Aetna CEO: New Math for Medicare

(We have made the point often in this space that, even with the private sector’s successes in containing healthcare costs and reducing Medicare per-capita spending to historic lows, the sheer magnitude of baby boomers reaching 65 and reaching Medicare eligibility necessitates significant changes to the program.  Moving away from a fee-for-service model that incentivizes volume rather than value is essential.  As Mark Bertolini, CEO of Aetna (a Healthcare Leadership Council member) points out in this Forbes op-ed column, innovative approaches to Medicare payment and healthcare delivery can achieve better patient health and improved system sustainability.)

By Mark T. Bertolini

The Medicare Part A trust fund will be exhausted by 2030. As 11,000 baby boomers become eligible for Medicare daily, Medicare spending is projected to exceed $1 trillion in 2020. We can’t change the numbers that define our population but, we can apply new math to them.

Focus first on helping the chronically ill

The sickest 5 percent of fee-for-service Medicare patients with chronic conditions drive more than 40 percent of the total cost of health care in the program. We should use the lessons learned in Medicare Advantage and other proven innovations. Encourage Medicare Part A and B enrollees with multiple chronic conditions to participate in new integrated care programs with top-notch physicians to ensure high-quality service. Pay managed care organizations rates that guarantee savings for taxpayers out of the gate.

Use the successes and learnings of this approach to phase out the Medicare fee-for-service payment model

The fee-for-service model has doctors getting paid by the number of procedures they do or tests they run, rather than on how well their patients do. We need to move to a system that pays for quality over quantity.

These two changes alone will mean lower cost coupled with better integrated, quality care for the members of our families that need that care the most.

While the Congressional Budget Office recently reported that estimated costs of Medicare and Medicaid have dropped, our country’s coffers are still being drained by a too-costly health care system. This was reconfirmed in July, when the Boards of Trustees of the Federal Hospital insurance and Federal Supplementary Medical Insurance Trust Funds projected that Medicare costs will grow from their current level of 3.5 percent of the gross domestic product (GDP) to at least 5.3 percent of the GDP in 2035.

Consider this: As baby boomers become Medicare eligible, the number of beneficiaries will grow from 50.7 million in 2012 to 81 million in 2030—a 60 percent increase in less than 20 years. Add to this that the tax base is shrinking: Baby boomers are retiring, leaving the country with a much smaller workforce paying a much higher Medicare tax burden. With average life expectancy projected to reach 81.5 years by 2030, on average those seniors will use Medicare benefits for three times as long as when Medicare was enacted in 1965. Chronic conditions among Medicare beneficiaries also are on the rise, making them a sicker and more expensive population than existed in 1965.

The current fee-for-service payment model unintentionally incentivizes the wrong kinds of behaviors—spending less time with patients, or having more tests and procedures. There is little reward for finding more efficient ways to make people better or for keeping them healthy in the first place.

Bringing innovative collaboration to traditional Medicare

Many programs that have been so effective for caring for Medicare Advantage’s sickest beneficiaries, including enhanced home-based care, care coordination and medication review, are not always covered under traditional Medicare. Our experience in Medicare Advantage shows the promise of these models. For several years, we have worked with health care providers to establish reimbursement models based on risk-sharing that encourages higher-quality performance. Aetna Aetna’s Medicare Advantage Provider Collaboration program, and its work to create accountable care organizations (ACOs), are examples of cooperative arrangements that are improving care quality and health outcomes while also reducing costs. In many instances, these programs have resulted in fewer inpatient hospital days, fewer hospital admissions and fewer readmissions for patients, which can reduce health care costs by as much as 30 percent.

Bringing innovative provider collaborations and managed care approaches to traditional Medicare is a winning proposition for everyone. Patients could get a full team of experts providing customized and focused attention, and be rewarded with incentives for adhering to treatment. Doctors could get greater support, information and resources to help their patients get and stay healthy. Managed care companies could serve a broader Medicare population, as long as they meet the required quality and outcomes results. Taxpayers could get a lower-cost, better-quality healthcare system.

In the past, we have shied away from making significant changes to Medicare, since the issues seemed to be so far down the road. That is no longer the case. Our Medicare spending has a tremendous impact on our economy now, and that will only increase over the next decade. Our population is aging too quickly and our nation’s Medicare costs are growing too rapidly for us to be timid. We need to take dramatic action now, and revolutionize how we approach the problem. The numbers can work if we are ready to adopt a new model. We can achieve a result that includes both healthier seniors and a lower tax burden.