This week on Facing the Future we looked at Medicare, one of the biggest drivers of America’s long-term fiscal outlook. Our guest was Amy Bassano, Managing Director of Medicare services at Health Management Associates and former deputy director of the Center for Medicare and Medicaid Innovation (CMMI) at the Centers for Medicare and Medicaid Services (CMS). She discussed Medicare cost trends and reform options.
At nearly $1 trillion and growing fast, Medicare is the second largest federal government program and the nation’s single largest payer of health care services. “It’s enormous,” said Bassano, “so there’s an enormous impact of what Medicare does and how the rest of the healthcare system will be impacted.”
One troubling aspect of Medicare’s financial future is that its Part A Hospital Insurance Trust Fund is projected to be depleted in 2032. Bassano explained that if this happened the program would need to reduce payments to providers, most notably hospitals because they are paid out of the Part A Trust Fund, along with Medicare Advantage plans. This payment reduction, she warned, would likely reduce access to health care because “providers would stop providing services to Medicare beneficiaries if they knew they were not going to get paid.”
Over the long-term, Bassano believes that Medicare can save money by moving away from the fee-for-service payment model that tends to reward quantity of service rather than quality of care. This is something she worked on at the CMMI, which was created as part of the Affordable Care Act (ACA).
“There are many organizations, entities, providers that have not moved into value-based care models,” she said, “because fee-for-service is so comfortable for them, because it’s a known quantity, and you just increase your volume and continue to get paid more. So, programs that change the incentives of that, moving away from volume, are things that are really important for the healthcare system as a whole to be more efficient, to make sure the patients are getting the right type of care, that all of the incentives are aligned for better outcomes and not just for more services. I also want to make sure the beneficiaries continue to have access because they are elderly, vulnerable populations.”
To date, the CMMI has not produced the cost savings that were projected when it was enacted, but Bassano remains hopeful that its work on payment models will result in cost-saving reform. She noted, however, “there’s limited things that CMS can do themselves to achieve long-term savings. The Innovation Center is trying to do that, and there have been some areas where they’ve achieved success, but in order to extend the trust fund decades longer, Congress needs to step in and change the law. There’s a number of areas where they could try and do things, but they all have significant trade-offs that go beyond just the financial.”
As examples, she cited changes in the eligibility age, benefits and taxes. “There’s discussions about raising the eligibility age. Sixty-five was chosen back in the day when Social Security was created and people were not living decades and longer than that,” she observed. Moreover, “You could reduce benefits, but the hospitals or physicians and others in the program – if you cut their payments or limit the type of services that are paid for – may not want to participate. There’s also concerns about if you’re going to be limiting access to technology or other new life-saving treatments, which are all very expensive. You could limit that and save Medicare money, but again, probably not a really good set of options.”
On the revenue side, she said, “You could put more money into the program from either raising taxes or more general revenue, which has its own set of trade-offs because people generally are not supportive of raising payroll taxes and so much of general revenue is already going to the Medicare program. It really then is a trade-off of Medicare versus other potential services across the country.”
Bassano noted that, “There have been commissions to think about the future of Medicare and how to address these issues, but the recommendations generally have not been accepted because they’re going to be painful and unpleasant across the board. So there’s the issue of how do you craft something that everyone may feel a little bit of pain, or may not really completely hate, to keep the program going. It’s a tough place for Congress and others to be thinking about; how to extend the program and keep it financially stable?”
Hear more on Facing the Future. Concord Coalition Senior Advisor Bob Bixby hosts the program each week on WKXL in Concord N.H., and it is also available via podcast. Join us as The Concord Coalition team discusses issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.
