Four Recommendations to Achieve Health Care Savings


Posted by Joel Wittman

The now-defunct so-called congressional “super committee” that was charged with the task of identifying deficit reductions received several recommendations that would create significant health care savings over a ten year period.  Despite the failure of the committee to successfully achieve its mandate, it is well worth exploring the cost reduction suggestions the committee received from health care executives.  These chief executives of both for-profit and not-for-profit health care companies, members of the Healthcare Leadership Council (HLC), presented a set of reform proposals that would not only generate $410 billion in savings over 10 years, but would also strengthen Medicare’s long-term sustainability.  In fact, according to Mary R. Grealy, president of HLC, “the reform recommendations will contribute to deficit reduction without placing an unfair or disproportionate burden on patients, healthcare consumers, or our most vulnerable citizens.”

HLC’s recommendations to the “super committee” included:

Create a new “Medicare Exchange” in which private insurance plans would compete on the basis of cost, quality, and value.  

While acknowledging that this recommendation would be compared to the Medicare reform concept contained in Congressman Paul Ryan’s proposed budget, the HLC indicated that the differences include the fact that there Medicare beneficiaries would have the option of staying in traditional fee-for-service Medicare and there would be a more generous inflation factor – growth in GDP plus one percent – for premium subsidies.

The thought behind this proposal is that Medicare beneficiaries should have the same freedom of choice as Medicare Part D prescription drug program participants, federal employees and members of Congress participating in the Federal Employees Health Benefits Program, and those who will utilize the new state-level insurance exchanges created as part of the Affordable Care Act.  The competitive environment will require healthcare providers, plans, manufacturers, and distributors to achieve greater cost-efficiencies while still offering quality and value to beneficiaries.

As Ms. Grealy stated: “ If given the choice between deeper provider cuts, which will reduce patient access to care, and reducing costs by using consumer choice to incentivize  cost-effective innovation, it doesn’t seem like a difficult decision.”  However, does it seem similar to the public option plan that was vigorously opposed when being considered as part of the ACA?  And, can competition be the driver of health care cost reductions in an imperfect market place?

Gradually increase the Medicare eligibility age from 65 to 67.

As more Americans remain healthy over a longer period of time, this transition would mirror the increase in the Social Security retirement age and reflect today’s longer average lifespans.  The increase would be implemented over roughly a decade, raising the eligibility age by two months annually.  The shrinking ratio of active workers to Medicare beneficiaries makes this change inevitable.  The Affordable Care Act makes such a change possible in that Americans in their mid-60s not yet eligible for Medicare would be able to purchase health insurance on the new state exchanges without their health status affecting their ability to acquire coverage.  But at what cost?  More than the price of Medicare Part B premium coverage?

Reform Medicare’s cost-sharing structure.

This reform would involve making the Medicare Part A and B beneficiary cost-sharing uniform, with a reasonable deductible and co-pays as well as a cap on annual out-of-pocket costs.  This would make Medicare costs more predictable and consistent for beneficiaries while also ensuring that seniors wouldn’t be devastated by catastrophic care costs or faced with limits on hospital stays.  Another part of this proposal would be a requirement that individuals with incomes of $150,000 and greater pay their full premium costs for Medicare Parts B and D.  Supposedly, this would affect less than 3% of Medicare beneficiaries and would generate budget savings while protecting financially vulnerable beneficiaries.  Uh-oh.  Is this an “us against them” issue?

Implement medical liability reform.

HLC members recommended liability reform measures including a cap on non-economic damages in medical malpractice cases, a one-year statute of limitations from the point of injury to the filing of litigation, and a “fair share” rule to have defendants pay damages commensurate with their responsibility for the injury involved.  Acknowledging the partisan difficulty in advancing tort reform legislation, alternative approaches including linking liability protections to healthcare providers’ use of health information technology and practice of evidence-based medicine should be considered.

The above four recommendations would generate just over $410 billion in budget savings over a ten-year period, based on Congressional Budget Office estimates and other published budget projections.  Alas, the “super committee” wasn’t so super after all and could not generate a program acceptable to the partisan participants. But, should that mean that some worthwhile recommendations not be explored further with the thought of strengthening our healthcare system?  Or do we slowly move along and be subject to on-going sequestration reimbursement rate reductions?

Joel Wittman is an Adjunct Associate Professor at the Wagner School of Public service of New York University.  He is the proprietor of both Health Care Mergers and Acquisitions and The Wittman Group, two organizations that provide management advisory services to companies in the post-acute health care industry. He can be reached at joel.wittman@verizon.net.

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