Insights

Strengthening Medicare for the Future

By: 
Doug Holtz-Eakin, PhD and Ken Thorpe, PhD

This July marks 50 years since President Lyndon Johnson signed Medicare into law. Since Medicare’s passage in 1965, the program has expanded to cover more services and provide greater care for seniors.  However, the Medicare that President Johnson signed into law 50 years ago is on an unsustainable path today. More seniors are aging into the program and living longer than ever before, raising concerns about Medicare’s solvency. This was the focus of a recent Brookings Institution and University of Southern California Schaeffer Center for Health Policy and Economics forum that discussed what Medicare might look like in 15 years at 65.
 
At “Strengthening Medicare for 2030,” the speakers agreed that fee-for-service (FFS) Medicare will become insolvent without substantive changes to its payment and health care delivery system.  There was widespread consensus that rewarding quality and paying for value, not volume, is critical to Medicare’s sustainability. The event also coincided with the release of five new papers on key issues in Medicare, such as the welfare of current beneficiaries, payment models, and potential modifications to the program. In fact, many discussions focused on current pilot and demonstration projects at the Centers for Medicare and Medicaid Services (CMS) that are testing new ways to deliver and pay for high-quality, high-value care.
 
Paul Ginsburg, chair of medicine and public policy at the Schaeffer Center, and Gail Wilensky, senior fellow at Project HOPE, discussed challenges in alternative payment models and how to better facilitate the transition to value-based care.  Both noted the increasing adoption of Accountable Care Organizations (ACOs), Patient-Centered Medical Homes (PCMHs) and other models by physicians and urged CMS to improve these pilot programs. Issues with benchmarks, beneficiary engagement and quality measurement were cited as top concerns. Additionally, Ginsburg and Wilensky recommended that CMS strengthen quality standards and improve physician payment incentives to increase participation in these programs.
 
Medicare Advantage (MA)’s payment model was also highlighted for its success in incentivizing high-value, high-quality coordinated care for beneficiaries. For years, beneficiaries enrolled in MA plans have reported improved health outcomes and lower utilization rates of health care services, compared to FFS Medicare.  These results have led to lower federal spending and increased savings for Medicare as a whole.  In fact, Alice Rivlin, director of the Center for Health Policy at Brookings, and Willem Daniel, senior research assistant at Brookings, mentioned MA’s success in delivering more cost-effective care than FFS Medicare. They also mentioned ways to strengthen MA for beneficiaries, such as changing the bidding process used to determine benchmarks for MA payments and improving the complex risk adjustment process used to ensure beneficiaries’ access to MA plans.
 
Health policy experts agree that advancing meaningful reform is the first step toward preserving Medicare for 2030 and beyond. MA’s success can provide valuable lessons to help advance the shared goal of moving Medicare away from FFS toward value-based payment models. As Medicare approaches its 50th anniversary next month, there is a lot to celebrate and look forward to in the years ahead.

Date: 
Monday, June 22, 2015