Changing Medicare for the Devil We Don’t Know

Jan. 7 (Bloomberg) — While the recent Beltway budget deal spared federal entitlement programs such as Medicare, that doesn’t alter the fact these programs play a pivotal role in driving up the deficit over the long run.
 Time and again politicians and policy wonks have said that Medicare’s practice of paying for every service, regardless of outcome, frequency, or necessity, is one of the biggest reasons for its out-of-control spending. 
 Whether it’s Uncle Sam or Sam’s Club paying the bills, purchasers and payers of health care services are looking for ways to drive down costs that risk the fiscal health of the nation. Alternatives to the fee-for-service approach that shift more risk to providers, bundle services and payments together, or tie payments to better outcomes are growing in popularity. Whether these services actually improve care or slow the growth in costs is unclear.
 Bloomberg Government health-care analyst Christopher Flavelle recently looked at some of the alternative approaches being used by the largest private health plans in the country. While Medicare often is a driver of payment reforms given its marketplace dominance as a payer, private payers are further ahead in efforts to control costs and move away from traditional payment approaches.
 While the private sector is ahead, that doesn’t mean it’s made more progress. According to Flavelle’s research, the five largest private insurers have all been aggressively implementing alternative payment approaches although the results to date have shown minimal savings or are inconclusive.
 One of the biggest barriers to any major reforms to Medicare, and to underlying cost problems, is getting providers and policymakers to the point where they are comfortable trading the devil they know for the devil they do not know. While the current system may be flawed, it is known and fairly predictable … and providers know how to make money off of it. The same cannot be said for new payment approaches.

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