Dealing With Medicare

I suppose the compulsion I feel to get people’s attention on the plight of the Medicare Trust Fund can be attributed to my current close association with it. Medicare is part of HHS and I’m also a Trustee.

This week, I released our budget proposal for the next five years. Medicare makes up 56 percent of the $737 billion we spend. I said at a news conference our proposal should be viewed as a stark warning. Medicare, on its current course, is just 11 years from going broke.

Eleven years is going to fly by. Here’s a perspective builder. The Fourth of July last year seems like yesterday. In 20 times that time, left on autopilot, Medicare will be broke.

Systems as big and complex as Medicare don’t turn on a dime. We need to start dealing with this.

I’m certainly not the first person to warn of this. Part of the problem is that the entire country has been desensitized, numbed actually, by a repeated cycle of alarms and inaction.

Dire warnings on Medicare insolvency have become a seasonal occurrence in Washington. It is like the cherry blossoms blooming in April, part of life’s natural rhythm. People briefly take note, remember it’s that time of year and continue on their way.

The budget we announced Monday is admittedly aggressive. It is another type of warning. I wanted to make sure people could see with specificity the hard decisions policy makers, no matter their party, will face every year until we change the current course.

Medicare is a centrally planned, government regulated system of price fixing. Price fixing systems adjust by having government regulators decide the priorities. The tools we use are blunt and inexact.

Government makes a few thousand decisions that determine who gets treated, how much they get treated, and how much value it has. It is an inefficient way and it contributes substantially to the dilemma we face. We can’t fix Medicare without changing the way health care works in the United States.

What if, rather than government making a few thousand regulatory decisions that affect everybody, consumers made millions of personal decisions informed by transparent information about the cost and quality of various providers? What if doctors and hospitals were rewarded by having high-value care rather than high-volume care?

My view: quality will improve and costs will diminish. That is what happens when consumers are allowed to make decisions armed with reliable information.

The invisible hand of the marketplace is better at rooting out waste and finding optimal value than government regulators.

Comments

I would propose an additional approach: stop paying for that which is useless. Depending on whom you read, large portions of the Medicare budget are devoted to heroic care in the last 6 weeks of life, despite copious evidence in the national and international literature that such heroics are futile. Why not apply the abundance of medical evidence to this problem? Why are we willing to perform CPR or mechanical ventilation in patients for whom we can predict 100% failure? Why do we pay for therapies that offer a patient a 5% chance of living 3 weeks longer? More to the point, why do we leave these decisions in the hands of the person least likely to make it objectively?

I do not advocate a medical monolith, and I strongly support the right of the patient to make his/her wishes known, but I would never accede to the performance of a surgery that was not indicated or safe, nor would I prescribe a medication without some reasonable expectation of its efficacy and safety. Indeed, we have an entire federal agency dedicated to that very principle. We have good data that identify groups of people for whom the likelihood of survival to hospital discharge, with or without heroics, approaches or equals zero. We could start by dealing with these.

To be sure, there will need to be serious and sober conversations at multiple levels of our society as to where to set thresholds of efficacy, but it is difficult to support expensive heroic measures in those instances where our own data shows them to be without merit. Perhaps it is time for CMS to stop applying generalized standards and start making substantive decisions based on available medical evidence. Agree to pay for what works, withdraw support for that which does not.

Posted by: David Tribble, MD ABHPM FAAFP | February 06, 2008 at 05:20 PM

Mike,

I am so proud of you for speaking up about the future prospects of Medicare that I could kiss you. It is for sure our politicians aren't speaking about this problem, much less actually addressing it. It is this disconnect that fuels the desire for real change on the part of the American people. In many respects, I agree Washington is disconnected and broken.

I have to be honest with you, even though what I am going to say next will make me sound like a raving lunatic. I have a patent pending system that has the potential to save Medicare up to $355 BILLION over the next 20 years alone. I have talked with CMS officials until I am blue in the face and have seen reactions ranging from fear to propose something new, to an inability to recognize true opportunity, even when it is staring them in the face. Actually, I have written off any ability CMS has to create real innovative change to substantively improve Medicare.

However, I will try one last time. I will make you a public proposal. I will go to the private markets to obtain funding to pay for a 2 year demonstration project to prove that my system works as designed, if you will push for the demonstration project to be implemented. You can go to my web site to obtain further information. Please don't think that good ideas cannot come from some guy who is a nobody in the private sector. I would be pleased to hear from you.

David A. Haley

Posted by: David A. Haley | February 06, 2008 at 08:56 PM

Secretary Leavitt,

I applaud your courage to point out that restructuring or adding government regulations won't fix the Medicare problem. I'd add that it's not just the government regulators that hamper the market from doing its job in lowering healthcare costs: It's the industry regulators, the professional regulators (i.e. medical boards), and the insurance regulators. With all of these regulators piled on top of each other it's a miracle that supply ever has a chance to see demand!

