Having trouble making sense of the current debate over Medicare? Joe Baker, from the Medicare Rights Center, has answers...

ONLY ON THE BLOG: Answering today’s five OFF-SET questions is Joe Baker, President of the Medicare Rights Center. (More biography below.)

On Wednesday, Mr. Obama said that one approach to taming the deficit involves lowering the government’s health care bills by reducing the cost of health care itself.  He said,

“We will change the way we pay for health care – not by procedure or the number of days spent in a hospital, but with new incentives for doctors and hospitals to prevent injuries and improve results. And we will slow the growth of Medicare costs by strengthening an independent commission of doctors, nurses, medical experts and consumers who will look at all the evidence and recommend the best ways to reduce unnecessary spending while protecting access to the services seniors need.”

You have been studying Medicare for decades.  Do you believe that it is possible to create the new incentives that Mr. Obama describes? Are there ways to reduce unnecessary spending—and as he says, save $500 billion by 2023?

One thing we know now is that the delivery system we currently have is not working as well as it could be for patients, especially those with multiple chronic conditions. 

We also know that acute care, like hospitals stays, are far more expensive than a lot of outpatient care and preventive care that would help people maintain a higher quality of life.  So, there are savings to be wrung from over-utilization of acute and Emergency Room services and making primary and preventive care more accessible. 

Even more importantly, there are vast improvements that we can make to quality of the care patients receive and of the patient experience, without increasing costs.

For example, the new Partnership for Patients initiative announced by the Obama Administration earlier this week takes a number of steps to improve quality and make the health system more patient-centered.  This initiative targets funding to decrease the number of hospital-acquired conditions and improve transitions between care settings, like moving from a hospital to your home or a rehabilitation facility. 

Numerous studies have shown that hospital-acquired infections, as well as other errors, and the inability to coordinate care for patients after they leave the hospital lead to unnecessary, and sometime life-threatening, health complications necessitating expensive hospital readmissions.  Nearly one in five Medicare patients discharged from the hospital is readmitted within 30 days – that’s approximately 2.6 million older Americans at a cost of over $26 billion every year.

Further, there are a number of initiatives in the Affordable Care Act that are just beginning to be implemented that could significantly change the health care delivery system for the better over the next few years. 

The formation of “Patient-centered Medical Homes” and “Accountable Care Organizations” aim to create coordinated health care systems where doctors, hospitals and other providers work collaboratively to integrate care for patients so that care is easier to receive and the work of primary care doctors, specialists, pharmacists and other providers is coordinated in the patient’s interest, avoiding duplication of services and improving the patient’s experience. 

In addition, and this has gotten less attention, the President’s framework also saves money by increasing the availability of generic drugs and lowering the amount Medicare pays for drugs.  This proposal is modeled on how the Department of Veterans Affairs purchases drugs – estimates show that the VA pays about 40 percent less for drugs than Medicare Part D drug plans.  We should be harnessing Medicare’s purchasing power to get the best possible price. 

The president also said, “I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry?” Is a voucher program what House Budget Chairman Paul Ryan was describing in his Republican budget proposal? When you read the Ryan proposal, what would the changes mean to average Americans?

Vouchers would end the Medicare program as we know it.  Instead of Medicare guaranteeing a set of benefits, it would provide a capped annual payment or voucher that individuals enrolled in Medicare could use to buy private health insurance. 

There are two primary problems for consumers with a voucher scheme.  First, it shifts far higher out of pocket costs onto consumers.  

Second, while the voucher is supposed to increase in value each year, in almost all proposals it will not match the rate at which health costs increase, so the voucher over time will become increasingly more inadequate to buy coverage comparable to Medicare, meaning many will be severely underinsured. 

Specifically, under the Ryan plan people would get far worse coverage and would have to pay much more out of pocket for it according to most analysis.

The Congressional Budget Office (CBO) and others anticipate that the voucher would not be enough for consumers to afford the coverage package that people with Medicare currently receive. CBO anticipates that the average 65-year-old under the voucher scheme would pay $6,400 to $7,000 more per year than for comparable coverage under traditional Medicare. 

You can call it premium support, you can call it vouchers but this is not a new idea and one that always ultimately fails because it saves the government money by shifting tremendous out of pocket costs onto consumers, consumers who are not in a position to bear that financial burden.  

