November/ December 2011 The Cure

The politics of debt have gotten so insane that both parties are on the verge of gutting Medicare. The moment might be right to actually fix it.

By Phillip Longman

Most of us who are now approaching retirement age or are younger have spent our entire lives living with, and largely accepting, some constraints on our choice of doctor, if only through the limits imposed by preferred provider networks. Personally, not once since I was still young in the early 1980s have I been part of a health insurance plan that allowed me to choose any doctor I wanted without paying a financial penalty, and I’ve had what by the standards of the times has been “gold-plated” coverage. Almost the only people left in America who don’t face such restraints are current beneficiaries of feefor- service Medicare.

That said, a plan like this could still provide future Medicare beneficiaries with plenty of options. In addition to being able to choose among competing Medicare-eligible HMOs, seniors should also be free to use their own money to pay to see any doctor they want or to access experimental drugs or unproven treatments that the HMOs (wisely) won’t cover. If the “price” of preserving Medicare is that some of us will be sometimes forced to go “out of network” and pay more of our own money to receive some kinds of care, then I think younger Americans already inured to the practice will almost certainly be willing to pay it.

To those who disagree, we could offer an additional choice: If you wait until you are, say, age seventy to apply for Medicare, then the system will cover you for the same wasteful fee-forservice medicine your parents currently get. But if you want to be covered at age sixty-five, you’ll have to agree to receive your care from a Medicare-certified nonprofit HMO.

These are tough choices, no doubt. But ask yourself: Do they sound all that onerous when compared to the competing policy proposals already on the table, such as turning Medicare into a voucher program that leaves all of us responsible in old age for paying 70 percent of our own health care costs, or seeing Medicare reimbursement rates reduced to the point that we can’t find a doctor who will treat us, or having to wait until age sixty-seven before being eligible for Medicare at all?

We can certainly expect lots of opposition from wellheeled practitioners of for-profit medicine—all those cardiologists making a killing doing unnecessary stent operations, for example. And we’ll hear from many prestigious academic medical centers, an unfortunate number of which engage in massive amounts of overtreatment because they are dominated by specialists who look down their nose at doctors engaged in “mere” primary care.

Yet as difficult as these challenges will be, reformers are now armed with abundant, peer-reviewed proof of just how dangerous and wasteful fee-for-service medicine has become, and the public has begun to catch on as well. Ten years ago, for example, researchers were just beginning to document how the death toll of medical errors, hospital infections, and inappropriate treatment had conspired to make contact with the health care system the third leading cause of death in the United States. Today, these facts are widely accepted by heath care experts and generally understood by policy makers at the highest levels of government. Educated Americans have read about them in the newspapers, and most citizens who have spent any time in a typical hospital trying to make sure a loved one gets her proper medicine on time have experienced firsthand the extent of routine system breakdown.

Some conservatives, no doubt, will instinctively align themselves with the forces of for-profit, fee-for-service medicine, or be lured into doing so by heaps of campaign contributions. Many Democrats as well can be counted on to carry water for prestigious but deeply wasteful and dangerous academic medical centers, which tend to be concentrated in Deep Blue zones like New York, Boston, and Los Angeles. So yes, enacting this proposal will not be easy.

But then, ask yourself again, compared to what? Both parties have already signed on to changes to Medicare that are hardly less radical, will be resisted by powerful interest groups, and risk the wrath of voters. Moreover, these proposals are not really solutions, because they either shift the inflating cost of health care onto individual Americans or cut reimbursement rates to a point where Medicare is “saved” on paper but in the real world has little value to elders who can’t find a doctor. By contrast, this approach directly attacks the root problem, which is the waste and inefficiency caused by fee-for-service medicine.

And as politically difficult as the road to this solution may be, it does give each side things it wants. It allows Democrats to say that they will not cut benefits to Medicare recipients. And Democrats should also like that these nongovernmental organizations serving the Medicare population will have the freedom to do things liberals have long wanted Medicare itself to do, like bargain with drug companies for lower prices. Meanwhile, Republicans who support this proposal will be able to boast that it takes vast decision- making power out of the hands of “unelected bureaucrats in the federal government” and puts that power in the hands of private organizations that compete with each other for customers. Under this approach, Medicare officials won’t have to figure out how to write regulations on what specific drugs and procedures are not appropriate medicine; they’ll be contracting out those details to private-sector organizations and simply holding them accountable for results, such as keeping a high percentage of their patients healthy and managing their conditions effectively.

Let’s close by stressing the positive. America is still a rich and productive country. Compared to Europe or Japan, it has a youthful population and no real long-term debt crisis except that caused by huge volumes of wasteful and dangerous fee-for-service medicine. So once again in our long history, Americans can have their cake and eat it too. We can improve our health care while lowering its cost, and in the process eliminate our long-term deficits and resume building for future.

So why don’t we feel more optimistic? Because there is this feeling of despair, especially among policy makers and the chattering classes, that we don’t know how, politically, to bring health care costs in line. We know that all other developed countries get better health care for less money, and that it is no real mystery how they do it. But all their approaches seem—or can be spun as— socialistic, paternalistic, and fundamentally un-American, and therefore impossible to consider.

Yet we have within our reach a solution that is not imported from abroad, and that has been proved on our own shores by all-American institutions, from our best nonprofit HMOs to the VA health system. We may not currently have the political will to use these institutions as the model and means to fix the health care crisis, and hence eliminate our long-term fiscal problems. But we shouldn’t fool ourselves into thinking it can’t be done.

