PhRMA President and CEO Billy Tauzin

When debating possible improvements to Medicare, Congress should focus on elements of the program that require reforming. Overall, Medicare continues to be a success story by providing quality and affordable healthcare coverage to millions of seniors and disabled Americans. In 2006, the program was enhanced to cover prescription medications. The coverage extension, known as Part D, expanded on Medicare’s success story.

Today, because of the new benefit, seniors are saving money on their medicines. On average, beneficiaries saved $1,200 last year, and the average total value of subsidies for low-income beneficiaries was $3,900, according to the Centers for Medicare and Medicaid Services.

Not only are Medicare beneficiaries saving significant money, so too are American taxpayers. Last year, the Congressional Budget Office (CBO) released baseline spending projections showing that for the 10-year period ending in 2016, the Medicare drug program will cost $438 billion, or 37 percent, less than originally estimated.

Saving money on medicines along with unprecedented drug plan choices have led to a high satisfaction rate among beneficiaries. A recent Medicare Today survey shows overall satisfaction has grown from 78 percent at the start of the program in 2006, to 90 percent in 2008.

And, despite the growing number of beneficiaries enrolled in the Part D benefit, drug spending is going down. This year, CMS projections for 2008 show that prescription drug spending will grow at the lowest rate recorded since 1961. The agency also projects that prescription medicines will account for only 10 percent of total healthcare spending through 2018.

Even in the context of Medicare reform, policymakers should not overlook the ongoing problem of “non-adherence” in the healthcare system. So-called “non-adherence” of prescribed treatments is directly related to poor clinical outcomes, high healthcare costs and lost productivity. Avoiding these costs by helping patients improve their adherence is one of the most promising opportunities to improve value in our healthcare system, yet this opportunity is often conspicuously absent from the health reform dialogue.

About one-third of Americans report not filling a prescription received from a doctor. Among patients with high blood pressure, 4 out of 5 don't take their medicines regularly enough to get the proven benefits — 20 percent don’t even go back to the pharmacy for the first refill. Unfortunately, as Peter Orszag noted while he was at CBO, doctors are no more accurate that a coin flip in determining which of their patients will be non-adherent.

As Congress tackles healthcare reform – including improvement to Medicare – reducing non-adherence should be a high focus.

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The most important thing to garner from below is that everyone believes we need to reform, fix, refinance, and improve Medicare. It is insolvent, it underpays doctors, it still operates as if the generational shifts of the past few decades never took place, it cost-shifts to private payers, and its trust fund IOUs do not bode well for its fiscal future. Medicare does not delve deep enough into value-based purchasing, it has very little in the way of coordination of care, and is only in the last few months beginning to encourage the use of health information technology. Next time I see Uwe at a cocktail reception, surely we can agree on most of these points - including that the regional variations (Wennberg) must be addressed.

So, we need to improve Medicare. We must, if we are ever going to improve the nation's health care system - this week's question is a no-brainer. But everyone here already knew that. What astounds me is that, after all of these comments, most of these posters will still advocate a "new, public, MEDICARE-LIKE plan."

The report Karen links to every week insists on creation of this plan. Len recently published a report on how he would build such a plan. Other groups that I will not name here have publicly stated that the creation of a new public plan is the only way to lead America to a single-payer system.

Is that really where we want to go, based on all of the commentary already posted about how many problems Medicare has? How much will health reform mean, if we create a whole new mess?

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It's heartening to see so many people in this discussion - John Rother at the AARP, Len Nichols at the New America Foundation, Uwe Reinhardt, Drew Altman at the Kaiser Family Foundation, Leonard D. Schaeffer, and Karen Davis at the Commonwealth Fund - making the crucial point that President Obama and Peter Orszag have repeated over and over: Entitlement reform (including Medicare reform) is health care reform.

Medicare is in trouble not because it risks underfunding in the future. That merely a symptom. The disease is our rapidly rising health care costs, which can only be controlled by comprehensive health care reform that gets everyone into the system, mandates benefits that meet our needs, and provides us a true choice between a variety of private insurance options and a new public health insurance plan that will be affordable, compete on a level playing field, and provide a guaranteed backup so people like you and me can always purchase and afford health insurance.

I find it ironic that given the amount of air expended by Mr. Goodman in previous discussions here, on his personal blog, and in other writings about the crisis that is Medicare (he's been pushing this line since at least 2005), he is now saying we should wait to really fix the system until we're out of the recession. Meanwhile, 14,000 people are losing their health care because of the recession every day. We real need solutions, not years-old rhetoric.

