De­fined-con­tri­bu­tion model would im­prove care

Modern Healthcare - - 50 MEDICARE AND MEDICAID THE NEXT HALF-CENTURY - Dou­glas Holtz-Eakin is pres­i­dent of the Amer­i­can Ac­tion Fo­rum. He pre­vi­ously served as direc­tor of the Con­gres­sional Bud­get Of­fice and chief econ­o­mist of the Pres­i­dent’s Coun­cil of Eco­nomic Ad­vis­ers un­der Ge­orge W. Bush. By Dou­glas Holtz-Eakin

Mod­ern­iz­ing Medi­care and Med­i­caid should be the high­est do­mes­tic pol­icy pri­or­ity. Th­ese pro­grams have an obli­ga­tion to pro­vide high-qual­ity care to Amer­ica’s se­niors and low-in­come ben­e­fi­cia­ries, and they must be made fi­nan­cially sus­tain­able.

The first pri­or­ity is to im­prove the qual­ity of care. It is now widely rec­og­nized that fee-for-ser­vice medicine pro­motes the in­ap­pro­pri­ate use of ser­vices. Both pro­grams should be moved away from siloed pay­ments to providers and to­ward co­or­di­nated care that in­cor­po­rates pre­ven­tion and re­wards qual­ity out­comes.

For Medi­care, that means build­ing on the suc­cess of the Medi­care Ad­van­tage pro­gram and im­prov­ing its as­so­ci­ated star-rat­ing pro­gram for health plans. In Med­i­caid, it means greater re­liance on man­aged care in the near term, and, ul­ti­mately, a move to por­ta­ble pri­vate cov­er­age en­abling ben­e­fi­cia­ries to keep the same plan and provider net­work as their cir­cum­stances change.

Ul­ti­mately, Medi­care must be con­fig­ured to take ad­van­tage of pri­vate mar­ket in­no­va­tion, de­liv­er­ing a mix of med­i­cal and long-term-care ser­vices in the most cost­ef­fec­tive set­ting. By mov­ing long-term care into Medi­care, states will be re­lieved of the bud­getary bur­den of nurs­ing home cov­er­age. Then Medi­care can in­te­grate the de­liv­ery of th­ese ser­vices.

The sec­ond pri­or­ity is to make the two pro­grams fi­nan­cially sus­tain­able. Medi­care and Med­i­caid spend­ing al­ready ac­counts for over a quar­ter of to­tal fed­eral spend­ing, and that will reach 30% in the next 10 years.

In both pro­grams, in­creas­ing amounts of gen­eral rev­enue must be used to cover th­ese com­mit­ments. Tak­ing ad­van­tage of mar­ket-driven ef­fi­cien­cies can con­trol ex­cess spend­ing and, ul­ti­mately, per­mit th­ese en­ti­tle­ment pro­grams to be trans­formed into de­fined­con­tri­bu­tion mod­els.

The scale of Medi­care and Med­i­caid make them the most pow­er­ful force for U.S. de­liv­ery-sys­tem re­form. Un­like top-down reg­u­la­tory mod­els such as the Af­ford­able Care Act, the use of bid­ding, de­cen­tral­ized co­or­di­nated-care plans and other com­pet­i­tive fea­tures per­mit suc­cess and fail­ure on small scales to iden­tify the most ad­van­ta­geous routes to the fu­ture.

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