Transcript Who are our hypothetical patients?

Is There a Better Way to Reduce
Growth in Medicare Spending?
National Academy of Social Insurance
17th Annual Conference
Washington, D.C.
January 28, 2005
Joseph Antos, Ph.D.
Wilson H. Taylor Scholar in Health Care
and Retirement Policy
American Enterprise Institute
Medicare consumes an ever larger
share of GDP
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2080:
13.9%
Percentage of GDP .
14
12
Projected
10
Actual
8
2004:
2.7%
6
4
2
1970:
0.7%
0
1970
1990
2010
2030
2050
2070
Source: 2004 Medicare Trustees report
2
Medicare outpaces other federal
spending, 2005-2015
Average annual growth rate
10
9%
7.8%
8
5.5%
6
5.6%
4.9%
4.3%
4
2
0
2.1%
2.2%
1.3%
.
d
ity
re
ys rest
se
et
DP
ai
r
a
r
a
n
c
l
u
G
c
c
i
e
fe
ut
is
di
ec
al
ed
nt
e
i
S
n
De f. d al o
i
M
M
et cial
m
t
e
o
o
d
N
T
n
N
So
No
I
CP
Source: CBO, 2005
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Approaches to cost containment
Regulatory


Set prices administratively
Restrict access (Rx non-coverage)
Technical/Scientific


Improve health care delivery (IT, DM, evidence-based medicine,
coverage tied to data collection)
Improve patients (prevention)
Economic

Realign incentives facing patients and providers
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Cost containment track records
Average Spending Growth, 1983-2002
Average annual percent change
10%
8%
9.1%
6.7% 6.5%
6.9%
5.8%
6%
7.1%
6.4%
4.9%
4%
2%
0%
M
ica
d
e
re
BP o Rx ER S o Rx
n s cai d
DP
I
H
G
i
lP
FE
w/
w/ vat e Med
Ca
P
S
Pri
HB
ER
E
P
l
F
Ca
Source: Joint Economic Committee, 2003
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Best practices to the rescue?
Disease management
 Promising concept, but will it reduce spending?
 CBO assessment
Evidence-based medicine
 Medical innovation outpaces evaluation
 Cox-2 scares – big gaps in knowledge
 Coverage contingent on data collection
Health IT
 Cultural, financial, privacy barriers
Prevention
 Near-term cost, long-term savings?
 Will patients respond?
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Can the U.S. become more like MN?
Medicare spending per enrollee, 2001
Minnesota
$4,767
U.S.
$6,237
Lower spending, equal or
better health outcomes
Source: Dartmouth Atlas
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New competition in Medicare
M+C
becomes MA
2004
2005
PDPs, regional MA
plans, bidding
2006
2007
2008
2009
CCA
demo?
2010
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What’s new about the new competition?
Bidding/negotiation process reflects plans’ actual costs
Risk-sharing
 Risk adjustment, risk corridors, stabilization fund, network
adequacy fund
Many more options for seniors




Traditional Medicare or MA plan
MA plan options: Regional PPO, local HMO or PPO, private FFS
Choice of Medicare Rx plan (or none)
Basic Rx coverage or enhanced coverage
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Bidding can hold down cost…
DME competitive bidding demonstration
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
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Multiple sellers of equivalent products
Price, quality, and customer service were considered
Existing fee schedule provides price comparison
Previous suppliers grandfathered in
Savings about 20% of fee schedule
 Wide range of discounts
 Bid prices exceeded fee schedule for certain products (surgical
dressings)
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Will MA competition work?
Competing plans are expected to participate in MA and PDPs
Impact on program spending uncertain:






Risk corridors reduce plans’ incentives to bid aggressively
Impact of FEHBP-style negotiations?
Plan overpayments and risk adjustment
Bids may cluster around benchmark
Savings may be used to enhance benefits, not lower costs
Seniors may not adapt quickly to new choices—low MA market
share?
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CCA demonstration not likely
Comparative Cost Adjustment, aka premium support




6-year demonstration, beginning 2010
No more than 6 sites
Bidding determines premiums for MA and traditional Medicare
Impact on traditional Medicare is phased in over 5 years
Precursors never got off the ground
 HCFA competitive pricing demonstration failed in Baltimore
(1996) and Denver (1997)
 BBA demonstration failed in Kansas City and Phoenix (1999)
 Provider and plan resistance was key
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Not in my back yard
“If they want these pilot programs, they
should only go to those states where the
Senators voted for this bill.”
-Senator Hillary Clinton (D-NY)
“I particularly oppose Michigan seniors being
forced to participate in this ill advised
experiment.”
-Senator Debbie Stabenow (D-Mich.)
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Past experience is sobering
M+C/ MA Plan Participation and Enrollment
Max enrollment
Max plan participation 6.3 M in 1999
346 in 1998
300
250
6
.
Total Plans
350
7
5
Enrollment (millions)
400
2004: 154 plans 4
& 4.7 M enrollees
200
3
150
100
2
50
1
0
0
1990
1992
1994
1996
M+C Plans
1998
2000
2002
2004
Enrollment
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Will history repeat itself?
3000
600
BIPA 00
BBRA 99
1000
MMA
0
-1000
200
.
400
0
$Billions
$Billions
.
2000
-200
BBA 97
-2000
-400
-3000
-600
1994
1996
1998
Actual Deficit
2000
2002
2004
5-year Deficit Forecast
Source: CBO
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