Academic journal article Generations

Should Medicare Rely More on Market Competition?: What the Healthcare Market Will Bear

Academic journal article Generations

Should Medicare Rely More on Market Competition?: What the Healthcare Market Will Bear

Article excerpt

Generations Guest Editors Tricia Neuman and John Rother devised and posed the questions in this discussion between Joseph Antos, Wilson H. Taylor Scholar in Health Care and Retirement Policy of the American Enterprise Institute in Washington, D.C., and Thomas Rice, Distinguished Professor of the UCLA Fielding School of Public Health's Department of Health Policy and Management in Los Angeles, California.

Generations: In your opinion, what are the biggest challenges facing the Medicare program, and is the current structure of the program up to meeting these challenges?

Joseph Antos (JA): One cannot overstate the importance of Medicare in shaping the future of healthcare for all Americans. Medicare is the largest health insurance program in the United States, covering more than 50 million beneficiaries at a cost exceeding $600 billion-one-sixth of the federal budget. The program's rules drive business decisions that directly influence what services are delivered, how they are delivered, and what they cost for people who are Medicare beneficiaries, as well as for those who are not. An unreformed Medicare impedes progress throughout the health system.

Medicare's major challenges include:

* Fiscal sustainability. The recent slowdown in health spending, including Medicare spending, is mostly due to six years of a weak economy and does not signal victory over excess cost growth. The onslaught of aging baby boomers will create unprecedented cost pressures that the current program is ill-equipped to handle.

* Value, not volume. Slower spending growth does not necessarily mean better spending. Sometimes less really is less.

* Efficiency and innovation. Top-down regulation discourages adoption of new approaches to healthcare and it reinforces the dominance of existing provider organizations. Lack of program flexibility impedes progress even when Medicare tries to promote delivery innovations.

* Realistic expectations. The public has come to believe that Medicare guarantees full access to high-quality care at little or no cost to them. Policy makers thinking about their next election rarely find the political will to discuss the program's serious limitations, much less act to resolve them.

Medicare's current structure is an amalgam of different kinds of health financing approaches that have not adapted well to the changing healthcare market. Traditional Medicare remains an insurance program out of the 1960s whose fee-for-service incentives and, in conjunction with Medigap coverage, first-dollar coverage promote overuse and raise costs without improving outcomes. Medicare Advantage offers a potentially more efficient alternative, but more direct competition and smarter program rules are needed. Tom, what did I miss?

Thomas Rice (TR): I think you covered many of the key challenges going forward, Joe. I fully agree that it's important that we not get complacent just because healthcare costs have been stable for a few years. The recession, however, is not the only reason spending increases have subsided. Outside of the Medicare program, patient cost-sharing-particularly, high deductibles- have been rising precipitously, quelling demand. In Part D, many analysts point to the lack of new, expensive blockbuster drugs-albeit that was before the extraordinarily expensive ($1,000 a pill) drug for hepatitis C hit the market. With advances in genetic therapy, it's not hard to imagine that we are moving from the calm to the storm. And a number of analysts, although probably not you, believe that the Affordable Care Act is helping keep costs down.

Even within Medicare, there are some encouraging, if modest, trends. More beneficiaries are enrolling in Medicare Advantage plans with better-rated quality. Readmission rates for heart attacks, heart failure, pneumonia, and hip and knee replacements all have fallen. Early evidence from Medicare accountable care organizations points to somewhat better quality than in the fee-for-service program. …

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