Thank you Madam Chairman, Representative Stark, committee members, for inviting me. The Progressive Policy Institute (PPI) believes that the next great challenge for Medicare will be shifting the program's emphasis toward chronic care. Medicare has always been a reliable bill payer when beneficiaries suffered an acute health care crisis requiring hospitalization or extensive medical procedures. Now, Medicare must learn how to better help the increasing number of seniors with chronic illnesses stay out of the hospital and maintain the best possible health and quality of life. This, we believe, is key to improved health outcomes, higher quality health care, and greater value for every health dollar spent.
PPI explains the need for a dramatic shift toward chronic care in a recent policy report: Healthy Aging vs. Chronic Illness, Preparing Medicare for the Next Health Care Challenge, by David B. Kendall, Kerry Tremain, Jeff Lemieux, and S. Robert Levine, M.D. I have brought copies of that report; if possible, I recommend it be added to the record of this hearing.
Because Medicare covers seniors and workers with long-term disabilities -- precisely the people most likely to have chronic or ongoing health problems -- Medicare beneficiaries have the most to gain from continuity of care and comprehensive, coordinated care management systems.
In the broadest use of the term, "disease management" can range from simple educational programs to specialized programs tailored to help people manage a particular disease, such as diabetes, to comprehensive case management systems for patients with multiple chronic conditions.
However, Medicare is not well suited to provide disease management services at any level, for four reasons:
- Medicare's fee-for-service program cannot pay for performance. Medicare's fee-for-service program pays for health services rendered, regardless of quality, provider, or likely outcome. The program has effectively become an entitlement program for health providers: If a licensed health provider treats a Medicare beneficiary, payment will follow. Such a system cannot steer patients with particular needs to health providers best able to provide the most appropriate assistance and care.
- Medicare's benefits are inadequate. Comprehensive, integrated benefits are a vital part of disease management programs. The most obvious inadequacy in Medicare's fee-for-service benefit package is the absence of an outpatient prescription drug benefit. Other inadequacies can include lack of reimbursement for home monitoring devices and services, and difficulties reimbursing health providers for the extra time, planning, and communication services that patients with chronic conditions need to avoid acute health crises.
- Medicare's benefits are poorly structured and hard to change. Medicare benefits reflect health insurance standards from the mid-1960s. However, because it literally takes an act of Congress to change them, Medicare's benefit structure has not changed very much since then. In the 1960s, health insurance couldn't do much more than pay bills for a hospitalization or an episode of care. Now, with our success in saving the lives of patients in crisis, we have more and more seniors living with chronic illness. As a result, health care needs have changed. However, Medicare's benefits have not adapted. As currently structured, the Medicare program's disjointed Part A and Part B benefits inherently impede coordination of care for beneficiaries with chronic illness.
- Medicare's HMO program is a mess. In theory, private comprehensive health plans like HMOs have the greatest incentives to provide comprehensive disease management programs, and, in fact some Medicare HMOs do a very good job. However, many have dropped out of the Medicare program or slashed their benefits. Medicare's HMO program is a take-it-or-leave-it affair: HMOs enter the program when reimbursements are high and exit the program when reimbursements are low. Medicare's new PPO demonstration program, which includes risk sharing and a more long-term partnership between plans and the government, holds promise for restoring private plan options for seniors.
To foster improved chronic care and disease management in Medicare, PPI encourages Congress to consider two simple tests for any legislative proposal:
- No new silos. Separated, unlinked, or uncoordinated benefits can thwart disease management efforts. Congress should scrap the idea of a premium-based stand-alone drug benefit. In general, health benefits should be integrated under one administrative structure, so that the insurer has the ability and the incentive to evaluate tradeoffs -- for example, adding drug benefits known to reduce the incidence or cost of hospitalizations. Even if benefits cannot be fully integrated under one insurance carrier, at the very least they should be linked, so that information can be shared between primary and supplemental insurers. Adding another separate, add-on benefit to Medicare's current, outdated structure would work against disease management and comprehensive, coordinated care for people with chronic illnesses.
- No new benefits without accountability. It doesn't make sense to add benefits without making fundamental changes to Medicare's processes, so that we can learn whether or not the benefits improved seniors' health. Even preventive and screening benefits should be accompanied by permanent evaluation systems designed to identify and help people who are at risk for particular problems or are coping with multiple ailments. All new benefits must help reorient the Medicare program toward more optimal care of chronic illness and be accompanied by new processes to spur systematic improvements in health care quality and outcomes.
CMS needs the flexibility to create disease and care management programs for Medicare beneficiaries. However, Congress is not going to give the CMS bureaucracy vast new powers without greatly enhanced accountability and oversight systems. Moreover, disease management is inherently a local system, requiring cooperation between local health providers, community institutions, consumer and seniors' groups, and, in some cases, local government agencies. CMS cannot run effective localized disease management and health improvement programs from its headquarters in Baltimore.
