No illusions: Medicare reform is for real

Last modified: 9/6/2010 12:00:00 AM
Former health and human services secretary Michael Leavitt (above) is incorrect in calling the Affordable Care Act's Medicare reforms an 'illusion.' It's no illusion to the seniors and people with disabilities who will pay less for prescription drugs, to the millions of Medicare beneficiaries who will have preventive care and checkups covered without paying co-pays, or to the people who will be protected from fraud and abuse. Under the act, Medicare is stronger than it has been in years, and seniors will get new benefits.

That's no illusion; that's progress.

The Medicare Board of Trustees estimated last month that the Affordable Care Act produces savings that extend the life of the Medicare Hospital Insurance Trust Fund for 12 years, to 2029. The actuary of the Centers for Medicare and Medicaid Services (CMS), an independent office, reached the same conclusion. And the Congressional Budget Office has estimated that the law will reduce the federal deficit by more than $100 billion over the next 10 years and more than $1 trillion in the following decade. Those are real savings that help today's and tomorrow's Medicare beneficiaries.

Some, including Leavitt, claim these savings are 'double counted.' This argument is inaccurate and oversimplifies what is really going on.

Following the accounting rules that Republican and Democratic administrations have used for decades, savings from reduced spending and additional revenue are credited to the Medicare trust fund, increasing the amount in the fund and postponing its exhaustion. Anything in the fund that is not immediately needed to cover expenditures is invested in Treasury bonds. These dollars are used to help cover other investments, such as expanding health coverage to 34 million uninsured people. Later, when the trust fund needs to cash in its Treasury bonds, they are repaid, with interest.

Before the Affordable Care Act, the Medicare Advantage program, which allows private health plans to contract to care for our beneficiaries, cried out for reform. For several years the Medicare Payment Advisory Commission reported that, on average, Medicare pays over $1,000 more to these plans than it costs to care for a beneficiary in traditional Medicare, without yielding measurably better health outcomes. The new law eliminates these unwarranted subsidies and, for the first time, financially rewards Medicare Advantage health plans that do a better job of providing quality care.

Leavitt was right on two counts. First, the Affordable Care Act does increase pressure on physicians and hospitals to find better ways to provide high-quality care at a reasonable cost. Health care commands almost 17 percent of our gross domestic product, an unsustainable proportion that is set to rise. Care providers and policymakers across the spectrum agree that it is urgent that we make quality care affordable.

Second, I wholeheartedly agree that 'the fundamental problem is that Medicare's dominant fee-for-service structure rewards volume, not quality or value.' We can't sustain a system that rewards how much is done to patients instead of how much is accomplished for patients. The Affordable Care Act will help us pay for quality and outcomes, not volume, with innovative tools such as bundled payments, incentives for hospitals that prevent readmissions and accountable care organizations in which health-care providers who work in teams deliver better care with lower costs.

The act encourages comprehensive payment and delivery system reforms. It establishes a Center for Medicare and Medicaid Innovation within CMS to help find ways to modernize our health-care system to make it safe, patient-centered, reliable, sustainable and efficient. These approaches, endorsed by health-care organizations, employers and economists, will help make the health-care system of higher quality and more affordable for America's families and businesses.

I share Leavitt's belief in the seriousness of the challenges before us, but I do not share his pessimism. We need to find our way to an improved and better-integrated system of care - one that is better for patients, better for those who care for patients, better for the many employers who pay for coverage and better for us as a nation. The Affordable Care Act sets the stage for what we need: better care, better health and lower costs. There is no illusion about it.

(Donald M. Berwick is administrator of the Centers for Medicare and Medicaid Services.)


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