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Sen. Frist Proposes Six Reforms for Medicare to
Begin Entitlement Control
Medicare pinpointed
as bigger economic threat that Social Security
Feb. 28, 2006 – Senate Majority Leader Bill Frist
(R-TN) said yesterday that the "demographic aging revolution dictates
that the spending path we’re on is unsustainable" because of the cost to
maintain Social Security, Medicare, and Medicaid. He said the place to
begin cutting back is with Medicare. "Whereas Social Security will go
bankrupt in 2040, the Medicare Trust Fund will go bust 20 years
earlier…in 2020" he said. He proposed six "fundamental reforms"
for Medicare in this
speech to the Detroit Economic Club.
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Pointing out that the federal budget is already
heavily weighted toward entitlement spending (Medicare, Medicaid, and
Social Security), Frist said, "…as people live longer and the baby boom
generation retires, that spending will continue to eat up a larger and
larger share of our budget."
"If we do nothing," he warned, "in just 30 years we
won’t have a dime of revenue to pay for anything else except four things
-- Social Security, Medicare, Medicaid, and a part of our interest on
the debt."
"We won’t have any additional resources for
anything else. Not for defense. Not for education. Not for NIH research.
Not for homeland security. Not even for Congress or the White House."
"To put it in perspective," he said, "in 1950, 8%
of the population was 65 or older. Today it’s 12%. And in 25 years, it
will climb to 20%: The proportion of the younger, working age population
who will be supporting these seniors is shrinking. The implications –
for our pay as you go entitlement programs -- can be catastrophic, if no
action is taken."
In addition to the fact that Medicare will run out
of money before Social Security, Frist said, we needed to start work on
Medicare because the necessary changes will take considerable time.
"Fixing Medicare involves radically transforming
operational systems of financing and delivery and organization…which
takes time for implementation and has a long lag effect before savings
and efficiencies are realized. Social Security, in contrast, can be
fixed actuarially -- simply dialing formulas up or down -- which is much
more straightforward and time-responsive to action taken," he said.
The Senator pointed out:
● The unfunded liability for Medicare is 5 times
that of Social Security – over the next 75 years.
● Medicare costs are growing almost twice as fast
as Social Security costs over the next decade.
● Medicare spending is expected to increase by
more than 150% from 2004 to 2015. It will grow from 13% to a whopping
21% of the federal budget.
He said this make the "mandate is clear: We need to
slow growth in Medicare expenditures. And we do that by
(1.) maximizing the value of our federal health
care dollar and
(2.) by reducing the disease burden we’re paying for.
Doing so will enable us to fulfill our commitment
to “health security” for our seniors without mortgaging our children’s
future, he said.
Frist said, "The vision for Medicare I see is a
transformed, 21st century system that’s patient-centered,
consumer-driven and provider--friendly. And it will be fueled by 3
dynamics: information, choice, and control."
"These principles," he said, "will transform our
Medicare system into a model for all American health care. The reforms
we lead with in Medicare will stimulate reform in Medicaid and even
greater efficiencies in the private sector."
The six reforms he proposed are aimed at achieving
this vision while slowing "Medicare's unsustainable growth."
Following are his proposals:
● Reform 1 - Chronic disease management
As we age, we’re more likely to suffer from
chronic, and potentially debilitating diseases, rather than acute
illnesses.
Consider the numbers: more than 90% of the Medicare
dollar is spent treating patients who suffer from 1 or more chronic
conditions. It’s obvious: if we manage diseases more carefully, we not
only save money, we improve lives.
Take, for example, diabetes. We have a new epidemic
of diabetes occurring in this country. One of every five (18%) Medicare
beneficiaries have diabetes – and they account for a third (32%) of
overall Medicare spending.
Yet, Medicare has no comprehensive diabetic disease
management program. We know that through evidence-based interventions
and monitoring (things as simple as phone calls from trained nurses),
disease management can reduce health costs by as much as 30%, and can
cut hospital costs by as much as 50%!
Diabetic disease management in Medicare could
conservatively save as much as $30 billion a year.
