Medicare should pay for patients, not treatments

 

The recent deceleration in U.S. healthcare costs appears to be at least partially structural, and not entirely due to a still-lackluster economy. That offers some hope that the slowdown will continue. Still, more needs to be done to encourage the trend.

Two new bipartisan proposals for the next round of healthcare reform may point the way. Last month, the Bipartisan Policy Center released a set of ideas for improving value in healthcare. And just this week, the Engelberg Center for Health Care Reform at the Brookings Institution put forward its own set of initiatives.

The Engelberg proposals — spearheaded by Mark McClellan, who ran the Medicare program under President George W. Bush — have been embraced by healthcare leaders including former Health and Human Services Department secretaries Michael Leavitt and Donna Shalala, as well as former Congressional Budget Office directors Dan Crippen and Alice Rivlin. (I am also part of the Engelberg group.)

The proposals from the Engelberg group have four general aims. First, the initiatives would expand the country’s electronic infrastructure, promoting data exchange and more evidence gathering on the costs and quality of various treatments. Second, they would create incentives for providers, partly by making an important change to Medicare and reforming medical-malpractice rules. Third, they would redesign health coverage to increase the value for consumers. And finally, they would change the tax treatment of employer-provided insurance.

I would like to focus on the reforms to Medicare since I view them as the most important. The key change proposed within Medicare is the Medicare Comprehensive Care payment reform. Under the Engelberg strategy, healthcare providers would receive a fixed payment for each Medicare beneficiary, rather than being paid piecemeal for every test and procedure. This comprehensive payment would be adjusted according to the beneficiary’s health status and the quality of care provided, giving doctors the incentive to avoid unnecessary treatment.

Under the proposal, no later than 2023, the vast majority of Medicare payments would be made in this way. Each year after that, Congress would consider how the payment benchmark should be updated — rather than set payments for specific procedures, as happens today.

The Medicare Comprehensive Care concept represents a plausible path forward between two competing views of health reform. It provides a mechanism for capping payments per beneficiary, something many Republicans want. Yet unlike premium-support proposals, which would direct federal money to insurance companies, the payments would go to healthcare providers. That should be a crucial difference for Democrats.

Indeed, comprehensive-care payments can be seen as building upon mechanisms encouraged by the 2010 health-reform law such as bundling and accountable-care organizations. What’s importantly, though, is that they are explicitly intended to become the dominant form of Medicare reimbursement over the next decade, giving some precision and certainty to the shift away from fee-for-service reimbursement. (The comprehensive-care payment, by the way, could either be one annual amount per patient, so that it would be similar to an accountable-care organization, or it could be one amount for each case of treatment that a given patient requires, making it similar to a bundled payment.)

The Engelberg proposals for reforming Medicare payments include much more, but if I had to pick one change, it would be this one.

Given the partisan divide in Congress, I don’t hold out too much hope that the comprehensive-payment strategy will become law anytime soon, just because it makes sense and has support from thought leaders from both parties. Given the central role of health costs in our fiscal future, however, we would be smart to get rid of sequestration, which hurts short-term economic growth but does little to reduce America’s long-term budget deficit. Instead, we should enact this type of Medicare payment reform.

Peter Orszag is vice chairman of corporate and investment banking and chairman of the financial strategy and solutions group at Citigroup and a former director of the Office of Management and Budget in the Obama administration.

© 2013, Bloomberg News

Read more From Our Inbox stories from the Miami Herald

  • Sen. John Walsh plagiarized my work

    On Wednesday afternoon, a flurry of phone calls and e-mails informed me that Sen. John Walsh, D-Mont., had apparently included — verbatim and without attribution — several pages of a 1998 paper of mine in a work he submitted to the U.S. Army War College. Walsh’s paper, which also failed to properly reference the work of others, was one of the requirements for the master’s degree he received from the War College in 2007.

  • teachers-comment 07-25

    Teachers unions’ destructive behavior

  • Left Coast Rising

    The states, Justice Louis Brandeis famously pointed out, are the laboratories of democracy. And it’s still true. For example, one reason we knew or should have known that Obamacare was workable was the post-2006 success of Romneycare in Massachusetts. More recently, Kansas went all-in on supply-side economics, slashing taxes on the affluent in the belief that this would spark a huge boom; the boom didn’t happen, but the budget deficit exploded, offering an object lesson to those willing to learn from experience.

Miami Herald

Join the
Discussion

The Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

The Miami Herald uses Facebook's commenting system. You need to log in with a Facebook account in order to comment. If you have questions about commenting with your Facebook account, click here.

Have a news tip? You can send it anonymously. Click here to send us your tip - or - consider joining the Public Insight Network and become a source for The Miami Herald and el Nuevo Herald.

Hide Comments

This affects comments on all stories.

Cancel OK

  • Marketplace

Today's Circulars

  • Quick Job Search

Enter Keyword(s) Enter City Select a State Select a Category