Dialogue on Medicare

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Dialogue on Medicare

• Stuart Guterman
• Director, Program on Medicares Future
• The Commonwealth Fund
• National Institute of Health Policy
• Washington Health Policy Seminar
• May 8, 2006

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Medicares Accomplishments

• Medicare has improved access to care and
  financial security for 41 million beneficiaries
• Before Medicare, about half of all Americans over
  age 65 had no health insurance
• Medicare effectively ended racial segregation in
  hospitals
• Medicare beneficiaries are highly satisfied with
  their coverage and feel confident in their
  ability to obtain care

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Concerns Remain

• Although Medicare spending growth has about
  matched that of private insurance, it is claiming
  an increasing share of the federal budget
• Disparities continue in access to needed care,
  even among Medicare beneficiaries
• Out-of-pocket spending can be burdensome,
  especially for beneficiaries with lower incomes
• Most working age individuals with disabilities do
  not have Medicare coverage

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Percent Annual Per Enrollee Growth inMedicare
Spending and Private Health Insurance and FEHBP
Premiums for Common Benefits
Percent
FEHBP estimates are for 19692002 and 19992002
from Levit et al., Health Spending Rebound
Continues in 2002, Health Affairs, Jan/Feb 2004.
Source Analysis by Office of the Actuary,
Centers for Medicare and Medicaid Services,
January 2005.
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Projections of Federal ExpendituresAs a
Percentage of GDP
Percent of GDP
Source Congressional Budget Office (2003), The
Long-Term Budget Outlook (Supplemental Tables),
Available athttp//www.cbo.gov/showdoc.cfm?index
4916sequence0 as reported in R. Friedland and
L. Summer, Demography Is Not Destiny, Revisited,
The Commonwealth Fund, March 2005.
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Projected Out-of-Pocket SpendingAs a Share of
Income Among Groups of Medicare Beneficiaries,
2000 and 2005
Out-of-pocket as percent of income
Annual household incomes of 50,000 or more.
Annual household incomes of 5,000 to 20,000.
Source S. Maxwell, M. Moon, and M. Segal, Growth
in Medicare and Out-of-Pocket Spending Impact on
Vulnerable Beneficiaries, The Commonwealth Fund,
January 2001 as reported in R. Friedland and L.
Summer, Demography Is Not Destiny, Revisited, The
Commonwealth Fund, March 2005. .
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Absence of Medicare Coverage For Most Working Age
People With Disabilities
According to 2000 Census, approximately 33.1
million working age individuals have disabilities
6.0 million are currently enrolled in Medicare
27.1 million are not currently enrolled in
Medicare
Sources Social Security Administration, Social
Security Protection If You Become Disabled,
www.ssa.gov/dibplan/index.htm and U.S. Census
Bureau, Disability Status 2000,
www.census.gov/prod/2003pubs/c2kbr-17.pdf from
B. Williams, et al. Waiting for Medicare
Experiences of Uninsured People with Disabilities
in the Two-Year Waiting Period for Medicare.
October 2004.
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Current Policy Issues

• Prescription Drug Benefit
• Monitoring implementation
• Enrollment of low-income beneficiaries
• Coordinating coverage with States
• Impact on most vulnerable beneficiaries
• Ensuring quality and effectiveness

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Current Policy Issues

• Improving Quality and Efficiency
• Measuring, reporting, and paying for performance
• Enhancing efficiency
• Promoting adoption of health information
  technology
• Incorporating chronic care management approaches

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Current Policy Issues

• Medicare Advantage
• Level of payment
• Risk adjustment
• Impact on beneficiaries
• Coordination of care for those with special needs
• Quality improvement

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Policy Options for Medicares Future

• Expanded coverage for older adults and disabled
• Providing a Medicare Extra alternative to Medigap
• Using Medicares purchasing power to leverage
  health system performance
• Improving care coordination and high cost case
  management

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Medicare Buy-In for Older AdultsPercent of
Adults Ages 5064 Who Are Very/Somewhat
Interested in Receiving Medicare Before Age 65
Percent of adults ages 5064 and not on Medicare
94
86
84
81
73
73
68
66
Source The Commonwealth Fund Survey of Older
Adults, 2004.
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Interest in Medicare Health AccountsIs Strong
Across Income Group
Percent of adults ages 5070 in working families
interested in a Medicare Health Account
Respondents were asked Thinking about paying
for your healthcare in the future,would you be
interested in having 1 of your (and/or your
spouses) earnings deductedfrom your
paycheck(s), tax-free, and placed in your own
Medicare account(s) to use forlong-term care or
other expenses not covered by Medicare? Source
The Commonwealth Fund Survey of Older Adults
(2004).
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Majorities of Adults Across Political Affiliation
Express Interest in Medicare Health Accounts

