As Medicare celebrates its 50th birthday, we recognize and applaud the fact that it has provided comprehensive coverage to older Americans since 1965. And with the additions of Medicaid and Affordable Care Act—alongside the 160 million Americans in employer-sponsored care—we as a nation have taken great strides to ensure that everyone has access to coverage.
It's now time to focus on ways to work together, taking advantage of the strength of all parties, to improve healthcare quality and make sure care is affordable in the long term.
Medicare faces the challenge of adapting to a changing environment to ensure its future viability. And with our health system in the midst of unprecedented changes, a revamped Medicare program has the potential to drive widespread improvements in quality and affordability. Large employers can provide ideas for sustainable and impactful Medicare reform, based on their successes innovating and improving the way health benefits are designed, delivered, and paid for.
Although Medicare has evolved since it was created in the 1960s, it still carries the legacy of its original design elements. In particular, the separation of benefits under Medicare Part A (in-hospital coverage), Part B (general medical coverage) and Part D (prescription drug coverage) is confusing for Medicare beneficiaries and creates a barrier for coordinated care. Furthermore, the dominant payment arrangement in Medicare is still the antiquated “fee-for-service” model, where physicians are rewarded for performing more services instead of delivering better service. Medicare is also hindered by a limited number of provider performance measures that are meaningful and useful to consumers and providers. Its continued use of medical claims in measuring quality indicates that it is not keeping up with the opportunity provided by the use of electronic health records and patient-generated data.
There are promising developments that we can build upon to modernize Medicare. The innovations launched in recent years—including accountable care organizations; bundled payments; penalty programs involving readmissions and hospital-acquired conditions; and other value-based payment arrangements—have been encouraging overall, although many of them are constrained by current Medicare law. For example, the Medicare ACO program relies on a retrospective “attribution” of patients to the ACO, rather than a proactive choice of the ACO by beneficiaries; this is a significant barrier to patient engagement, which is essential for real improvements in care. MACRA—the new physician payment law—also provides hope for reform, but its success rests on moving to meaningful alternative payment models and using strong performance measures.
Large employers, who represent the second-largest purchaser of U.S. healthcare services behind Medicare, have been successful in introducing innovations, but they do not have the market clout to drive systemwide changes. These innovations—if adopted by Medicare—could lead to a significant improvement in quality and affordability nationwide. One key lesson from large employers' experience is that a comprehensive approach is needed. The three key elements are:
- Provider payment reform: Paying providers for value, not volume of services. Medicare should encourage the wider use of Medicare Advantage plans, ACOs, primary-care medical homes, bundled payments for certain procedures and conditions, and other alternative payment models to be developed.
- Benefit redesign: Encouraging beneficiaries to seek and use high-value providers and services. The antiquated separation between Parts A, B and D should be replaced by a comprehensive benefit package available to all Medicare beneficiaries. Furthermore, the use of value-based benefit design should be used to reward patients who use high-value providers, while protecting low-income beneficiaries from financial burdens.
- Information infrastructure: Creating and using meaningful performance measures to support consumer choice and provider quality improvement. Medicare should move beyond the dependence on claims data by taking advantage of data from clinical registries, electronic health records and patient-generated data to rapidly develop better performance measures.
Finally, we need to push for alignment between Medicare's and large employers' purchasing strategies. We need to be using the same performance measures, similar payment models and aligned consumer incentives.
Many providers are rightfully concerned about the proliferation of inconsistent performance measures and the mixed signals from different payment models. If the public and private purchasers can act in alignment, it has the potential to unleash a wave of innovation and improvement in our care delivery system. If we can accomplish that, our children and grandchildren will be celebrating Medicare's success on its 100th birthday.
William Kramer is executive director of national healthcare policy for the San Francisco-based Pacific Business Group on Health, a coalition of 60 large purchasers of healthcare dedicated to improving the quality and value of care.