THE COMMONWEALTH FUND Medicare Reform: Improving a Good Thing Stuart Guterman Assistant Vice President Director, Program on Medicares Future The Commonwealth Fund Families USA Annual Meeting: Health Action 2009 Endangered Species? Talking About Medicares Fiscal Health Washington, DC January 29, 2009

THE COMMONWEALTH FUND Medicares Accomplishments Medicare has improved access to care and financial security for 44 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

THE COMMONWEALTH FUND Profile of Medicare Elderly Beneficiaries and Non-Elderly with Employer Coverage, by Poverty and Health Problems No health problems, higher income 15% Health problems, lower income 38% Note: Respondents not reporting income level were excluded; lower income defined as <200% of poverty; health problems defined as fair or poor health, any chronic condition (cancer, diabetes, heart attack/disease, and arthritis), or disability. Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). Health problems, higher income 40% No health problems, lower income 8% No health problems, higher income 56% Health problems, lower income 7% Health problems, higher income 24% No health problems, lower income 14% Medicare, Ages 65+ Employer Coverage, Ages 19–64

THE COMMONWEALTH FUND Access Problems Because of Cost Percent of adults who had any of four access problems in past year due to cost Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). Note: Adjusted percentages based on logistic regression models; age groups controlled for health status and income; insurance status controlled for health status, income, and prescription coverage. * Significant difference at p<.01 or better; referent categories are ages 19–64 and Medicare 65+. Note: Access problems include: Did not fill a prescription; did not see a specialist when needed; skipped medical test, treatment, or follow-up; did not see doctor when sick. * * * * * *

THE COMMONWEALTH FUND Access to Physicians for Medicare Beneficiaries and Those With Private Insurance Percent Never had a delay to appointment No problem finding physician Source: MedPAC Report to the Congress: Medicare Payment Policy, March 2006, p. 85.

THE COMMONWEALTH FUND Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). Note: Adjusted percentages based on logistic regression models; age groups controlled for health status and income; insurance status controlled for health status, income, and prescription coverage. Rating of Current Insurance Percent of adults who rated their current insurance as excellent or very good * Significant difference at p<.01 or better; referent categories are ages 19–64 and Medicare 65+. * * * * *

THE COMMONWEALTH FUND Confidence in Future Care Percent of adults who were very or somewhat confident they will get best medical care available when they need it Source: The Commonwealth Fund Biennial Health Insurance Survey (2003). Note: Adjusted percentages based on logistic regression models; age groups controlled for health status and income; insurance status controlled for health status, income, and prescription coverage. * Significant difference at p<.01 or better; referent categories are ages 19–64 and Medicare 65+. * * *

THE COMMONWEALTH FUND …But There Are Many Challenges Although Medicare spending growth has been about the same as private insurance, it is claiming an increasing share of the federal budget Out-of-pocket spending can be burdensome, especially for beneficiaries with lower incomes There is wide variation across the country in spending per beneficiary and the quality of carebut not generally in the same direction Medicare is oriented toward acute care needs, while an increasing number of beneficiaries have multiple chronic conditions

THE COMMONWEALTH FUND Making Medicare More Sustainable Paying providers and plans –Physicians –Hospitals –Post-acute care providers –Medicare Advantage plans Managing chronic illness Increasing value for the Medicare dollar –Quality –Efficiency –Care coordination Protecting beneficiaries (particularly those who are most vulnerable) Improving the programboth for its own viability and as a model for the entire health system

THE COMMONWEALTH FUND Medicare: Payment Reform Payment reform: Medicare provider payment choice of per patient or per episode global fee payment Physician payment choices –Fee-for-service –Blended fee-for-service, patient-centered medical home fee –Primary care per patient global fee –Ambulatory care per patient global fee –Admitting physician inpatient care global fee, 90-day follow-up Hospital payment choices –DRG per hospitalized patient –Global DRG fee for hospitalization, 90-day warranty Integrated delivery system choices – above options, plus –Global DRG fee for hospitalization and physician services, 90- day warranty –Full capitation

THE COMMONWEALTH FUND Medicare: System Reform Quality standards and quality reporting –Physicians, hospitals, integrated delivery systems electing global payment must be accredited/certified as capable of assuming accountability for bundled services and meeting quality standards –All providers must report quality measures, with more comprehensive outcome and care coordination metrics for providers assuming accountability for bundled services –Payment rewards for quality and outcome results Transparency – Medicare publishes quality, accountability, and provider profile information Information technology – electronic medical records within five years; 1% assessment of private insurers and Medicare outlays to finance information exchange networks and safety net providers; personal health records accessible to beneficiaries Comparative effectiveness – center to evaluate comparative effectiveness of drugs, devices, procedures; benefit design tied to recommendations

THE COMMONWEALTH FUND Source: The Commonwealth Fund Health Care Opinion Leaders Survey, June Health policy experts have suggested various changes to the Medicare program. Do you favor changing Medicare in the following ways?

THE COMMONWEALTH FUND An Agenda for Change Short-term actions: Medicare budget savings targeted on high cost areas, high cost providers, waste, and unsafe or ineffective care: –Freeze on payment updates to hospitals and physicians in high-cost regions –Incentives for reduced hospital readmissions –No payment for hospital-acquired infections and never events Offer Medicare Extra as a choice to small employers and individuals, eliminate two-year waiting period for disabled, and buy-in for older adults; financial protection for beneficiaries Offer global fee payment options to physicians, hospitals, and integrated care systems Accountability for quality and care, rewards for results Transparency Health information technology and information exchange networks; personal health records for beneficiaries Comparative effectiveness National leadership and public-private collaboration

THE COMMONWEALTH FUND 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