The New York Times

Editorial

Published: November 20, 2011

There is no way to wrestle down the deficit without reining in Medicare costs. Ensuring that the program provides quality health care coverage to millions of older and disabled
Americans is essential. These goals are not incompatible, but they require a judicious
approach to policy making that is depressingly absent in Washington.

Medicare is nothing less than a lifeline for 49 million older and disabled Americans. It
helps pay for care in a wide range of settings, including hospitals, nursing
homes, outpatient clinics, doctors’ offices, hospices and at home, as well as
for prescription drugs.

It is also hugely costly. The federal government spent about $477 billion in net
Medicare outlays in fiscal year 2011 — 13 percent of its total spending. By
2021, it is projected to spend $864 billion — or 16 percent of the total —
according to figures derived by the Kaiser Family Foundation. That rate of
growth is not sustainable indefinitely.

Unfortunately, many politicians seem less interested in coming up with ways to fix Medicare
than in how they might impose their ideology on the program or leverage the
issue for their next political campaign. Members of both parties need to define
more clearly for the public what Medicare’s true problems are and how they
propose to address them. Here are some of the major issues:

NEAR-TERM COSTS There are three key drivers of Medicare spending: the spiraling cost of all health care as new technologies and treatments are developed; much greater use of medical services by the typical beneficiary; and an aging population. By 2020, the number of enrollees will increase to 64 million.

The current rancorous debate in Washington is focused on finding big immediate cuts to slow Medicare spending. We are skeptical that this can be done quickly without wreaking major havoc.

The health care reform law enacted last year calls for cutting more than $400 billion from Medicare over the next decade, primarily by slowing the rate of growth in payments to health care providers and phasing out unjustified subsidies to private Medicare Advantage plans that insure roughly a quarter of all enrollees. Republican leaders, who denounced those cuts in 2010, have since
embraced Representative Paul Ryan’s proposal, which adopts virtually all of the
same reductions. Even these will be difficult to achieve without driving out providers,
according to the government’s nonpartisan budget analysts.

There is
time to get this right. Since January 2010 the growth in Medicare spending has
actually slowed to an annual rate of about 4 percent, less than half the annual
rate for the previous decade. No one is quite sure why, but one theory holds
that hospitals are scrambling to squeeze a lot of fat out of the system even
before the health care reforms pressure them to do it.

LONGER-TERM SAVINGS The only way to make
Medicare sustainable is to have it grow at the same rate as the economy that
provides the tax base to support it. In recent years, Medicare spending has
been growing faster than gross domestic product, by roughly 1.7 to 2 percentage
points.

Policy
experts of varied political stripes have proposed a host of ways to eliminate
excess spending without harming beneficiaries or the medical system. Some would
charge higher Medicare premiums for those able to afford them, or raise the age
of eligibility, or increase cost-sharing by beneficiaries to deter unnecessary
use of medical care. All such proposals have strengths and weaknesses that need
to be carefully analyzed.

A more radical proposal,
championed primarily by Republicans, is to stop providing Medicare payments for
specified benefits no matter the cost and instead give beneficiaries a set
amount of money to buy private insurance policies that might not provide the
same benefits. These so-called premium-support or voucher plans come in many
flavors — some good, some bad — and would need to be carefully vetted. The most
extreme version, proposed by Representative Ryan, would save the federal
government a lot of money mainly by shifting big costs to beneficiaries and
driving up costs for the rest of the health care system.

FEE-FOR-SERVICE Experts
across the political spectrum agree that Medicare’s system for paying health
care providers is a big part of its spending problem. The traditional Medicare
program pays doctors separate fees for each of 7,000 different services, such
as a diagnostic test, office visit or surgical procedure. This encourages
excess use of medical tests and procedures because the doctors get more income
as their services proliferate and the patient has little reason to question
whether another M.R.I. so soon after the last one is really necessary.

The
solution, most experts agree, is to have Medicare pay doctors and other health
care providers fixed sums to manage a patient’s care and then let the doctors
decide which services are truly necessary. Close monitoring would be needed to
ensure that doctors don’t deny medically important services to improve their
bottom lines.

The
reform law is making a start with pilot programs and modest changes in payment
policies to encourage coordinated care management. More vigorous action is
needed. This can be done by strengthening provisions in the reform law (unless
the Republicans succeed in repealing it) or by adding additional measures that
gain bipartisan approval.

BENEFITS Medicare reform should not just be about saving
money. Medicare’s coverage has some glaring gaps that need fixing. There is no
provision for long-term care in nursing homes or at home, forcing many middle-class
people to impoverish themselves to qualify for Medicaid. And patients can be
socked with very high or very low rates of cost-sharing depending on whether
care is delivered in a hospital, nursing home, by a doctor or at home. This
crazy-quilt pattern confuses patients about the costs they will have to pay and
almost certainly complicates and drives up the costs of administering the
program.

At this
point, the supercommittee looks close to implosion. But the last time
Washington tried for a quick fix of Medicare, in 1997, it did not turn out
well. Congress devised a flawed formula that was supposed to hold down payments
to doctors. Instead, many doctors simply expanded the number of services
delivered to keep their incomes high, while Congress — after being lobbied —
has postponed the payment cuts year after year. To catch up with the formula,
Congress would have to cut physician reimbursements by 29 percent next year.
That obviously shouldn’t happen and won’t.

That cautionary tale is in
no way an argument for inaction. It is an argument for serious, unhurried
analysis in a less polarized climate. That is the only way to fix this vital
program.