Report: Only Swift and Bold Reform Can Cure Medicare’s Woes

The Committee for Economic Development (CED), the public policy center of The Conference Board, has issued a new Solutions Brief, Modernizing Health Programs for Fiscal Sustainability and Quality. It recommends several policy reforms for decreasing the cost of Medicare and other Federal health programs while increasing the quality of care for patients.

The Solutions Brief—the latest in CED’s Sustaining Capitalism series—comes as fiscal and demographic challenges threaten the financial sustainability of Medicare, requiring a broad effort to modernize the program. To address this, Congress should consider a comprehensive package of reforms through bipartisan negotiations, facilitated by a bipartisan Fiscal Commission.

As the Solutions Brief emphasizes, the interconnectedness of the health care system demands a whole-system perspective. Policymakers should consider how each reform would impact patients, health care providers, hospitals, insurers, and other relevant stakeholders. Stakeholder engagement at every step of the process will be crucial.

“The headwinds facing Medicare—left unaddressed—threaten its solvency and ability to provide care to millions of vulnerable Americans,” said David K. Young, President of CED. “An aging population and rising health care costs per beneficiary put pressure on the Federal budget, which is already running sustained, record-breaking deficits. Policymakers and health care providers must work together—and quickly—to put Medicare on sound financial footing.”

Framework for Modernizing Medicare

The size and complexity of Medicare require a framework of principles to drive the modernization of the program. This serves to meet the needs of both current and future beneficiaries and bend the cost curve of increasing spending while promoting high-quality care.

1. Identifying and treating health conditions early will save money both before individuals enroll in Medicare and in the long run for the Medicare program because future enrollees will be less likely to develop (or to have developed) long-term chronic conditions.
2. Linkages to commercial insurance are crucial as hospital systems and other medical providers must develop additional revenue streams to balance relatively lower expected Medicare and Medicaid reimbursement, increasing the pressure on the Federal government and states to raise rates and putting an additional burden on commercial insurance to make up the gap.
3. A shift to value-based care will promote patient-centered care, improve the efficiency of providing that care, and realign incentives away from volume and towards quality and outcomes. A shift to value-based care before individuals enroll in Medicare will reduce costs to the program over time and will lead to greater fiscal solvency for it.
4. Incentives should be aligned across an entire community and the health care system to facilitate effective implementation of reforms. Payors and health care providers should invest in practice transformation and business model transformation as well to ensure the reforms’ success.

Key Recommendations

These recommendations for Congress, the Centers for Medicare and Medicaid Services (CMS), and health care providers lay out potential options that collectively work together to achieve the broad transformations needed to set Medicare and other Federal health programs on a more sustainable fiscal path. CED’s recommendations include:

• Congress should consider a comprehensive package of reforms to address the impending financial insolvency of Medicare’s Hospital Insurance Trust Fund, which may include adjustments to premiums, cost-sharing, and prescription drug payments.
• CMS should continue its implementation of value-based care and alternative payment models, including greater use of accountable care organizations.
• The CMS Innovation Center should regularly demonstrate to Congress and other policymakers that it is incorporating lessons learned from its testing of innovative payment and service delivery models to ensure value for money.
• Congress, CMS, and health care providers should make upfront investments in workforce and data infrastructure to effectively and efficiently implement value-based care and alternative payment models.
• Congress should evaluate and reform the payment methodology for Medicare Advantage plans to affirm that the plans are generating savings for the Medicare program and delivering value and high-quality care to enrollees in Medicare Advantage.
• Congress, CMS, and health care providers should also emphasize primary care and care coordination to improve health outcomes and achieve savings in the long term.
• The Administration and Congress should assess strategies to streamline regulations and payment policies that add costs and administrative burdens to the health care system.

About The Conference Board

The Conference Board is the member-driven think tank that delivers Trusted Insights for What's Ahead.™ Founded in 1916, we are a non-partisan, not-for-profit entity holding 501(c)(3) tax-exempt status in the United States. ConferenceBoard.org

The Committee for Economic Development (CED) is the public policy center of The Conference Board. The nonprofit, nonpartisan, business-led organization delivers well-researched analysis and reasoned solutions in the nation’s interest. CED Trustees are chief executive officers and key executives of leading US companies who bring their unique experience to address today’s pressing policy issues. Collectively, they represent 30+ industries and over 4 million employees. ConferenceBoard.org/us/Committee-Economic-Development