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Analysis: Sorting out Medicare reform

By ELLEN BECK

WASHINGTON, Feb. 2 (UPI) -- Medicare financing reform offers only difficult political and social choices, but health and economic policy experts say the future spending forecast as 76 million baby boomers retire is so scary something has to give -- the status quo will not stand.

New study results, speeches by government officials and economic forecasts all have said it in different ways, but the message to Americans early in 2005 is clear -- the now $325 billion program that provides health insurance for 40 million-plus elderly and disabled citizens will, by 2015, cost $766 billion and, by 2080, will be double what is spent on Social Security.

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"These current trends simply will not be able to persist," Douglas Holtz-Eakin, director of the Congressional Budget Office, told the World Health Care Congress this week.

"There is no magic bullet -- there is no single fix to this," Dr. Robert Berenson, a senior fellow at the Urban Institute, a non-partisan policy think tank, told United Press International.

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"It is clear these projections will not come to pass -- policy will change," Robert Reischauer, president of the Urban Institute and vice chairman of the Medicare Payment Advisory Commission, told the Health Care Congress.

Otherwise, by 2025, seniors could find the costs of their Medicare premiums, deductibles and cost sharing total more than their Social Security check each month.

Costs will go up because of the sheer number of beneficiaries. Nevertheless, there are ways to reduce the growth, which often is driven by technology and pharmaceutical spending. Each potential solution has strengths and weaknesses, but if enough of them are found to work -- and are put together in Medicare -- they could have a significant effect on spending.

One option is to ensure that healthcare dollars are spent on appropriate and effective care -- no small feat, because it is a huge problem throughout healthcare.

A second option is keeping people healthy -- the ounce-of-prevention-is-worth-a-pound-of-cure idea. A third is to see if competition among healthcare providers -- featuring competitive bidding by insurers and pay-for-performance for doctors -- can encourage efficiency and better care while driving down total costs.

Asking beneficiaries who are financially able to pay more for their Medicare is an idea that represents far greater philosophical and political headaches than it creates economically. Bringing healthcare into the 21st century with electronic records that reduce errors and lead to better care could result in substantial savings. There always is the option to increase the eligibility age from 65 to 67.

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Of course, technically, Congress simply could do nothing and allow spending to occur -- a notion not without its liberal supporters on Capitol Hill.

"There is no single item ... that is likely to prove to be the answer," Holtz-Eakin said in predicting incremental changes to the program.

Some of those items will not even be included on the serious discussion list long-term:

--doing nothing;

--reducing benefits for beneficiaries -- Medicare just added prevention and drug benefits;

--making major cuts in provider reimbursements -- such measures usually are short-lived and current rates already are below hospital and physician costs of care, and

--raising the income tax contribution for Medicare -- not in a Bush administration and not with a Republican-controlled Congress.

Reischauer said the issue of raising co-pays and premiums for beneficiaries also is difficult, because seniors will be living longer and using even more medical services.

"We can't fix Medicare without fixing the (healthcare) system as a whole," he said.

Berenson said research by Dr. Elliott S. Fisher and colleagues at Dartmouth College and elsewhere, which estimated 30 percent of Medicare spending is unnecessary, needs to be replicated. "The findings are too powerful to ignore," he said.

In his experience as a physician, Berenson said he found "there is a lot of spending that serves no particular purpose."

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MedPAC, for example, has begun to focus on an explosion in the use of imaging services in Medicare, which pays the average cost for the service. The high volume should mean Medicare pays the marginal cost, Berenson added, to make sure imaging is done only when necessary.

The focus of President Bush's State of the Union speech is expected to be Social Security -- not, as some called for, Medicare -- even though the fiscal outlook for the senior health program is far more grim.

The administration, however, already has put some elements of potential reform in place via the Medicare Modernization Act of 2003. Those reforms are tied to the prescription-drug benefit, which unfolds next year, so no one at the White House wants to tinker with a law that has not even been fully implemented. To Bush's way of thinking -- he already has taken steps to reform Medicare -- it just has not happened yet in real time.

Disease management programs, pay-for-performance, preventive medicine and competitive bidding by health plans all are part of the MMA. All but coverage of preventive services, however, are starting out small, as demonstration projects.

Gail Wilensky, a senior fellow at Project Hope -- and a former Health Care Financing Administration administrator and health adviser to President George H.W. Bush -- called the provisions "baby steps" compared to what is needed in the future.

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She also said forcing richer Medicare beneficiaries to pay more for Medicare "is not likely to bring a lot of money in the near term," but could affect the program over time.

Wilensky suggested a broader-brush approach to Medicare reform -- rethinking the entire entitlement issue and putting Social Security and Medicare together, because both involve taxing workers to pay retirees. This new thinking, she said, also might include helping seniors remain in the workforce past age 65 and pressuring businesses to find a way to help.

"If we can keep them working, active and productive ... it will really help the baby boomers," Wilensky said.

Another broad approach comes from David Kendall, a senior fellow at the Progressive Policy Institute, a think tank for the Democratic Leadership Council.

He told UPI that Medicare should adopt elements of a crime reduction program that places responsibility on precinct captains to account for the crime rate in their area.

Kendall's idea would make Medicare regions accountable for both the cost and quality of care provided.

"Tinkering around the edges isn't going to solve the problem," he said. "It's got to be an overall strategy."

Part of Kendall's plan also would include packaging of medical services -- for example, everything related to a specific knee surgery -- and coming up with one price.

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"What it's about is getting more value for the dollars we currently are spending," he added. "So if we have to make choices down the road, we can do it. But we don't know what we're spending on our money on."

There remains much debate among politicians and policy experts about whether MMA reforms will amount to anything. Disease management is showing promise in private healthcare but still is in its early years, so the long-term impact is unclear. The government is pushing for electronic health records but how to pay for it and how it will be interconnected among all players in healthcare are unanswered questions. The true cost of the new Medicare drug benefit is up in the air.

There still is time to answer these questions and figure out which ideas work and which do not, but the time to begin the Medicare sorting process has arrived in 2005.

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