January 01, 2004
3 min read

Medicare reform: Tough decisions yet to be made

At some point, fiscal responsibility must enter the program; reduced reimbursement rates have only been delayed.

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Douglas W. Jackson, MD [photo] --- Douglas W. Jackson, Chief Medical Editor

Medicare exists today as an increasingly expensive creation of the Great Society. It was conceived and born in different times, and real reform of this untouchable entitlement is a term-limiting position for politicians. When will the necessary real reforms be put in place to give our seniors “the needed” coverage our nation can afford?

Certainly, the idea of assistance with prescriptions for our poorer elderly is something the majority can support. That is quite different than a universal prescription program in which we have no idea what the costs will be. We do not even know what the new drugs that are in and will be in the pipeline will cost under this program.

There were some attempts at reform attached to the drug prescription legislation to introduce some potential changes in a program in financial trouble. These small changes for choice and competition were only achieved by adding another entitlement (prescription drugs). It will take multiple subsequent bills at this rate before we will ever really reform Medicare. Doing it with stepwise modification will only make the program more confusing, expensive and delay the ultimate reform that is necessary.

The current groundwork for increasing spending only means future reimbursement cuts and/or increased taxes or both. Consider the following:

  • Approximately 30 million more seniors will be eligible for Medicare over the next 20 years.
  • The 65 and older population will increase faster than the number of workers supporting their care.
  • Health care costs have been and will continue growing faster than wages and the economy.
  • New technology in medicine will continue to increase costs, not lower them.
  • The prescription drug benefit package could become itself the largest new entitlement in years and will surely have associated escalating costs.
  • There will be continued demands by individuals, organizations (special interests) and society to guarantee that all of the potential benefits are available to everyone.
  • The Medicare population and our current politicians want quality care, universal coverage, immediate access and individual service programmed and funded with cut-rate reimbursement.
  • At some point, the beneficiaries will have to pay a greater share or the younger workers will pay more taxes or both. For the time being, the increased spending will only delay the inevitable future cutting of reimbursements.
  • How much of this current spending will be passed to future generations to make the payments? Will everyone in the program continue to have the same (universal) benefits? Will those who have had good health and lifestyle choices continue to support unhealthful life styles and practices? Will there have to be some rationing of medical care in this age of increasing numbers of beneficial medications and new technology advances?

These represent just some of the tough issues our government leaders, the public, hospitals and physicians will have to face.

Another problem: price fixing, setting reimbursement rates

CMS (Centers for Medicare and Medicaid Services) oversees and decides which procedures and services are covered. This bureaucracy sets reimbursement rates. The RBRVS or Resource Based Relative Value Scale, which is based on time and complexity, overhead and malpractice, has succumbed to “administrative pricing.” Under another name this is called price fixing.

Increased spending followed by reimbursement reductions is a self-limited approach. Without some changes in benefits and utilization, the only source of more money will come from providers, beneficiaries and from taxes. Price fixing that eliminates competition and choice in the marketplace has not worked well in our society in most situations where it has been tried. This new legislation introduces alternative choices and some market forces. Unfortunately, as I become familiar with this legislation, my interpretation is that this current change will primarily benefit managed care companies.

Medicare has been and is still committed to the single-payer, same-price same-benefits program. There are two opposing views compromised in any new legislation. The traditionalists strongly support that all beneficiaries get the same benefits at the same price. Those on the other end of the spectrum support competing systems with different prices and different services for beneficiaries.

Despite the many ideas being discussed, none of our leaders are willing to bring forward and sustain support for genuine reform. Political leadership has found it easiest to increase deficit spending, cut reimbursements and increase taxes. This will continue as long as long as physicians and those being taxed will tolerate it.

What would a new Medicare program look like if it were recreated? It would have to include decisions that deal with some of these issues:

  • Health care is expensive and will increase. What is the proper balance between beneficiary and taxpayer: Collect more taxes or increase payments from beneficiaries?
  • Should full coverage for the increased beneficiaries, treatments and drugs start at age 65, 68, 70 or when? Should means testing be part of qualification?
  • Should there be a limit or a ratio on benefits (determine a certain level that is provided to everyone in the program)?
  • Should effective incentives be developed to stop over-utilization and reward healthful lifestyles?
  • What percentage of our total productivity (GDP) are we willing to spend on health care (spending limits)?
  • Can competition more effectively lower prices than price fixing?

Quality health care is not cheap and will get more expensive with time. With the current legislation, we are getting in deeper on a spending side with no meaningful reform and fiscal responsibility on the horizon.