A model for re­form

Medi­care must be changed to sur­vive; Part D of­fers a so­lu­tion

Modern Healthcare - - OPINIONS / COMMENTARY - By Grace-Marie Turner

Democrats and Repub­li­cans are sharply di­vided over how best to im­prove Medi­care, a pro­gram that cov­ers nearly 50 mil­lion Amer­i­cans and that will spend al­most $600 bil­lion this year.

Pres­i­dent Barack Obama has high­lighted the need to re­form our na­tion’s en­ti­tle­ment pro­grams, say­ing that health­care spend­ing is the key driver of our bal­loon­ing fed­eral debt and spend­ing deficit. This year, he cited the need for “mod­est re­forms” of Medi­care and So­cial Se­cu­rity so they don’t “crowd out the in­vest­ments we need for our chil­dren and jeop­ar­dize the prom­ise of a se­cure re­tire­ment for fu­ture gen­er­a­tions.”

But when he re­leased his bud­get in April, most of the sav­ings he pro­poses come from tin­ker­ing with the byzan­tine pay­ment reg­u­la­tions that dic­tate how Medi­care pays hos­pi­tals, doc­tors and other providers of med­i­cal ser­vices—cuts that come on top of the $700 bil­lion in Medi­care cuts in the Pa­tient Pro­tec­tion and Af­ford­able Care Act.

Fur­ther cuts in what the govern­ment pays to providers will in­evitably re­duce qual­ity and ac­cess to care for se­niors. With the num­ber of baby boomers turn­ing 65 ex­pected to grow from an aver­age of 7,600 a day in 2011 to more than 11,000 a day in 2029, the ur­gency for re­form grows daily. The Bowles-Simpson Com­mis­sion on Fis­cal Re­spon­si­bil­ity and Re­form said “fed­eral health­care spend­ing rep­re­sents our sin­gle largest fis­cal chal­lenge over the long run.”

But it is cru­cial that the pro­gram con­tinue to meet its com­mit­ment to se­niors. The data show where our fo­cus should be: From 1987 to 2006, 10 chronic dis­eases—in­clud­ing hy­per­ten­sion, di­a­betes and arthri­tis— ac­counted for about half the growth in Medi­care spend­ing. Ac­cord­ing to the Cen­ters for Dis­ease Con­trol and Preven­tion, chronic dis­ease ac­counts for nearly 75% of over­all health spend­ing in the U.S.

For a Congress di­vided over where and how best to re­duce spend­ing, tack­ling the is­sue of chronic dis­eases should be a national pri­or­ity within the broader Medi­care re­form de­bate.

The ques­tion is, how best to do it.

There is one pro­gram that of­fers a so­lu­tion, a pro­gram that is both pop­u­lar and un­der bud­get: the Medi­care pre­scrip­tion drug ben­e­fit, Part D.

Just af­ter Congress cre­ated Part D, the Medi­care trus­tees es­ti­mated that Medi­care ben­e­fi­cia­ries would pay an aver­age of $61 a month for their drug ben­e­fit by 2013. In­stead, the aver­age pre­mium has re­mained con­sis­tent at about $30—about where it was when the pro­gram be­gan.

Dur­ing the same pe­riod of time, pre­mi­ums for Medi­care Part B, which cov­ers doc­tors’ vis­its and other out­pa­tient care, have in­creased from an aver­age of $89 in 2006 to $105 in 2013.

Part D works dif­fer­ently from tra­di­tional Medi­care: Part D of­fers se­niors a choice of plans that are com­pet­ing with each other to of­fer the most com­pre­hen­sive se­lec­tion of drugs at the low­est price. Se­niors have shown they are smart shop­pers, and they are the ones who have driven down the cost of the pro­gram. Over­all, the cost of the Part D ben­e­fit to the fed­eral govern­ment is 43% un­der bud­get pro­jec­tions.

We need a new path for­ward for the rest of Medi­care, and Part D is a model.

In a rare move, last Novem­ber the non­par- ti­san Con­gres­sional Bud­get Of­fice changed its method­ol­ogy to take into ac­count the ef­fect that pre­scrip­tion medicines can have on spend­ing in Medi­care. The CBO es­ti­mates that for ev­ery 1% in­crease in the num­ber of pre­scrip­tions filled by Medi­care re­cip­i­ents, spend­ing on Medi­care and other fed­eral pro­grams that in­clude drug uti­liza­tion is an­tic­i­pated to de­crease by roughly 0.2%.

Part D shows that bet­ter ac­cess to the right medicines can help re­duce the cost of health­care. It’s sim­ple: If peo­ple take their medicines, they can con­trol their dis­eases and avoid ex­pen­sive hos­pi­tal stays. Chronic dis­eases are less deadly when pa­tients stick to their reg­u­lar treat­ment pro­gram.

Repub­li­can lead­ers are of­fer­ing Medi­care mod­ern­iza­tion ideas based on the Part D model, giv­ing se­niors a choice of com­pet­ing plans and a guar­an­tee that the Medi­care sub­sidy will cover the full cost of a ba­sic plan, while giv­ing se­niors the op­tion of stay­ing in tra­di­tional Medi­care.

Yet the pres­i­dent’s 2014 bud­get would take the great­est chunk of health sav­ings from drug spend­ing, cut­ting about $164 bil­lion over 10 years. That is 42% of the to­tal pro­posed cuts to HHS spend­ing, even though drug spend­ing over­all rep­re­sents less than 15% of the Medi­care bud­get. This is false econ­omy.

With­out ques­tion, Congress and the ad­min­is­tra­tion are headed for a show­down over how best to re­form Medi­care. Po­lit­i­cal lead­ers see two tracks for re­form: com­pe­ti­tion and con­sumer choice ver­sus more govern­ment price con­trols and re­stric­tions on ac­cess.

In an era in which few so­lu­tions are read­ily ap­par­ent, pol­i­cy­mak­ers should set pol­i­tics aside and look at the data. Part D is work­ing and should be a model for fu­ture Medi­care re­form to en­gage an army of se­niors in get­ting bet­ter value for their health­care dollars—just as they have al­ready proven they can do with the Medi­care pre­scrip­tion drug ben­e­fit. Medi­care could be pre­served, tax­pay­ers can be pro­tected and se­niors can con­tinue to have ac­cess to the treat­ments and medicines they need.

Fur­ther cuts will re­duce ac­cess

to care for se­niors.

Grace-Marie Turner is pres­i­dent of the Galen In­sti­tute, a not-for-profit re­search

or­ga­ni­za­tion that fo­cuses on pa­tient­cen­tered so­lu­tions for

health re­form.

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