29 September 2008, NYC —With Medicare’s financing unraveling, Medicare reform will need to be high on the next president’s agenda. In a new brief from The Century Foundation, fellow and HealthBeat blog editor Maggie Mahar (www.healthbeatblog.org) points out that past proposals for containing Medicare’s costs, such as putting a cap on physicians’ fees or requiring beneficiaries to pay more for their care, have not worked. She calls for a fundamental set of reforms that would not only save money but also improve the quality of care that beneficiaries receive.

In “Getting More Value from Medicare,” Mahar also describes the current problems with Medicare financing and explains why some of the proposals to fix those problems are not effective solutions and not in the best interest of patients. For example, she writes that Medicare cannot contain health care inflation by focusing solely on doctors’ fees. She calls the recent attempt by Congress to slash fees that Medicare pays physicians by more than 10 percent a “crude solution” and notes that Medicare pays primary care physicians too little while paying specialists too much for certain procedures. “The fee schedule must be adjusted with a scalpel, not an axe,” she writes.

Mahar depicts Medicare as a system “clogged with waste.” She points to studies that show that one out of three health care dollars is squandered on ineffective, sometimes unwanted procedures, unnecessary hospitalizations, and overpriced drugs and devices that are no better than the less expensive products that they are meant to replace. She believes that the silver lining to the discovery of so much “hazardous waste,” in the system is this:  if we make a commitment to Medicare reform, we will not need to hike Medicare payroll taxes or ration care.

Mahar makes recommendations for reforming Medicare financing, based on proposals in the Medicare Payment Advisory Commission’s 2007 and 2008 reports.  She strongly urges the repeal of the provision in the Medicare Modernization Act that provides the $16 billion bonus to Medicare Advantage insurers. Other recommendations include:  

• revising Medicare’s physician fee schedule to pay more for primary care, palliative care, and co-ordination and management of chronic diseases;
• rethinking Medicare’s fee-for-service system to reward doctors for quality, not volume;
• creating an independent Comparative Effectiveness Institute that reviews head-to-head testing of drugs, devices, and procedures to ensure that they are effective; and
• identifying and rewarding hospitals that provide better outcomes and higher patient satisfaction at a lower cost while helping other hospitals meet benchmarks.

Mahar believes that strong successful Medicare reform could be used as a demonstration project for national health reform: “As I see it, the larger goal of Medicare reform would be to show that lower cost and higher quality do indeed go hand in hand.” 

“Getting More Value From Medicare” is one of The Century Foundation’s series of election-year publications titled The Agenda. Briefs in The Agenda series put forward specific ideas for making progress in addressing crucial challenges facing the United States. The proposals are built on innovations that have already proven to be effective. Expanding on policies that have demonstrated past success is the central premise guiding The Century Foundation’s Agenda series.

Maggie Mahar, a fellow at the Century Foundation, is author/editor of the highly respected blog Healthbeatblog.org (www.healthbeatblog.org), and author of the widely acclaimed book Money Driven Medicine: The Real Reason Health Care Costs So Much (Harper/Collins, 2006). For more information or for media interviews with Maggie Mahar, contact Christy Hicks at hicks@tcf.org or 212-452-7723. Read the blog at www.healthbeatblog.org. Learn more about Century Foundation work in Medicare and Healthcare reform at www.tcf.org or www.healthpolicywatch.org.