Phillip Longman is a senior editor at the Washington Monthly and a lecturer at Johns Hopkins University, where he teaches health care policy. He is also a senior fellow at the New America Foundation, where Atul Gawande is a board member.


  • Jack Lohman on October 25, 2011 9:32 AM:

    Can we fix Medicare? Yes, but first we must stop politicians from taking campaign bribes from the insurance industry. See http://moneyedpoliticians.net/2011/10/17/can-we-fix-medicare/

  • Dave Roberts on October 25, 2011 12:46 PM:

    Another extraordinary diagnosis and prescription by Phillip Longman. Kudos to the Washington Monthly for continuing to provide insight without dogma.

  • kindness on October 25, 2011 1:08 PM:

    I have Kaiser. I like them a lot.

    Can someone come in and do cleanup on the spam that is the first post please?

  • Melissa on October 26, 2011 6:21 PM:

    "Going forward, Medicare should instead contract exclusively with health care providers like the Mayo Clinic, Kaiser Permanente, the Cleveland Clinic, Intermountain Health Care, the Geisinger Health System, or even the Veterans Health Administration."

    I LOVE this idea. My parents have been part of Kaiser since before I left home, about 22 years ago. Since then, their coverage, under the same plan, has expanded dramatically. Kaiser didn't used to cover glasses, hearing aids, or fertility treatments, to name a few. They do now. Unlike the plans I've been on (I would choose Kaiser in a heartbeat but there isn't one where I live)

    As for quality of care, my parents have been extremely fortunate. My dad has lived through an surgery for an aneurism, two kinds of cancer, and many other problems. They referred him out to a specialist when they needed to, and gave him excellent care otherwise. Last year, they paid for him to be in the nicest rehab place (not drugs, physical rehab) I have ever seen.

    My mother has also had good treatment for her problems, most recently breast cancer - the support group has been wonderful for her. (Her prognosis is excellent.) The only thing they haven't covered for her is a high-end osteoporosis treatment - I can't think of the name of the drug, but you have to inject it daily - and she is paying out of pocket, $10,000 for one year, and she's lucky she can stretch to afford it. But after all they've covered that doesn't seem unreasonable.

    My parents considered moving to be close to my husband and me but they didn't because it would mean they would have to leave Kaiser.

  • Rachel Karash on October 29, 2011 1:58 PM:

    Medicare doesn't have to stop reimbursing for-profit hospitals in order to stop reimbursing them on a fee-for-service basis, as it has reimbursed for-profit inpatient hospital health care providers according to the Inpatient Prospective Payment System since 1983 and has reimbursed for-profit outpatient hospital-based health care providers according to the Outpatient Prospective Payment System since 1997. The latter was part of the Balanced Budget Act, which also established PPSs for skilled nursing facilities, home health care, inpatient rehabilitation services, and outpatient rehabilitation services. As for Part B services, Medicare hasn't reimbursed those based on the charge since the passage of OBRA 1989, which established the Resource-Based Relative Value Scale (RBRVS). The Balanced Budget Refinement Act of 1999 established a PPS for long-term care hospitals.

    Inpatient psychiatric facilities are reimbursed based on the IPF PPS.

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  • Maggie Mahar on February 24, 2012 7:37 PM:

    Great piece.

    The idea of setting a target date when Medicare drops fee-for service payment is excellent.

    And I would love to see Medicare patients treated by larger, more efficient, collaborate non-profits that enjoy economies of scale as well as the market clout that comes with size.

    But in rural areas and sparsely populated states, Medicare patients will have to be cared for by smaller groups. These groups might become "virtual networks" and enjoy some economies of scale, particularly with regard to IT,
    but we can't expect that seniors in Oklahoma will be able to travel to a Kaiser, an Intermountain or a Mayo Clinic. Inevitably, in Oklahoma an institution that models itself on these institutions will be much smaller, and as a result may require more funding from Medicare.

    I would add that I don't think we should write off accountable care organizations. Some of them will work, and work well. But I would like to see them operate as non-profits. This shouldn't be that hard. Today, the vast majority of hospitals are non-profits (though admittedly, some of these non-profits seem to put profits first. Medicare will have to insist that they re-think their priorities.

    Also, since half of all seniors are living on total income of less than roughly $20,000, we really cannot expect them to pay out of pocket to go out of network. Already, the $35 co-pays that Medicare charges for specialist care is more than many can afford.

    Unless we want to set up two sharply different tiers of care--one for people who can afford to go out of network, another for people who can't--we should make sure that "in network" care is good enough to be the norm (and the gold standard) 98% of the time, except in those cicumstances where it is clear that the patient cannot get the care he needs in network. Then Medicare should cover "out of network.

    Of course, if a wealthy person wants to pay for something out of pocket that isn't covered by
    Medicare, he should be able to do that. But the vast marjority of practioners and all hospitals that want to be reimbursed by Medicare should have to meet the standards of a network (practicing evidence-based medicine,etc. and accepting the payments that Medicare offers to these network . ) Over time, as you point out, Medicare patients, like the rest, of us, will adjust to the idea that being able to choose your network is fine. You really don't need to choose an individual doctor. The days of having one doctor "my doctor" are past. In the future patients will be treated by teams of doctors and nurses who, by working together, will be able to provide better care.

    But these are quibbles. You've outlined a generous vision of where we should be heading. I hope many people read this.