Posted by: Ryan Patterson | February 07, 2008 at 02:55 AM

Medicare is big problem, and it is very hard to find solutions, that is reason why most politics avoid to talk about it.
Hope that you are standing behind those words.

Good Luck!!!

Posted by: Caira | February 08, 2008 at 12:32 PM

Mr. Leavitt,

While I agree with you that we should let Adam Smith's invisible hand help us bring the marketplace to rights, its difficult to overlook the fact that your words say one thing while your actions say another.

Mr. Smith also noted that, for the invisible hand to work, markets need "perfect information." So far, HHS has actively blocked the release of information that could help the market work, at least where Medicare physician data is involved. As you are undoubtedly well aware, in the case of Checkbook v HHS, Consumers' Checkbook sued HHS for the Medicare physician data for 4 states and DC. In October, after the courts found with Checkbook, HHS appealed, saying that physicians had a right to privacy.

It's an odd argument. Hospitals don't have a right to privacy, but doctors, who like hospitals are vendors taking public money for their services, do have that right.

To make matters worse, it appears took this position after being lobbied by the AMA. According to a 12/10/07 article in American Medical News, AMA Board Chair Ed Langston gloated that he was pleased HHS took the Association's advice. The skeptics among us could think that this means HHS puts the interests of doctors above those of the rest of Americans.

On Friday the Memphis Business Journal reported you saying that we ought to have "a Travelocity for health care" that would "give a quality grade for doctors and show how much they charge for services." I'm wholeheartedly with you on this. But how do you square this proposal with the fact that, though you're the nation's largest payor, you acquiesced to the AMA's interests and then refused to release physician data?

Can you please explain these discrepancies?

Thanks much for your consideration.

Posted by: Brian Klepper | February 11, 2008 at 03:00 PM

Thank you. For more perspective on Medicare, I commend Breach of Trust, How Washington Turns Outsiders into Insiders, by Tom A. Coburn, M.D. (and Senator from Oklahoma)WND Books Nashville, particularly the Introduction, and Chapters 1,2,3,6,10,11 and Conclusion and Epilogue. You bothagree.

Posted by: J.I.M.C. | February 12, 2008 at 06:08 PM

Secretary Leavitt,
As a member of Leadership Pinellas here in Pinellas County Florida - 35 local leaders are spending the day tomorrow learning how health care is delivered in our community and the challenges we all face. As a young baby boomer I agree - like with web 2.0 and blogging - transparency informs, educates and empowers those involved. As we have had other community days learning about our local education issues, local government and human services it makes each of us more aware of how the pie is split by so many worthy causes and yet - when I go to the doctor I feel I am shielded from the real costs being charged. When I was in a car accident and had lots of care available I was shocked to see what "could be charged" - I learned a long time ago there's no free lunch - just choices. Thanks for such a thought provoking post.

Posted by: Cyndee Haydon | February 12, 2008 at 10:15 PM

I agree with Brian Klepper -- it's past time for HHS to be an aggressive, whole-hearted mover towards release of more information and more timely information.
Meanwhile, one easy, no-cost step would be for Secretary Leavitt to use his bully pulpit to call for states to collect "all payer" data. It sounds like a technical issue, but what it will do is allow valid national comparisons of quality of care, as well as enable better state efforts.
A local/nation win-win.
Michael Millenson
President
Health Quality Advisors LLC
Highland Park, IL

Posted by: Michael Millenson | February 13, 2008 at 04:16 PM

Secretary Leavitt,
I just spent the day with 35 of our community leaders focused on Health Day and discussing the issues facing us at a national and local level.

We also learn how the majority of our health care dollars are spent on the last 40 days of life. These are challenging times and as a young baby boomer the upcoming medicare crisis is scary.

While many Presidential candidates are discussing Healthcare the one thing I think we all know is that there are no easy fixes.

I'll look forward to reading more here. Thanks!

Posted by: Cyndee Haydon | February 13, 2008 at 05:54 PM

Dear Secr. Leavitt:

This is a very critically important blog, and I hope you make an exception to your usual practice and try to post replies. As perhaps the only physician in this blog so far, the efforts to "commoditise" health care like cars or refrigerators worries me. The fundamental question the government and society has to answer is "Is health care a right under the constitution?" and "Is health care a commercial product being delivered to the consumer (patient)?" You admit that Medicare is a form of "price-fixing". Why do we expect this to work in healthcare when it has failed everywhere else?

I suggest that any buyer of healthcare services be smart enough to purchase health care that is most suitale to the individual user, for which the Medicare formula of "one size fits all" should be dismantled. I suggest that the government allocate a finite "bonus" to each beneficiary that uses Medicare dollars most efficiently. Why should physicians be given responsibility to calculate savings for Medicare without any knowledge of how the beneficiary has spent his Medicare dollars at other providers/institutions?

My opinion is that with more and more beneficiaries coming into Medicare in the next 10 years, its time to recognise that Medicare has outlived its usefulness, both for patients and care providers. The sooner everybody accepts this, the better solutions will emerge.