● Reform 2 – Prevention
"To save money, let’s reduce the size of what we’re
having to spend money on in the first place – let’s reduce the disease
burden. This sounds so obvious. But politicians in Washington don’t seem
to get it. Washington focuses on flow of money – who pays and how much,
ignoring reducing the amount of disease for which you’re paying.
Prevention (including early detection and
treatment) works. I’ve seen it in my own medical practice. When you
treat hypertension up front, you eliminate the huge expense of treating
the massive (and expensive) heart attack caused by uncontrolled high
blood pressure.
And the public health numbers prove it. This month,
we received spectacular news: the number of Americans dying from cancer
fell for the first time in decades! Why? The marked decline in smoking,
along with early detection (colonoscopies and mammograms) and better
treatment. Prevention – lowers the disease burden; Prevention lowers
cost.
In Medicare, we’ve taken some baby steps. The
recently enacted prescription drug plan for the first time ever covers
drugs to control hypertension…and which will prevent the chronic,
debilitating, and costly stroke. But, it’s only a modest first step
compared with what we can accomplish in a truly transformed
patient-oriented, prevention-centered Medicare.
Americans are ready to participate in preventive
programs. They’re ready to assume responsibility. But they must be
called upon to do so. They’re ready to play a more active role in their
own care and disease management. We need to give them the tools to do so
—and in my mind there are 3: information, choice, and control.
● Reform 3 – Information
"This is taking advantage of 21st century
information technology and making easily understandable information
available to seniors. As we’ve recently seen with the confusion
surrounding the new Prescription drug benefit, Medicare is in the dark
ages compared to every other sector of our economy when it comes to
providing easy-to-understand information to seniors.
"But imagine integrating privacy-protected
electronic medical records that would eliminate red tape, reduce the
waste of medical errors, improve quality, and weed out fraud. All of a
sudden, that health care dollar goes a lot further. 21st Century
technology opens up the doors to transparency in pricing and quality of
care. You will know what you’re shopping for and exactly how much it
will cost.
● Reform 4 - Choice
When you have 40 million seniors making daily
choices on quality and cost -- based on their access to accurate and
transparent information -- you suddenly realize efficiencies through
competition that were never thought possible.
We’re witnessing that with the new Medicare drug
program where monthly premiums, anticipated to be $37, have fallen
overnight to $25 — because of competition and market-based dynamics.
(Private competing plans providing prescription drug coverage negotiated
much bigger discounts than the government had predicted.) This
market-based competition, when applied more broadly to hospital and
physician services in Medicare, will help slow the growth to sustainable
levels in the future. It will increase value and quality.
● Reform 5 – Income related
Americans understand that those who can truly
afford it should pay more of their fair share for Medicare, allowing a
greater proportion of scarce resources to go to those who have the
greatest need. Such so-called “income-relating,” – although offensive to
some — is inevitable to avoid the intergenerational inequities that
would otherwise stem from the demographic aging revolution upon us.
● Reform 6 – Provider-Friendly
A consumer-driven, patient-centered Medicare
program must be “provider-friendly.” And by that I mean doctors, nurses,
social workers, laboratory technicians — all must be an integral part of
the transformed Medicare system. Medicare policies should encourage
provider participation and begin to specifically reward quality and
provider performance rather than just blindly reimbursing for treatment.
In our effort to slow growth, what we do not want
to do is simply trim at the margins and cut reimbursements to doctors so
severely that they flee the system. Such short-sighted policy is
destructive. It would destroy quality and access, and lead to a lack of
integrity in recurring “health security” for our seniors.
As we slow the growth in Medicare expenditures and
increase the value of our federal health care dollar, we’ll create the
tools and provide the models that will facilitate transformation of our
entire health care system.
Sen. Frist said these six reforms will transform
Medicare to a patient-centered, consumer-driven system.
"As Medicare goes, so does Medicaid and the private
sector. By leading health care reform with Medicare, we move all health
care – Medicaid, employer sponsored private plans, and individual plans
– to greater efficiencies, lower costs, and greater availability.
"More value in Medicaid at the state level means
less crowding out of education which means more young people equipped to
compete for jobs against China and India.
"More value in the private sector means more people
insured and more job creation and economic growth."
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