Flaws in Medicare Reform

Two years ago, Washington budget-crunchers started spreading the bad news: Medicare will become insolvent by 2008. Congress promptly did what it does so well. It appointed a 17-member commission of legislators and health care experts and gave it until March 1, 1999, to come up with a way of saving basic health insurance for 40 million elderly and disabled Americans.

Today, squeaking in just before the deadline, the commission’s co-chairman, Sen. John B. Breaux (D-La.), will call for a commission vote on his proposed solution. Breaux’s plan attempts to bring “market-based competition” to Medicare by, among other things, allowing managed care providers, not the Medicare bureaucracy, to decide which drugs and medical procedures should be offered to their patients.

Bringing more competition to the outdated fee-for-service Medicare system is a good idea, but the commission should add consumer protections and quality-monitoring systems to the Breaux proposal.

Medicare definitely needs better quality-assessment tools. Currently, the system is little more than a check-writing machine, sending 200 billion taxpayer dollars each year to doctors and hospitals. Fraudulent payments are questioned only months after the fact and only in obvious cases.

Managed care does have many of the tools that Medicare needs. Most HMOs, for example, have data-tracking systems to flag problems (like dangerous drug combinations that physicians unknowingly prescribe) and to focus spending on the most cost-effective treatments. But while applying managed care to Medicare is a good idea in principle, in practice Breaux’s plan could be disastrous. It lacks safeguards to discourage HMOs from increasing profits by denying patients medically necessary care. Nothing in Breaux’s plan, for instance, would prevent an HMO from requiring an epileptic to switch from a pricey drug with slight side effects to an older, cheaper drug that has serious side effects like heavy sedation and weight gain.

That leads to another problem. Breaux would use savings generated by reform to provide prescription drug coverage under some plans. That is sure to be politically popular with seniors who are fuming at soaring drug costs, but it could add uncontrollably to future Medicare spending. Reformers should evaluate real savings before adding a big new benefit.

The commission needs to require managed care providers to open their decision-making to scrutiny by physicians and public health experts in the federal government’s Agency for Health Care Policy and Research. Congress also should pass a bill being introduced by surgeon-turned-senator Bill Frist (R-Tenn.) that would grant the agency funding to begin assessing the quality and cost of treatments. The agency, for example, could research how Southern California’s Loma Linda Hospital achieves a high success rate at coronary bypass surgery while charging $8,000 for the procedure, less than half the national average.

Reforming Medicare, if done responsibly, could actually improve the quality of health care for all Americans and save money at the same time.