Posted by: Arvind Cavale | February 13, 2008 at 08:04 PM

Dear Mr. Secretary:

I am a Medicare user. I feel happy that many people are thinking about how to improve Medicare. I think that Medicare is broken at a macro level as well as a micro level.

When I turned 65 I was forced out of my regular medical insurance plan and into Medicare. That means Medicare is primary and my long trusted plan "coordinates benefits" with Medicare.

However, my preferred and long used primary medical provider does not accept Medicare payments - but will bill Medicare. Then the provider looks to me for the Medicare approved amount plus 15% because Medicare sends me these silly paper checks about 30 to 45 days after they get the provider's bill.

Now my old trusted plan (that, until I turned 65, sent an electronic payment to my provider) takes about two weeks to send me another check to cover the 15% surcharge and the Medicare copayment.

All this just because I turned 65 and like to choose my own provider based on the quality of service over many years.

I was willing and able to stay with my old trusted health insurer. Why was I forced into Medicare?

In an attempt to save money, I guess, Medicare does not send paper MSN's unless there is a check. Oh, the others are online, and will come in three months - (long after a provider wants their money). The online service is deficient in many ways that I will not detail here.

I find it difficult to harvest the MSNs online and integrate with the MSNs with checks. I hope that Medicare will create a world class online system and deliver checks electronically.

Oh! someone said my health care costs would go down when I went on Medicare. They did - about $100 a month. However, I have access to fewer participating providers now - I'd rather keep paying the $100 more.

Finally, I feel discouraged when I shop for a new provider and I hear, "We do not accept new Medicare patients." Or, "I will have to ask the Doctor if he/she will accept a new Medicare patient." I believe that is their choice - which takes me back to - why can I get booted from my old trusted medical insurance company just because I turned 65? Don't we want to encourage people with medical insurance coverage to stay in their plan if they like it and can afford it? Why 65? Why not 70?

Let me close with a positive. I had an emergency experience where I did not have a chance to choose my medical provider. The facility and professionals all accepted Medicare. For me, the payment process worked quickly and effortlessly. My old trusted insurance stepped to the window and coordinated benefits. It was easy to see how much I owed - it was very reasonable in my opinion. I did not have to track silly paper checks, MSNs, or match line items.

So, it is broken but there are some bright spots too. I think it is fixable. Let's ask lots of why questions. Good luck.

Posted by: Joe Smith | February 13, 2008 at 11:27 PM

Medicare plan D Law won't pay for my Zofran for me to function and from the January to now I have tried three Nausea Medications and end up in the Er to get Zofran shots or IV. Zofran is not approved for what I take it for and never will be. I can't get Zofran from the Drug Company due to how the Plan D Law was written, so wht don't you ask Congress to fix a Law that does not work. I'm on Social Security Disabilty due to promblem from a brain hemorage and brain tumor removed. All the Nausea Medications thet are FDA Approved for Nausea work in the Brain and all the ones like Zofran that don't work in the Brain are for Cancer Only. Zofran is double my income each month, So how do you suggest that I pay for Zofran for me to Function outside a Nursing Home on feeding tube and IV. Jackie Hansen

Posted by: Jackie Hansen | March 11, 2008 at 02:46 PM

Thanks, thanks and many more thanks for sounding the alarm that those of us in the healthcare field have already heard and understand. The general public has NO idea what we are spending with Medicare and the increasing expectation of what Medicre will offer (Part D plans) is growing annually. There is talk for an opt-in program for people in their 50s to pay for Medicare before they are 65 if they chose.

There is a LOT we can still do to bring down healthcare costs. I'm very frustrated that a lot of the healthcare providers are refusing to acknowledge the consumer driven healthcare concept and even as recently as yesterday I called a large physician group for one of my insurance clients to inquire her charges for an office visit with her new plan. She is an established patient - now with a HDHP and a HSA. The billing office person REFUSED to give me a range of prices for this network as it was "proprietary". I tried to tell her that is the point with CDHC and the push for "transparency in billing". She continued to give me the run around and I thought about it later- if there is no acknowledgment upfront about the price, let's see how they handle a patient who then does NOT pay the bill.

Healthcare providers need to be on the same page and encourage patients to be aware of costs associated with medical care, products and services.

The first poster was right on also. It sounds bad but the term "circling the drain" used to be used to explain the expenses incurred in the last 30 days of life (usually about 95% of all healthcare utilized in a person's lifetime).

Americans need to be more comfortable with the notion that death is certain and something that needs to be planned for.

Posted by: Dawn Hooley RPh Health Agent HSA Specialist | March 26, 2008 at 09:59 AM

Mr. Secretary,
At this point in history (2008) the priorities are
1) accessibility
2) affordability
3) quality

We all want quality, but, quality in this country is not the problem. Your respondents from Highland Park, IL and Memphis can quibble over quality data, but what good is that , when beneficiaries have no access?

Don't fantasize on a free market to mend problems. Most patients lack capacity to judge quality.

Posted by: jz-md | March 26, 2008 at 04:35 PM