• Premiums and out-of-pocket medical expenses
  constitute 22 percent of Medicare beneficiaries
  incomes, with figure projected to increase to 30
  by 2025 (S. Maxwell, M. Moon, M. Segal 2001).
• Fund exploring new strategies to encourage
  individuals to save more for retirement
• Commonwealth Fund Survey of Older Adults found
  that nearly seven of 10 respondents were
  interested in a Medicare Health Account

Respondents were asked Thinking about paying
for your healthcare in the future, would you be
interested in having 1 of your (and/or your
spouses) earnings deducted from your
paycheck(s), tax-free, and placed in your own
Medicare account(s) to use for long term care or
other expenses not covered by Medicare? Source
The Commonwealth Fund Survey of Older Adults,
2004.
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Elimination of Two-Year Waiting Period for
Coverage of the Disabled

• 1.2 million seriously disabled currently in
  two-year waiting period
• 41 of Medicare disabled uninsured prior to
  Medicare coverage
• Coverage would save states 1.8 billion a year
• Medicare coverage critical to receiving prompt
  attention to disabling conditions

Importance of Becoming Eligible for Medicare
Percent of Medicare beneficiaries ages 5070 who
said it was very important to become eligible
for Medicare
Source The Commonwealth Fund Survey of Older
Adults, 2004.
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Part E A Comprehensive Medicare Benefit Option
Estimated Impact on a Typical Beneficiary
Switching From Medigap Coverage to Proposed
Medicare Extra

• Fund-supported work proposes a new Medicare Part
  E, Medicare Extra, to eliminate need for
  beneficiaries to purchase Medigap supplemental
  coverage and a private drug plan
• Modeled after benefits typically offered in
  employer-based health plans, particularly the
  Federal Employees Health Benefits Program
• Financed by budget-neutral beneficiary premium

Source K. Davis, M. Moon, B. Cooper, and C.
Schoen. Medicare Extra A Comprehensive Benefit
Option for Medicare Beneficiaries. Health
Affairs Web Exclusive. October 4, 2005.
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Using Medicares Purchasing Power to Leverage
Health System Performance

• Medicare is a major payer and could use its
  purchasing power to improve quality and
  efficiency
• Creation of multi-claims database on provider
  performance
• Potential savings by establishing networks of
  higher quality, lower cost providers
• Pay for performance

If Medicare or your insurance plan charged you a
lower monthly premium if you agreed to go to
doctors that provided the best care at the lowest
cost, would you participate, even if it meant you
had to change doctors?
Percent of adults age 5070 who responded yes
Source The Commonwealth Fund Survey of Older
Adults, 2004.
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Improving Care Coordination

• Importance of improving transitions in care,
  doctor to doctor, and post-hospital
• Follow-up care following hospital discharge could
  reduce rehospitalization
• High cost care management could reduce errors and
  lower costs
• Will require restructuring Medicare benefits and
  incentives

Effect of Advanced Practice Nurse Care on
Congestive Heart Failure Patients Average Per
Capita Expenditures
Average cost of care (Dollars)
Note Patients ages 65 treated at 6 Philadelphia
hospitals 19972001 randomly assigned to 3-month
transitional care intervention or usual care.
Source Leatherman and McCarthy, Quality of
Health Care for Medicare Beneficiaries A
Chartbook, 2005. The Commonwealth Fund.
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Medical Home and Continuity of Care
Mean Medicare Part A Reimbursement by Duration of
Tie to a Usual Source of Care

• Medicare beneficiary should have a medical home
• Same day physician appointments reduce use of
  emergency rooms
• Continuity of physician-patient relationship
  improves quality and could reduce cost

Dollars
Source L.J. Weiss and J. Blustein, Faithful
Patients The Effect of Long-Term
Physician-Patient Relationships on the Costs and
Use of Health Care by Older Americans, Am J
Public Health, 1996, 861742-1747.
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Conclusions

• Medicare has served beneficiaries well for 40
  years
• Medicare is likely to face fiscal strains in the
  years ahead as the baby boomers retire
• Medicare today is undertaking the most extensive
  changes in its history
• There are several policy options that could make
  Medicare more effective in achieving its mission
  in the future

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Acknowledgements
Michelle Serber, Program Assistant, Program on
Medicares Future Commonwealth Fund
Karen Davis, President Commonwealth Fund


Visit the Fund at www.cmwf.org