Many people don’t realize that about half of current Medicare consumers have household incomes of $20,000 or less per year and things will not change drastically for most of the next generation of Medicare consumers, half of whom are projected to have income below about $26,400 per year.  This population, though in desperate need for health services and coverage–nearly half of all Medicare consumers have three or more chronic conditions–is not a population that can really afford to pay more for it. 

And voucher proposals do nothing to address the real cause of growing costs in Medicare.  The root of high Medicare costs is not the Medicare program itself, but rising costs in the entire health care sector.  Medicare spending is growing at a similar or slower rate as private insurance for those under age 65.  These types of proposals wrongly puts the burden of these growing costs square on the backs of Medicare consumers alone, without sharing any of the responsibilities with the pharmaceutical industry, insurance companies or providers.

There are critics of the Ryan plan who say that Republicans want to kill Medicare once and for all. Do you think that’s what’s happening?

Well, there is no doubt that Chairman Ryan’s House budget plan would eliminate Medicare as we know it today.  I hope that regardless of party allegiance, policymakers and lawmakers understand that “privatizing” Medicare through vouchers for private plans simply puts the risks of higher costs (and less coverage) onto Medicare consumers, who are the least able to afford those costs or control those costs by negotiating for a better price with their doctors or, even more preposterously, a hospital.   

If you could wave a magic wand today, how would you reform the Medicare system?

First, I would use my wand to reform the entire health care and health insurance system.  Medicare and Medicaid are not the cause of our health care costs and coverage problems.  In fact, Medicare has bested private insurers in trying to control costs – per person spending in private health plans grew at an average rate of 9.3% a year between 1970 and 2008, compared to 8.3% for Medicare.  All the more reason that Medicare reform means reform of the entire health care system, the job of the initiatives described in the first question above.

Second, reform has become synonymous with cuts, but that is not really what reform should mean.  Medicare coverage and cost-sharing need to be improved for consumers. 

The Affordable Care Act added a fully-covered annual wellness visit to Medicare, something insurance for many under age 65 has had for years,  and starts to close the coverage gap (aka the “doughnut hole”) in prescription drug coverage, something that good plans for those under 65 have never had.  But, rather than a voucher program shifting costs to consumers, we need to talk about making the Medicare benefit package better and less expensive. 

People with Medicare shouldn’t need supplemental insurance to cover the costs of Medicare.  And even though most people with Medicare have some type of supplemental insurance, median out-of-pocket spending as a share of income for people with Medicare grew from 11.9 percent in 1997 to 16.2 percent in 2006.  As noted, almost half of people with Medicare have less that $20,000 in income each year.  Based on the 15,000 calls we get to out national helpline each year, we know that many people can’t always afford access to the care they need.    

There are now some 50 million uninsured Americans.  There are many who want Mr. Obama’s new health care reform legislation repealed. What can/should be done for those Americans who have no health insurance?

The current “repeal and replace” effort aimed at the Affordable Care Act is misleading because there has been no serious proposal presented to “replace” the ACA with another way to cover the uninsured, control costs and improve quality. 

The ACA isn’t perfect but it makes considerable headway on all those goals.  So, we need to implement the ACA and keep the improvements to Medicare (new preventive benefits, expanded drug coverage and increased payments to primary care doctors) that would have been eliminated if the House bill to repeal the ACA succeeded, though certainly the threat to these and other provisions of the ACA is far from over.

MORE BIO of Joe Baker:

Mr. Baker was recently appointed to serve on the Institute of Medicine Board on Health Care Services and Committee on Geographic Variation in Health Care Spending and Promotion of High-Value Care.  He is an Adjunct Professor at the New York University School of Law, currently teaching a class on implementation of the Affordable Care Act.

Previously, he was the deputy secretary for health and human services in New York State under Governor David A. Paterson, where he was instrumental in developing Medicaid reforms and a proposal to extend health coverage to younger New Yorkers. Mr. Baker served as assistant deputy secretary for health and human services under Governor Eliot Spitzer, after having directed the Health Care Bureau under Spitzer when he was attorney general of New York.

Before returning to Medicare Rights in 2009, Baker was executive vice president from 1994 to 2001, and prior to that was associate director of legal services for Gay Men’s Health Crisis. He is a graduate of the University of Virginia School of Law.