The only way to bend the cost curve is to reign in costs and make health care affordable to everyone, those enrolled in the Medicare program included.

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"Ensuring the long-term fiscal health of Medicare is crucial, and one place to start is with delivery and payment reform, both of which have been discussed as part of health care reform. These reforms should incentivize physicians to better coordinate care and provide prevention and wellness care to help keep Americans healthy and, in the long-run, keep health care costs down.

"As policymakers take a hard look at how to keep Medicare fiscally sound in the long-run, we need to ensure that seniors’ access to care is maintained. Efforts to increase the supply of physicians and nurses must intensify so that there will be an adequate supply of health care professionals to care for seniors as the baby boomers age. Permanent reform of the Medicare physician payment formula must be done this year so that physicians can continue to provide high quality care to seniors now and in the future. President Obama made clear in his budget that he does not expect Medicare physician payment cuts to occur, and we encourage Congress to seize this opportunity for permanent action to fix the physician payment formula."

First, Medicare’s financial problems are huge –- it has six times the unfunded liability of Social Security.

Second, the Medicare Trust Fund is irrelevant because it consists of nothing more than IOUs the government has written to itself. In a pay-as-you-go system, the only thing that matters is cash flow.

Third, Medicare currently has a cash flow deficit that will grow larger through time. When combined with Social Security and Medicaid, these entitlement programs threaten to crowd out every other federal program.

Fourth, although we desperately need to fix the long run problem by moving to a funded system, prudence requires that we wait until we get out of the recession we are in.

Finally, we can and should fix the short term problem immediately by freeing the doctors and freeing the patients to seek lower-cost, higher-quality care, as outlined here and here.

Office of Management and Budget Director Peter Orzsag noted at last month's Fiscal Summit that the path to fiscal sustainability leads directly to Medicare reform. While there are a number of politically sensitive options--such as cutting benefits, raising the age of eligibility, introducing income-related premiums, and raising payroll taxes--the single most effective way to ensure the long-term fiscal solvency of Medicare is to deal with rising health care costs throughout the entire U.S. health system.

As the country's largest purchaser of health services, Medicare is uniquely positioned to effectuate much-needed change and encourage efficiency in our finance and delivery systems. In a recent issue of Health Affairs, my colleagues and I proposed a new Medicare provider payment framework that would slow cost growth, improve value, and act as a model for wider health system reform. Our proposal included new incentives for providers not only to ensure accountability for outcomes, but also improve care coordination and reduce fragmentation within our delivery system.

The Commonwealth Fund Commission on a High Performance Health System offered a similar set of payment reform policies in its recent report, The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way. The Commission called on federal leaders to strengthen primary care by revising the Medicare fee schedule; encourage adoption of the medical home model to promote more accessible, coordinated, patient-centered care; promote more effective, efficient, and integrated health care delivery by adopting more bundled payment approaches; and correct price signals in health care markets to better align payments with value.

Analysis of these policies shows that changing Medicare payment policy to reward value instead of volume will help slow the growth in total health care spending by a cumulative $1 trillion through 2020 and spur far-reaching change in the U.S. health system. The President and the Congress have taken several important steps down the path to fiscal solvency in Medicare and broader health security by including important health provisions in the stimulus package and the federal budget. More are needed. We must build on early successes and enact comprehensive reform this year to put our country back on a sustainable course and ensure that all American families have access to affordable health care.

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In the best of all possible health policy worlds, Medicare, along with Medicaid and the rest of our health care non-system, would be restructured in a coordinated, integrated manner that would control costs, while improving quality and expanding access. If you think we live in that world, wait for comprehensive reform.

While comprehensive reform may or may not be enacted, Medicare legislation will definitely pass for two non-health care related reasons: 1. The Medicare trust fund is running out of money and 2. Old people vote. Most elected officials face not being reelected if Medicare is not there in a meaningful way for current and near-future beneficiaries.

The danger lies in some type of "Medicare fix" that does not address the underlying financing problem or generates huge cost-shifting to other government and private payors.

