Transform Medicare Rather Than Reform It

The American Enterprise Institute held a forum on Tuesday to highlight changes that should be made to Medicare to bring the program into the 21st Century. Speakers included former House Speaker Newt Gingrich, now a fellow at AEI, Walton Francis, an independent economist and policy analyst, Joe Antos of AEI, Dr. Carolyn Clancy of the Agency for Healthcare Research and Quality, and Rick Ratliff of SureScripts.

Newt Gingrich said the changes to Medicare being debated by the House/Senate conference committee will be the biggest expansion in health care programs since Lyndon Johnson?s Great Society. He said the key to an effective conference committee report will be whether the conferees create boundaries or building blocks for future reform. Gingrich said the debate offers an opportunity for a dramatic transformation of the Medicare program into one that saves lives while saving money. The transformation Gingrich envisions would provide rapid diffusion of innovation, electronic transactions, and a consumer driven system where individuals have more information and choices. Gingrich predicted that the House and Senate would pass a final Medicare bill by the end of October, and by surprisingly big margins. ?It?s almost inconceivable that we won?t have a signing ceremony sometime this year,? said Gingrich.

Joe Antos talked about the need for seniors to be more cost-conscious consumers of prescription drugs. He said some cost sharing is desired to let them see the true cost of the drugs they are getting. Antos proposed moving some of the early-dollar coverage in the House and Senate bills up to fill in the doughnut hole, effectively raising the deductible. He would then give subsidies to low and middle-income people in an account they would own and control for drug expenses up to the deductible. This will allow beneficiaries to do their own comparison shopping for prescription drugs, letting them see the true costs. Antos said an effective Medicare conference report will not be overburdened with red tape, will allow the government to lead the way in information technology, will manage resources more intelligently in the form of care management, and will integrate prescription drugs into the overall health plan.

Walt Francis asked why seniors can?t keep at age 65 the same health plans they have at age 64? He said turning age 65 shouldn?t put people into an alternative health care plan. Francis suggested using the same $7,000 the government spends on the average Medicare beneficiary each year on vouchers to allow seniors to purchase the health plan of their choosing. He also explained two ways in which the federal government can save money on the Medicare program in the next few decades. First, the government can harness market incentives by giving consumers choices and giving health plans incentives to make wise purchasing decisions. Second, the government can manage health care costs through care management and case management techniques. ?We?re not going to solve this problem until we use private plans to manage cost and care,? said Francis.

Carolyn Clancy discussed the role of information technology in improving quality of care and reducing costs. ?We have some very serious problems with the quality of health care in this country,? said Clancy. She said information technology has the potential to reduce adverse drug events, improve compliance with clinical guidelines, enhance data collection, and better coordinate bioterrorism preparedness. For example, allowing physicians to submit orders for medications and lab tests using online systems, known as computerized physician order entry, resulted in a 17% reduction in preventable adverse drug events and a 55% reduction in patient injuries secondary to adverse drug events at Brigham & Women?s Hospital in Boston. If adverse drug events were reduced by 17% nationally, Clancy estimates an annual savings of $654 million. Clancy emphasized that who gets to recoup these savings is an important question as we move forward in information technology.

Rick Ratliff described the SureScripts electronic prescribing product that allows physicians to send prescriptions directly to pharmacies using automated prescribing devices. SureScripts intercepts the prescription and checks for drug interactions. Ratliff said the biggest benefits of such an electronic prescribing program are reducing errors associated with written prescriptions, improving compliance, and reducing physician overhead costs in time and money involved in prescription renewals. SureScripts plans to roll out its product nationally later this month.

Tom Miller of the Cato Institute asked during the question and answer period why seniors are going to have an incentive to move from traditional Medicare into a new system if we insulate current beneficiaries and future beneficiaries for the next 15 years from changes to traditional Medicare? Gingrich said that if you believe that a competitive market-based system is going to be more efficient than traditional Medicare and 75% of the savings are passed along to seniors, then you have to trust that seniors will go to the plans that provide the best value for the lowest cost. Gingrich said he believes people will migrate fairly rapidly, without the need for more generous drug benefits to be offered in private plans than for those who stay in traditional Medicare. ?People don?t need to be punished into going to Wal-Mart because they know Wal-Mart provides the best value. 100 million people go to Wal-Mart each week without the government telling them to go,? said Gingrich.

–Joe Moser
Galen Institute

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The American Enterprise Institute held a forum on Tuesday to highlight changes that should be made to Medicare to bring the program into the 21st Century. Speakers included former House Speaker Newt Gingrich, now a fellow at AEI, Walton Francis, an independent economist and policy analyst, Joe Antos of AEI, Dr. Carolyn Clancy of the Agency for Healthcare Research and Quality, and Rick Ratliff of SureScripts.

Newt Gingrich said the changes to Medicare being debated by the House/Senate conference committee will be the biggest expansion in health care programs since Lyndon Johnson?s Great Society. He said the key to an effective conference committee report will be whether the conferees create boundaries or building blocks for future reform. Gingrich said the debate offers an opportunity for a dramatic transformation of the Medicare program into one that saves lives while saving money. The transformation Gingrich envisions would provide rapid diffusion of innovation, electronic transactions, and a consumer driven system where individuals have more information and choices. Gingrich predicted that the House and Senate would pass a final Medicare bill by the end of October, and by surprisingly big margins. ?It?s almost inconceivable that we won?t have a signing ceremony sometime this year,? said Gingrich.

Joe Antos talked about the need for seniors to be more cost-conscious consumers of prescription drugs. He said some cost sharing is desired to let them see the true cost of the drugs they are getting. Antos proposed moving some of the early-dollar coverage in the House and Senate bills up to fill in the doughnut hole, effectively raising the deductible. He would then give subsidies to low and middle-income people in an account they would own and control for drug expenses up to the deductible. This will allow beneficiaries to do their own comparison shopping for prescription drugs, letting them see the true costs. Antos said an effective Medicare conference report will not be overburdened with red tape, will allow the government to lead the way in information technology, will manage resources more intelligently in the form of care management, and will integrate prescription drugs into the overall health plan.

Walt Francis asked why seniors can?t keep at age 65 the same health plans they have at age 64? He said turning age 65 shouldn?t put people into an alternative health care plan. Francis suggested using the same $7,000 the government spends on the average Medicare beneficiary each year on vouchers to allow seniors to purchase the health plan of their choosing. He also explained two ways in which the federal government can save money on the Medicare program in the next few decades. First, the government can harness market incentives by giving consumers choices and giving health plans incentives to make wise purchasing decisions. Second, the government can manage health care costs through care management and case management techniques. ?We?re not going to solve this problem until we use private plans to manage cost and care,? said Francis.

Carolyn Clancy discussed the role of information technology in improving quality of care and reducing costs. ?We have some very serious problems with the quality of health care in this country,? said Clancy. She said information technology has the potential to reduce adverse drug events, improve compliance with clinical guidelines, enhance data collection, and better coordinate bioterrorism preparedness. For example, allowing physicians to submit orders for medications and lab tests using online systems, known as computerized physician order entry, resulted in a 17% reduction in preventable adverse drug events and a 55% reduction in patient injuries secondary to adverse drug events at Brigham & Women?s Hospital in Boston. If adverse drug events were reduced by 17% nationally, Clancy estimates an annual savings of $654 million. Clancy emphasized that who gets to recoup these savings is an important question as we move forward in information technology.

Rick Ratliff described the SureScripts electronic prescribing product that allows physicians to send prescriptions directly to pharmacies using automated prescribing devices. SureScripts intercepts the prescription and checks for drug interactions. Ratliff said the biggest benefits of such an electronic prescribing program are reducing errors associated with written prescriptions, improving compliance, and reducing physician overhead costs in time and money involved in prescription renewals. SureScripts plans to roll out its product nationally later this month.

Tom Miller of the Cato Institute asked during the question and answer period why seniors are going to have an incentive to move from traditional Medicare into a new system if we insulate current beneficiaries and future beneficiaries for the next 15 years from changes to traditional Medicare? Gingrich said that if you believe that a competitive market-based system is going to be more efficient than traditional Medicare and 75% of the savings are passed along to seniors, then you have to trust that seniors will go to the plans that provide the best value for the lowest cost. Gingrich said he believes people will migrate fairly rapidly, without the need for more generous drug benefits to be offered in private plans than for those who stay in traditional Medicare. ?People don?t need to be punished into going to Wal-Mart because they know Wal-Mart provides the best value. 100 million people go to Wal-Mart each week without the government telling them to go,? said Gingrich.

–Joe Moser
Galen Institute

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