Medicare Advantage, not fee-for-service, is the best way forward

Additional wholesale cuts to Medicare, such as the looming 2014 cuts to the Medicare Advantage program, have no political support and will backfire. Dramatic cuts in senior health care merely shift health care costs elsewhere. This was the consensus of a handful of senators and health care policy experts on Wednesday’s Senate hearing on the issue.

David Blumenthal, M.D., president of the Commonwealth Fund, suggests “Instead, the most effective way of reducing federal health care costs is moving across-the-board away from the current fee-for-service reimbursement system.” His opinion appeared to represent the consensus of those who testified at the hearing.

Fee-for-service reimbursement policies, he said, “encourages volume rather than value.”

Instead, Blumenthal says “put in place policies to reduce unnecessary utilization, increase care coordination and improve outcomes.”

Doing so, Blumenthal suggests, would align “incentives for providers, consumers and payers to reward choices that lead to better patient outcomes and use resources wisely.”

Blumenthal also opposes cutting Medicare spending in response to the country’s health care cost problems. He said, “Solutions to the larger health spending problem are not likely to be effective if pursued only in one part of the health care system rather than system-wide”.

For instance, “drastically cutting reimbursement rates in public programs could shift costs onto private payers and do little to solve the underlying problem,” Blumenthal explained.

Consistent with Blumenthal’s analysis, even the heavily criticized Medicare Advantage system, which is facing serious cuts in 2014, was supported.

The Chairman of the of Health Policy and Management Department at Emory University, Kenneth E. Thorpe, Ph.D, said that the experiences and research conducted through the Medicare Advantage program shows that prevention and care coordination play a key role in cost reduction and improving the quality of health care. Thorpe’s testimony took place at a hearing of the Special Committee on Aging on Strengthening Medicare for Today and the Future.

Meanwhile, Juliette Cubanski, Ph.D., associate director, the Program on Medicare Policy, at the Henry J. Kaiser Family Foundation, testified that “While Medicare faces long-term financial challenges, it is also important to remember that Medicare is a vital source of financial and health security for 50 million people today, and the vast majority of seniors say that Medicare is working well for them.

Cubanski said that recent polling by the Kaiser Foundation uncovered that “While policymakers weigh potential Medicare savings options to reduce the deficit, the public does not perceive a need for significant cuts.”

“In fact, 58 percent of Americans say they would not be willing to see any reductions to Medicare as part of deficit reduction discussions,” she said.

Cubanski said when asked about specific proposals to reduce Medicare spending in the context of deficit reduction, a majority of Americans support two proposals:

  1. Requiring drug companies to give the federal government a better deal on medications for low-income people on Medicare; and
  2. Requiring high-income seniors to pay higher Medicare premiums; these proposals were supported by 85 percent and 59 percent of Americans, respectively.

“Notably, the survey also shows that relatively few Americans (roughly 20 percent) are aware that wealthier Medicare beneficiaries already pay higher premiums for their Medicare coverage,” she testified.

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