150 Ways to Reform Medicare

At nearly $500 billion a year, Medicare is the costliest piece of the federal health care budget. As we’ve discussed before, Medicare spending and enrollment is projected to rise rapidly as more baby boomers retire over the next few decades. Meanwhile, Part A of Medicare has been running cash-flow deficits over the last several years and is projected to be insolvent by 2024. As a result, many groups -- such as The Commonwealth Fund, the National Coalition on Health Care, the Center for American Progress, and the American Enterprise Institute -- have come out over the last few months with reports outlining options that lawmakers could adopt in a budget deal to help reign in Medicare spending and make Part A solvent.

In perhaps the most comprehensive and detailed report to date, the Kaiser Family Foundation (KFF) has released a compendium of 150 different policy ideas that have the potential to produce Medicare savings (and a few which would raise revenue outside of the program). Many of these policies overlap with those included in our Health Care and Revenue Savings Options report. This report further discusses the implications each policy option has for beneficiaries, providers, and plans. Savings estimates vary where scorable and many do not have official estimates available but would certainly produce savings.  Options fall into the following areas:

• Medicare eligibility age (savings up to $113B)
• Beneficiary cost sharing (roughly $130B in scorable savings) and premiums (roughly $270B in scorable savings)
• Program financing (up to $1.1T in scorable savings)
• Medicare payments to providers and plans ($350B)
• Medical malpractice (roughly $40-57B in savings)
• Delivery system reforms (No estimates available)
• Reforms to improve care for high-need beneficiaries and patient engagement (No estimates available)
• Medicare benefit redesign (roughly $125B in scorable savings)
• Premium support (Dial-able)
• Spending caps (Dial-able)
• Medicare program administration and program integrity (Minimal savings where available)

Together, these policies show three different pathways toward reforming the Medicare program which can be dialed in any number of ways to achieve significant savings. One approach would be to keep the current program as is, but make modifications to certain payments or cost sharing requirements. Another approach would use Medicare to drive policy that encourages value over volume in the delivery of care system wide. A third approach would change the fundamental structure of the program through reforms that impact the government’s financial contribution.

At a briefing for the release of the report, Dr. Gail Wilensky, Senior Fellow at Project HOPE and former Administrator of the Health Care Financing Administration (HCFA, the predecessor to the Center on Medicare and Medicaid Services), said, "Most people who look beyond 2020 acknowledge Medicare poses a real problem in terms of growth relative to GDP." Dr. Bruce Vladack, Senior Advisor to Nexera Inc. and also a former HCFA administrator, acknowledged that "an aging population means less of a workforce which poses serious long term fiscal challenges, people will need to stay in the workforce longer.”

Panelists also discussed the issue of cost sharing reforms and other ways to give beneficiaries some "skin in the game." Mark McClellan, Director, Engelberg Center for Health Care Reform at the Brookings Institution, pointed to Medicare Part D’s history which showed that when given a choice, beneficiaries chose non-traditional benefit designs. He argued that Medicare could do more to encourage beneficiaries to lower unnecessary utilization which increases spending.

Overall, this report is helpful towards better informing the discussion on reforming Medicare spending. If anything else, it reminds us that given the opportunities ahead, policymakers do not lack ideas on how to restrain health spending.

Click here for the full report.