The opportunity lies in the fact that most of the U.S. health care system relies on Medicare funding and will quickly respond to changes in the program. If we want health care IT implemented, Medicare should not pay without it, and overnight our health care system would be wired. (This assumes Medicare can promptly issue data definitions, inter-operability standards, etc.). If we want to control costs per service or utilization of services, or require quality outcomes, Medicare reimbursement should be changed to accomplish these goals and other payors should be allowed to adopt the same reimbursement methodologies.

Comprehensive reform is preferable, but Medicare legislation is inevitable. The big risk is piecemeal reform that is aimed at solving one problem but makes everything else worse.

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Medicare's fiscal problems, exacerbated by the current economic situation, are serious but not hopeless. In addition to longer-term health system reforms, there is no shortage of proposals -- old and new -- to help strengthen Medicare's financial condition in the nearer term, including reductions in payments for providers and health plans, increases in payroll taxes and higher payments from wealthier seniors. The bad news, according to our polls, is that few options have widespread public support, other than those that produce modest savings. Given the popularity of Medicare, the high financial burden of health care on seniors, and the fairly urgent need for some changes that will allow Medicare to pay full benefits in the relatively near future, it is likely that some attempt to address the issue will be made. But with powerful stakeholders waiting in the wings, you can bet it won't be easy.

The Obama Administration has worked to reframe the Medicare and entitlement debate by connecting it to health reform, because at its heart, the Medicare solvency problem is driven not by our aging population but by the underlying problem of rising costs in the health system generally. Reducing the long term rate of increase in health spending is the key to improving Medicare's fiscal health, the Administration argues, and with substantial merit. Initial investments in health information technology and comparative effectiveness research (though not yet linked to payment), have been made as first steps. One additional step I have always believed is needed, among many others, is a much more aggressive effort focusing on the small percentage of Medicare beneficiaries who account for the majority of program spending.

The objective behind linking the health reform and Medicare discussions as the Administration is doing is, ultimately, what has been called a "grand bargain" in which we invest in health reform now in return for savings in health care costs, including Medicare expenditures, down the road. A grand bargain could make sense politically too, because it would bring together liberals who want coverage expansion with conservatives and blue dogs who want entitlement spending controlled, if the latter believe the promised long term spending reductions will actually materialize.

But a grand bargain would require looking out over a longer time horizon than the Congress normally does in considering potential savings from legislation; in effect trading a willingness to spend now to expand coverage for the uninsured and subsidize coverage for the underinsured in return for system-wide savings later that would help control health costs and put Medicare and the federal budget on a more sustainable long-term course. Linking health reform and Medicare solvency also poses risks to each issue, because failure on the grand bargain could mean inaction for both. The bigger policy question is: does changing the time horizon for scoring the costs and savings from legislation and looking more broadly at where costs and savings occur represent a weakening of fiscal discipline, or a broader more strategic approach that is in the long run national interest?

An attempt at linking so many big health reform and Medicare issues and interests usually dealt with in Washington issue by issue, committee by committee, press story by press story, and interest group by interest group, would be challenging to say the least. If successful, it would mark a real change in the way policymaking usually works. It's probably a bridge too far, especially with the short time horizon available to get things done before the midterm election looms, but linking health reform and Medicare solvency makes sense, both substantively and politically.

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My friend and self-styled country bumpkin economist Uwe Reinhardt is missing two points, I think. First, whatever one thinks of the merits of Medicare the promises to everyone in that program imply huge financial commitments that right now are likely to be honored only by crowding out funds from other priorities in the future, such as education. And second, the design of Medicare itself (e.g. heaving subsidizing drugs without regard to income) inefficiently fuels general health costs – as do many perverse incentives in the private sector, such as the unlimited tax exclusion for employer-sponsored coverage.

So it is reasonable and necessary to revise the Medicare social contract, just as it would be wise to revise the incentives for private coverage for working families. Revising Medicare is a prudent way to bring greater social justice to our intergenerational obligations.

Surely Uwe is a good progressive who would join me in arguing that bank executives retiring to Boca with fat bonuses should get a lower – or no – premium subsidy for their Part B and D coverage. Can we agree that Medicare should focus a bit less on the affluent and a bit more on those who can’t afford today’s deductibles and copayments, just as we agree that the tax treatment of health should not favor the rich over the poor?

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Medicare is in crisis, and needs urgent attention. Last year's Trustees Report showed that the Part A (Hospital Insurance) Trust Fund would be bankrupt in 2019 -- eleven years from the date of the report. In human terms, last year's crop of 54 year olds were told that, without action by the Congress, