Turning Medicare over to the private sector, through HMOs, for example, won't necessarily result in a more efficient system.
That's the view of Marilyn Moon, a senior fellow at the Urban Institute, a Washington-based research organization. Medicare managed its per-capita cost increases better than private insurers and health plans in nine of 18 years from 1976 to 1993, Moon said. The private sector outperformed Medicare in eight years. In one, the two showed equal per-capita increases.
Moon was one of several speakers at the Montgomery Dorsey Symposium late last month in Beaver Creek, Colo. The annual event is sponsored by HealthOne, a philanthropy reorganized in 1995 when the HealthOne hospitals became part of a joint venture with Columbia/HCA Healthcare Corp.
No clear answer resulted to the symposium's theme, "Who is in Charge of the Healthcare System?" Much, however, was said to challenge many changes now being considered to improve the healthcare system.
Medicare spending is under congressional attack because it is one of the fastest-growing sections of the federal budget, second only to Medi-caid. That's because the program is covering a growing share of the U.S. population, Moon said.
Supporting Medicare ultimately will require a tax increase, she said.
Private health plans will not escape political and budget pressures if they manage Medicare, argued Lynn Etheredge, a consultant and former director of the health staff of the White House Office of Management and Budget.
Etheredge said as policymakers wrestle with the budgetary challenges of Medicare, "government is going to be a source of innovation and entrepreneurship."
Providers and health plans are boasting about the private sector's success at reducing healthcare inflation, but it hasn't done so well, said Uwe Reinhardt, a Princeton University healthcare economist. "They are stabilizing us at 14% of the gross domestic product, and that is not something you would want to brag about at international meetings," Reinhardt said.
In fact, the growth of Medicare HMOs will require the federal government to continue its strong role in Medicare policy, said Theresa Hamilton Varner, director of the Public Policy Institute at the American Association of Retired Persons. The plans must meet uniform national standards to protect Medicare beneficiaries.
"Medicare beneficiaries are increasingly troubled by managed care," she said. "They're terrified that necessary care will be delayed or denied."
Medicaid programs also benefit from federal involvement, said Lawrence Bartlett, a consultant to state Medicaid programs and former director of the State Medicaid Directors' Association.
Bartlett said there are "real advantages to having both the federal government and states involved in Medicaid." For example, the federal government sets standards like a large multistate employer; states have the flexibility to respond to local needs.
The popular idea of direct contracting between providers and employers also drew criticism. Jeff Goldsmith, a well-known healthcare futurist, called direct contracting "a mirage.
"Hospitals do worse than health plans at responding to customer complaints. Middlemen exist for a reason," Goldsmith said.
Minnesota employers essentially have chosen to outsource direct contracting, said George Halvorson, president of HealthPartners, Bloomington, Minn., a health plan with 700,000 enrollees.
HealthPartners has contracted with 14 provider systems on behalf of Buyers Health Care Action Group, an employers coalition. "From the employers' perspective, they want the simplest model they can get," Halvorson said.
He predicted that employers will adopt a defined contribution model of health benefits, similar to many pension plans.
Medical savings accounts, another trendy idea, weren't favored by speakers either. MSAs would provide tax incentives to individuals who set aside money for routine healthcare services. They're touted by advocates as a market-oriented way to control healthcare costs.
But if individuals use MSAs to pay providers directly, without benefiting from a health plan's negotiated prices, providers could charge whatever prices they want, Halvorson said.
Reinhardt said he dislikes the idea of MSAs because of tax incentives that make them more beneficial to rich people. In addition, by giving individuals control of health spending, they "economize on the one piece of healthcare supposed to be cost-effective, preventive medicine," he said.