according to the health-care industry. And while Medicare beneficiaries were spared direct cuts this round, decreases in provider payments could mean fewer doctors would be willing to take on Medicare patients. Also potentially on the slate: raising the age for Medicare eligibility and increasing premiums for wealthy beneficiaries.

Whether you find it appalling or appealing to cut or privatize Medicare, the program needs more, not less revenue to accommodate baby boomers now hitting the eligibility age. The number of Americans over 65 is expected to rise from 41 million today to 72 million in 2030, nearly 20 percent of the U.S. population, according to the federal Administration on Aging. Medicare currently costs about $500 billion annually, according to the U.S. Bureau of Economic Analysis, and that amount is expected to go up proportionately as the beneficiary population increases. According to Kaiser Family Foundation research, Medicare will have insufficient funds to pay for full coverage beginning in 2019.

Amy Lischko, an associate professor of public health and community medicine at the Tufts School of Medicine, served as Massachusetts commissioner of health-care finance and policy and was a key member of former governor Mitt Romney’s team that wrote the Bay State’s health-care reform bill. She served in senior positions in state government for more than 15 years. Her research includes efforts to develop and evaluate strategies to increase access to health insurance and to make health care more affordable. Another goal is close to home: she wants to make academic research more accessible to policymakers.

Tufts Now: Can Medicare as we know it survive?

Amy Lischko: It absolutely needs reform; we simply can’t sustain the program the way it exists now. With the baby boomer population aging, we just don’t have the right framework or the right amount of money coming in to support the number of people who will be on Medicare in the future unless we change something pretty dramatically. I think everyone agrees on this.

What changes would you recommend?

What politically can work and what can work from a content and performance perspective are quite different. I am pretty pragmatic about these things, but encouraging more managed care and using cost-effectiveness research to determine covered services offered by Medicare would make a real difference. But in the current political climate, where people see anything less than complete freedom of choice and government funding of current services as a threat, these approaches  are difficult to impose. I think we must ultimately accept some combination of solutions from the right and the left in order to move forward. 

So what will Medicare look like in the future?

There will have to be some privatization of Medicare, but not a complete change over to a voucher system, where the federal government provides beneficiaries with coverage limited to a certain dollar level—that appears to be unacceptable to the public. Privatization would, however, have to be combined with some additional government oversight on how people access care and the type and quality of the care they receive.

We should understand that people now are receiving unnecessary, ineffective and even redundant care and tests. This is wasteful and raises costs. People should be covered for care that is proven to be cost effective.Care that isn’t beneficial should not be covered, so the system can work better for all.

So how would appropriate care be determined?

Americans want medical decisions to be made between a patient and a physician all the time, but that’s often done without the use of rigorous data and analysis of the costs and benefits of various treatment options.  Ultimately we have to move towards a systematic assessment of all new treatments and drugs using both cost and outcome data. This clinical effectiveness research can then feed into the decision-making process in a meaningful way. Whether government, private insurers or doctors and patients will be the ultimate decision-maker is yet to be determined.  Importantly, the 2010 Patient Protection and Affordable Care Act established the Patient-Centered Outcomes Research Institute to conduct research to provide information about the best available evidence to help patients and their doctors make more informed decisions. Many believe that this provision does not go far enough, as there is no requirement for anyone to use this information. Still, this may be an important first step.

How could this kind of research on the efficacy of drugs and treatments affect the costs for users?

I think in the future this information could be used by Medicare for coverage decisions, although it would be a difficult and lengthy process. If used in this way, overall costs for the program would come down, as expensive treatments that offer little or no benefit would not be covered. Alternatively, and possibly more likely, would be that beneficiaries would be given choices. For example, beneficiaries could agree to a package of care based on clinical effectiveness research—like a Medicare HMO where you are managed more in the kinds of medical tests or treatments available, and pay less. Or they could have access to all available care and pay much higher premiums and co-payments. No one really knows how this information will be used just yet.

Is there really no way to preserve Medicare in its current form, say by generating or reallocating revenues?

You could keep it in the same form, but I think that’s pretty unlikely at this point. You would need to significantly increase revenue or reduce provider rates further, and there is no indication that either of these approaches would be appealing. More importantly, though, there’s a lot of research showing significant geographic variations in the care Medicare beneficiaries get, because of the kinds of and numbers of health-care providers available—without a measurable difference in outcome. The least controversial approach is to remove the unnecessary care that is not producing better outcomes. That would be the ideal way to go.

What about raising the age of eligibility for Medicare?

Yes, that would be a very big savings to the federal government. The question is whether it is palatable to people and how you phase in such a change, so as not to negatively affect those near enrollment age and their finances. It makes a lot of sense, because people are living longer and working longer. Raising the enrollment age does nothing to fundamentally change the way health care is delivered, though, and doesn’t help overall health-care cost growth. There’s the unintended consequence of shifting costs to employers as these elderly workers remain on their private insurance.

What was your role in crafting the 2006 Massachusetts health-care reform bill?

Our agency, the Division of Health Care Finance and Policy, was responsible for collecting data on the health-care system, providing support to both the legislature and administration. So we had a lot of information on health insurance in the state: costs and who was insured and who was uninsured.  When the governor wanted to reform the system, we had all the data and analysis necessary to craft a solution that was empirically based.

What have we learned from the Massachusetts program?

We got 98 percent of Massachusetts’ residents insured, and that’s a great thing, but we still don’t know a lot about the longer-term impact of getting them insured. The reforms had no effect on lowering health-care costs, although perhaps it has created an environment that is more open to looking for solutions to the cost problem.

How do the Massachusetts and national health-care bills line up?

I think everyone would agree that the framework and goals are the same, although there are differences in details. The federal law is also much more complicated: compare that 2,500-page document to our state law, which had about 65 pages. The biggest difference is the level of bipartisan support we had here in Massachusetts, versus the division nationally. So how does that play out when you actually try and implement the national law? It’s hard enough to implement a complicated law when everyone really feels it is the right thing.

Inevitably, people are going to have to accept significant changes to Medicare, true?

The options are really pretty limited. Either people have to pay more, or providers have to get less or we have to give people fewer or less costly services. And out of those three options, I think the strategy people will favor is to cut out from Medicare the stuff people don’t need. But it will be hard to try and keep medical decisions just between doctor and patient and yet use clinical effectiveness research to determine what Medicare should cover. It’s always hard to have it both ways.

Gail Bambrick can be reached at gail.bambrick@tufts.edu.