Money Talks, Nobody Walks on the Medicare Gravy Train

(MoneyWatch)  What if Medicare were run like a corporation, with a CEO and a tightly managed budget? That's the provocative question posed by Daniel Callahan, a healthcare expert at the Hastings Center, a nonpartisan bioethics research institute.

Callahan suggests that if Medicare were more independent of Congress and could make its own decisions, much the way the National Institutes of Health and efficient healthcare organizations like the Mayo Clinic and the Geisinger Clinic do, it might have a much better chance of remaining solvent. It's hard to argue with his logic, but the same special interests that now micromanage Medicare through Congress would certainly block any proposal to make the agency more independent.

In fact, those forces have already tried to eliminate the independent Medicare payment advisory board that the Senate reform bill proposes. Callahan views this board as a potential springboard for achieving his goal of a well-managed, efficient Medicare program. Beginning in 2018, under this legislation, the board would make recommendations about restraining costs if Medicare spending surpassed the growth in GDP per capita plus 1%; in other words, it would have to find ways to reduce the average annual increase in Medicare costs from 6% to 3%. Writes Callahan:

For the first time, Medicare would have to live with an annual budget. Nothing could do more than that to make Medicare solvent in the long run, now projected by its trustees to run out of money in eight years.

However, Callahan adds, some changes would have to be made in the Senate bill, which now prohibits the advisory board from making any recommendations that would "ration care, increase revenues or change benefits, or propose cuts in hospital or hospice coverage." Of course, the healthcare industry had those limits inserted into the bill, and it would rally its supporters in Congress against any proposal to give the board more power.

Another proposal, from Robert Mechanic and Stuart Altman of Brandeis University, focuses on the new Center for Medicare and Medicaid Innovation (CMI) that is included in the reform bills. Mechanic and Altman note:

The CMI would be charged with testing innovative payment and service-delivery models designed to reduce Medicare and Medicaid expenditures while preserving or enhancing the quality of care - objectives that should have bipartisan support.

In an ideal world, that would be true. But there will be bipartisan opposition to the idea of reducing payments to some healthcare providers and suppliers in order to fund higher payments to others. Why? Because government-financed healthcare, like defense, has beneficiaries in every congressional district, including physicians, hospitals, nursing homes, home care agencies, and drug and device companies.

Mechanic and Altman make some excellent points: They note that the CMI proposal would allow the Secretary of Health and Human Services to expand any pilots that show promise of reducing costs and improving quality. CMI could also decide where to concentrate its resources, unlike the Centers for Medicare and Medicaid Services (CMS), which must follow Congressional dictates.

And pilot projects would not have to be budget-neutral during the testing period, giving CMI more flexibility to experiment. Moreover, the authors foresee advanced healthcare organizations collaborating with CMI to figure out which treatments work best. Medicare could then reward providers for following guidelines that emphasize those approaches.

Make sense? Of course. But that's exactly why such ideas will encounter fierce opposition in the current political environment. Even if reform as a whole isn't deep-sixed, any effort to pay providers more for avoiding wasteful and unnecessary tests and treatments will encounter massive resistance, just as the comparative effectiveness research program has. Among the affected businesses, the only good change is change that generates additional profits.

Image via Flickr user Pocheco, CC 2.0