Every day, 10,000 people in the U.S. celebrate their 65th birthday, making each one of these seniors eligible for Medicare. The very program that gives America’s seniors access to affordable health care will turn a youngish 48 on July 30, but in a biting irony, it could go bankrupt before reaching its 65th birthday.
We cannot wish away or ignore the reality that Medicare’s Part A trust fund — the portion that pays hospital claims — is currently projected to run out of money by 2026. The good news, however, is that it is possible to put Medicare on a sustainable path if we can surmount current political hurdles.
It is no secret that Washington is better known for what it is not doing than what it is doing these days. Partisan gridlock has proved to be an insurmountable impasse for potentially worthy legislative efforts. This is especially true when it comes to making the changes needed to sustain Medicare’s future, where Washington is truly making things much harder than they need to be.
Much of the current debate has focused on reforms that would only slightly defer Medicare’s pending insolvency, with the potential for mere cost-shifting. With many of those recommendations, political disagreement is so strong that an extremely limited chance exists to pass a compromise version. However, even if enacted, these reforms would only address the symptoms of Medicare’s condition rather than the underlying problem. The result would only help Medicare limp to its 65th birthday at best.
There is a much more meaningful reform out there that addresses the underlying problem, and, surprisingly, bipartisan consensus exists around the need to end the fee-for-service system in Medicare.
The current fee-for-service payment system compensates physicians and other health care providers for each service they deliver, such as an office visit, test or other procedure. While it is critical that providers be fairly compensated, Medicare’s fee-for-service structure contributes to inefficient care that is often disconnected with actual patient outcomes. It has accelerated the program’s financial imbalance with inflationary spending that has little or no connection to helping beneficiaries get healthier.
Republicans and Democrats, liberals and conservatives agree that changing fee-for-service Medicare would extend the program’s timeline by addressing the root cause of its troubles. A number of proposals released this year can serve as a starting point for deliberations in Congress. They include those developed by leading think tanks, such as the Bipartisan Policy Center and The Engelberg Center at the Brookings Institution, as well as those introduced, or currently being drafted in Congress, including the Medicare Physician Payment Innovation Act of 2013, initiated by Reps. Allison Schwartz, D-Pa., and Joe Heck, R-Nev.
The underlying concept central to these proposals and to meaningful, broader Medicare reform is to transform the system so that it rewards value instead of volume. These proposals support the advancement of innovation so that beneficiaries truly receive effective care. Moving away from fee-for-service to new, value-driven payment models is the first step to improving care for beneficiaries.
New models are already being tested by the Centers for Medicare and Medicaid Services and across the private sector that reimburse providers through bundled or capitated payments. Under these models, instead of paying for each individual service, providers are paid a single fee to take care of each patient or set of patients, based on their specific illness or a defined episode of care, with all services covered by that fee. This allows physicians greater flexibility to deliver and personalize patient care to increase effectiveness and often times allows them the chance to share in any savings from improved efficiencies, if quality is maintained or improved. Unlike fee-for-service, these new payment models provide the right kind of incentives, encouraging the best, rather than the most care.
If we are to help Medicare reach its own 65th birthday, it is vitally important that policymakers begin to rise above partisan factions, engage in constructive deliberation on these issues, and take action. The opportunity exists, and the cause is great. Medicare is an important part of our nation’s history and reform must be made a priority if the program is to live on and remain for generations to come.
To ensure Medicare celebrates its 65th birthday, we must act now.
Douglas Holtz-Eakin is president of the American Action Forum. Kenneth Thorpe is the Robert W. Woodruff professor and chairman of the Department of Health Policy and Management at Emory University. Both are co-chairs of the Partnership for the Future of Medicare, a bipartisan organization focused on ensuring the long-term security of Medicare.
This column originally appeared in USA Today on July 20, 2013.