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Tuesday, April 29, 2008

Leavitt’s cut-the-cake Medicare solution

By Larry Lipman | Tuesday, April 29, 2008, 05:05 PM

Everyone familiar with Medicare’s financial situation knows something must be done. Starting in October, the federal government will begin selling its Medicare trust fund bonds to keep the hospital portion of the program solvent. By around 2019, those bonds will be exhausted.

HHS Secretary Michael O. Leavitt keynoted a forum on Medicare today and met with health reporters to give his views on Medicare’s future. Without a change in course, he says, Medicare is “drifting toward disaster.”

Three things are needed to change course, Leavitt says:

  • Separate the commitment to change course from the political pain of doing so. In other words, as long as members of Congress are going to be held answerable for every change in Medicare policy, they won’t have the political courage to make necessary painful changes any time soon. So Leavitt suggests some kind of extraordinary mechanism — perhaps like the way military base closures are adopted — so that Congress can set in place a series of “triggers” for action when the problem reaches a certain point.

  • Change the framework of Medicare “to make value replace volume.” As it stands now, the more procedures, office visits, prescriptions, etc., that are involved, the more everyone in the health care system is paid. Medicare even pays for mistakes that lead to further medical treatment. One way to change the payment dynamic, Leavitt says, is to introduce competition for services based on price and consumer satisfaction, similar to the Medicare Part D prescription drug program.

  • Address the demographic problem in which fewer and fewer workers are paying for higher and higher Medicare costs. That probably means current beneficiaries who can afford to do so will have to pay an even greater share for their coverage. Leavitt says those who have the capacity to pay more should pay more.

Leavitt acknowledges that these changes, which are not specific Bush administration policy, aren’t likely to be implemented soon.

But he suggests that the sooner Medicare’s course is altered the better. And he chides the presidential candidates — all of them — for not spending more time talking about this issue because it’s likely to impact whomever is elected, certainly by the time a second term rolls around.

One way to change course, he suggested, is the “cut the cake” solution he and his brother used to use when there was only one piece of cake left. One brother would cut the cake, the other got the first choice.

That means the parties have to devise a solution that is so fair, both will be willing to accept the outcome.

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Leavitt: ‘How much for that knee replacement?’

By Larry Lipman | Tuesday, April 29, 2008, 04:04 PM

knee.jpg
Photo by Kimberly Smith/AJC
How much does it cost to have a knee replacement? Or any other major surgery for that matter? HHS Secretary Michael O. Leavitt hopes to find out before his term ends in 265 days.

At a briefing with reporters this morning, Leavitt noted that Medicare pays for about 255,000 knee replacement surgeries a year but there is no set price on how much it costs, nor is there any competition in terms of cost or quality. He’d like to see that changed.

What if everyone involved in a knee replacement surgery received a lump sum for the procedure and then divided that payment among themselves? The surgeon would get so much, the anesthesiologist would get so much, the radiologist would get so much, the hospital would get so much….

Then, what if groups that did knee surgeries competed against each other? Which group offers the best price and who has the best reputation for quality? Leavitt says if Medicare paid for services that way, it would go a long way toward reducing the cost of health care because Medicare sets the pace for how medicine is paid for.

If you bought a new car the way you buy a surgical procedure, Leavitt said, you’d go to the hospital with no idea how much the car would cost. A few weeks later you’d begin to get the bills for the car’s chassis, the paint job, the transmission, the salesman’s fee, the showroom fee … and don’t forget some exorbitant payment for the coffee you thought was complimentary.

Leavitt hopes to spearhead a demonstration project in bundling Medicare payments for some high-volume surgical procedures before the Bush administration ends next January. The Medicare Payment Advisory Commission recommended a similar course at a meeting three weeks ago to bundle payments to doctors and hospitals. MedPAC is expected to formalize the recommendation in June.

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