Kenneth E. Thorpe is the Robert W. Woodruff Professor and chairman of the Department of Health Policy and Managment, Rollins School of Public Health at Emory University. He was deputy assistant secretary for health policy from 1993 to 1995.
The Congressional Budget Office continues to provide sobering data about our projected budget deficit. Over the next decade, federal spending will hover around 23 to 24 percent of gross domestic product while revenues are not expected to exceed 20 percent of GDP. Nearly 40 percent of the projected growth in federal spending over the next decade is traced to two programs—Medicare and Medicaid. Recognizing this fact, many entitlement reform proposals or options have focused on slowing the growth in spending in these two healthcare programs. However, most of these proposals have focused on shifting rather than reducing healthcare costs. Proposals offered include providing states a block grant for Medicaid that is indexed to inflation or labor costs—growth rates substantially below projected increases. On the same theme, some have proposed providing seniors a fixed federal contribution that rises with inflation—again substantially below current growth in underlying healthcare costs. In both cases, federal spending would decline but spending for Medicare beneficiaries and state and local governments would rise, leaving the underlying cost pressures to continue.
Other proposals targeting Medicare would increase premiums and cost sharing paid by seniors, increase the eligibility age from 65 to 67, and cut payment rates to healthcare providers. Each of these proposals would reduce federal spending by shifting costs to beneficiaries and healthcare providers. Bottom line, these simple approaches do not attack the underlying causes of rising healthcare costs and therefore do not reduce total healthcare spending.
Rising rates of largely preventable chronic illnesses are a key driver of rising spending in Medicare and Medicaid. For Medicare, six conditions—diabetes, hypertension, hyperlipidemia, asthma and pulmonary disease, arthritis, and depression account for 40 percent of the growth in Medicare spending. These increases are all the result of the rising share of seniors treated for these conditions. In Medicare, the prevalence of diabetes has doubled since 1987 to 22 percent, while treatment for mental disorders tripled to 23 percent over the same period. Over 95 percent of spending in Medicare is linked to chronically ill patients—including 50 percent of Medicare patients treated for five or more conditions during the year. Yet, in traditional Medicare there is no care coordination at all. As a result, Medicare will spend $250 billion over the next decade on potential preventable hospital readmissions that effective care coordination could largely eliminate.
We need entitlement reform proposals that will reduce the underlying growth in spending in the Medicare and Medicaid programs—not ones that simply shift spending from the federal budget elsewhere. These approaches need to address the two key issues: rising rates of largely preventable chronic disease prevalence, and providing effective team-based care coordination nationally in the Medicare program. Two simple ideas are presented below.
Offer effective lifestyle modification interventions focused on weight loss as a covered benefit to overweight adults starting at age 60.
We have several years of randomized trials showing that programs like the lifestyle modification in the diabetes prevention program generate sustained weight loss and reduction in the incidence of diabetes and hypertension. The intensive lifestyle intervention in the DPP generated a 7 percent reduction in weight after a year, and derivatives in community based settings appear to achieve positive results. Since obese Medicare beneficiaries spend 25 to 35 percent more on health care over their lifetimes compared with normal weight adults, a scaled-up program applying the same proven principles might be able to generate savings for Medicare.
Introduce care coordination into traditional fee-for-service Medicare and for dual Medicare and Medicaid eligibles nationally over the next three years.
Of the $560 billion spent on Medicare, approximately $360 billion flows through the traditional Medicare program. Other than for homebound patients, traditional Medicare includes no efforts to coordinate care for chronically ill patients (virtually all the spending). In addition, dual eligibles—those enrolled in both Medicare and Medicaid—are the most expensive patients of all, accounting for over $300 billion in expenditures per year. More effective approaches for managing chronic conditions in these populations will improve health outcomes and reduce spending. The Affordable Care Act outlined the dimensions of effective care coordination in section 3502-community health teams. The teams, working in close collaboration with primary care provider practices, would provide several evidence-based functions including transitional care, medication management and reconciliation, coaching, and continuous 24/7 care. The provision was authorized but was not funded. These teams could be offered nationally to all beneficiaries enrolled in traditional Medicare for an investment of under $40 billion over the next decade.
Data from several randomized trials show the potential for the functions performed by the teams to reduce spending. Evidenced-based transitional care programs can cut preventable readmissions by 25 to 50 percent. Medication management and reconciliation programs have also been shown to reduce overall healthcare spending. Effective health coaching alone—those programs that change behavior and improve compliance with care plans—have been shown through randomized trials to reduce spending by a net of 3 percent. Even at the low end of what the literature has found, savings of 3 percent would be easy to achieve—Medicare could save $150 billion over the next decade with similar savings and better outcomes achieved for dual eligibles.
These two proposals would improve the quality of care delivered to Medicare and Medicaid patients and reduce total spending—federal, state, and local, and for beneficiaries. Over the next decade it would not be unreasonable to assume savings exceeding $300 billion in these healthcare programs.
We need to change the policy option debate in Washington from cost shifting to cost reductions. Focus on averting disease and potentially eliminating costs instead of shifting them, through effective lifestyle modification programs and finally introducing evidenced-based care coordination into Medicare and Medicaid would represent moves in the right direction.