PPI proposes a package of Medicare reforms that would achieve three basic ends:
- a radical decentralization of Medicare's administration, so that local Medicare administrators and medical directors are directly empowered to create disease management and health improvement programs targeted to the needs of beneficiaries in their area;
- a drug benefit structure that helps link, not fragment, Medicare benefits and provides information to target disease management programs; and
- a much expanded menu of private insurance plans in Medicare, along with locally-run comprehensive disease and care management programs for fee-for-service beneficiaries with specific or multiple chronic conditions.
PPI's proposal is explained in greater detail in the report An 'ABC' Proposal to Modernize Medicare, and it is very similar to the Medicare proposal announced last year by several House members, including Representatives Cal Dooley (D-Calif.), Ellen Tauscher (D-Calif.), Jim Davis (D-Fla.), Ron Kind (D-Wisc.), Charles Stenholm (D-Texas), and Adam Smith (D-Wash.). Here are some basics:
Accountability. Medicare officials should be held accountable for measuring and improving the health of older Americans. They should be given the freedom to make improvements at the local level, in accordance with local needs, with clear public disclosure of results and Congressional oversight. The model for the PPI's proposal is the "CompStat" system developed in New York City to help fight crime. In that system, crime trends were tracked in real-time, and local police commanders were given flexibility to deploy resources as needed in their precincts in exchange for real accountability for their crime-fighting plans and success. Unsuccessful commanders who did not have a credible plan for performance improvement were replaced.
We propose that Congress create approximately 150 local Medicare administrative regions and staff each local area with a Medicare medical director and Medicare local administrator. We believe those officials should be given flexibility to create new programs to improve health in their areas, with budget authority to create local programs that are budget-neutral within a 10-year period. Local officials would be ranked annually on their ability to foster improvements in health quality and outcomes in their regions, and Congress would establish a new congressional agency, patterned after the Joint Committee on Taxation, to oversee the local officials' actions, proposals, programs, and ratings. Local administrators with poorer performance results would be replaced. Medicare's central bureaucracy would be reduced as the local officials were put in place.
Benefits. PPI believes the most realistic and workable Medicare drug benefit would be a universal, zero-premium catastrophic benefit, provided mostly through the supplemental insurers that already serve Medicare beneficiaries, including employment-based plans, Medigap plans, and state programs. (Seniors without any supplemental benefits would choose a discount card that also provided the catastrophic drug benefit.) The catastrophic benefit would be based on total drug spending; PPI proposes that the catastrophic benefit explicitly allow seniors to have additional coverage under the catastrophic "deductible" without forfeiting their catastrophic benefits. By contrast, Congressional proposals that base a catastrophic drug benefit only on "out-of-pocket" drug spending would be unfair to beneficiaries who have and want additional drug coverage, and could disrupt the employment-based retiree coverage many seniors receive. PPI's preferred approach is more expensive for the government, but it is more practical and workable. Under PPI's proposal, low-income seniors would be eligible for additional drug benefits, including "up-front" benefits that started at much lower levels of drug spending.
We believe that universal catastrophic drug coverage would create tremendous side benefits by building an information-based infrastructure for disease and care management programs. CMS would obtain real-time data from the supplemental insurers and other plans and discount cards administering the benefit, so that Medicare would know when a patient hit the catastrophic deductible, and Medicare's liability was triggered. Therefore, Medicare would have a nearly real-time database of all beneficiary drug expenditures, which would help local Medicare administrators target quality improvement and disease management programs to particular demographic groups or regions. The new data could also dramatically improve risk adjustment methods, which would help private comprehensive plans stay in Medicare.
Choices. PPI proposes to revitalize Medicare's HMO program and expand the PPO demonstration program nationwide. We would establish a new type of Medigap coverage that included some up-front drug benefits; however, to keep the cost down, the "New Medigap" plan would not have absolute first-dollar coverage of beneficiaries' coinsurance for Medicare's other benefits. Beneficiaries could enroll annually in private plans, New Medigap options, and new comprehensive disease management programs, and have premiums deducted from their Social Security checks.
PPI's proposed drug benefit could be scaled up or down based on budgetary constraints. In our model, the generosity of the benefit -- literally the level of the catastrophic drug deductible -- would not affect the proposal's workability. There would be no adverse selection, since the benefit would be free and universal. There would be no need for late enrollment penalties, and employer-based retiree coverage and state pharmaceutical assistance programs would be encouraged, not disrupted. In many cases, seniors would automatically receive the new benefit through their current supplemental coverage -- they would not have to adjust their coverage at all.
PPI believes we must switch the Medicare debate from arguments about how much to spend on a stand-alone, add-on drug benefit to a discussion of what sort of benefits would create the most value in improved health per additional dollar of health spending, and how can we create measurement and accountability systems to assess that value.
At its deepest level, Medicare modernization means establishing a fundamental basis of accountability for improving Medicare's performance, and seniors' health quality and outcomes. No budgetary shortfall should stop us from making the structural reforms necessary. It is wrong to say that because we no longer have enough money for a generous add-on drug benefit, we should therefore do nothing. On the contrary, we must reform Medicare and create a new results-based management structure, which, in turn, will be able to accommodate the introduction of new benefits designed to improve health outcomes, when the budget permits.
