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Highlights From The Medicare Policy Summit: What’s On The Mind Of The Congressional Budget Office (CBO)?

There is no doubt in anyone’s mind that the U.S. healthcare system, in its current form, is financially unsustainable. Many in Washington believe that 2009 will usher in more sweeping reform than we’ve seen in decades. I attended the Medicare Policy Summit (along with about 100+ industry insiders and one other physician, Dr. Nancy Nielsen) to try to read the “tea leaves” regarding Medicare’s likely reform – and how that will impact the healthcare system in general.

I took 49 pages of notes during the two-day conference, but will spare you the gory details and simply capture (in a series of blog posts) what I found to be the most interesting parts of the discussion. This post is devoted to highlights from Bruce Vavricheck’s lecture, “The President’s Budget and What It Means for Entitlements.”

Bruce Varvichek is the Assistant Director for Health and Human Resources, Congressional Budget Office.

Bruce explained that if we continue on our current healthcare spending path, over 50% of all federal spending will go towards funding Medicare, Medicaid, and Social Security entitlement programs by 2018.

What are the underlying causes for this rapid rate of growth in spending?

1.    Chronic Illness. The sickest, top 5% of Medicare beneficiaries account for 43% of all Medicare spending. Cost containment should focus on identifying these 5% early, and intervening so as to prevent advancement of disease where possible. Solution: The “medical home” model may help to identify people who are likely to become sick, and engage them in preventive health programs early.
2.    Obesity. Rises in obesity rates is directly related to increased heart disease, diabetes, cancer, and other chronic disease prevalence. The fastest growing segment of the population that is becoming obese is the high income bracket. Bruce concludes: “This can’t just be explained by McDonald’s.”
3.    Non outcomes-based spending. Medicare beneficiaries with the same medical conditions receive widely different medical services depending on where they are in the country. More services, however, do not correlate with improved outcomes.
Solution: Comparative Effectiveness Research

What changes in Medicare benefits is the Congressional Budget Office considering?

1.    Creating Medicare insurance buy-in for people ages 62-64.
2.    Reduce or eliminate 24 month waiting period for disabled people to become eligible for Medicare.
3.    Increase the age of eligibility of Medicare beneficiaries to 67. This encourages people to work longer since average lifespan has been steadily increasing.

CBO Strategies to improve quality and efficiency of care:

1.    Bundle Medicare payments so that hospital and post-acute care are linked. This will incentivize hospitals to do a better job of follow up once patients are discharged from the hospital.
2.    Reduce payments (after risk-adjustment) to hospitals with higher re-admission rates.
3.    Offer physicians performance-based payments for managing and coordinating care for their patients (the medical home model).
4.    Create incentives and penalties to promote adoption and use of HIT.

CBO strategies to streamline payment structure and benefits:

1.    Modify the Sustainable Growth Rate (SGR) formula used to determine payments to physicians. Put a cap on total spending.
2.    Change Medicare Advantage program to fee for service.
3.    Replace the current beneficiary cost-sharing structure with a unified deductible and uniform cost-sharing plan. Add catastrophic limit for out-of-pocket spending.
4.    Require drug manufacturers to pay a rebate to Medicare for drugs covered in Part D.
5.    Fill in the “donut hole” in Part D.

***

Next up: Grace Marie Turner and the free market gang debate the merits of a government-run healthcare system.


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4 Responses to “Highlights From The Medicare Policy Summit: What’s On The Mind Of The Congressional Budget Office (CBO)?”

  1. Parrot says:

    Heart disease has been on the decline for decades. Cancer is on the decline as well. And according to studies of the NHANES data, the rate of diabetes has remained pretty stable.

    By what logic can anybody argue that these diseases are taking up an ever increasing chunk of health care dollars?

  2. Parrot says:

    Heart disease has been on the decline for decades. Cancer is on the decline as well. And according to studies of the NHANES data, the rate of diabetes has remained pretty stable.

    By what logic can anybody argue that these diseases are taking up an ever increasing chunk of health care dollars?

  3. Deron S. says:

    CBO's top three cost drivers make it perfectly clear that a lot of the reform discussion out there is misguided. We need to directly address the increasingly unhealthy lifestyles of the population to bring down the rates of chronic illness and obesity. Nearly all available healthcare resources should be allocated to that mission. Things like HIT, universal healthcare and restructuring healthcare financing should be secondary initiatives, not primary.

  4. Deron S. says:

    CBO's top three cost drivers make it perfectly clear that a lot of the reform discussion out there is misguided. We need to directly address the increasingly unhealthy lifestyles of the population to bring down the rates of chronic illness and obesity. Nearly all available healthcare resources should be allocated to that mission. Things like HIT, universal healthcare and restructuring healthcare financing should be secondary initiatives, not primary.

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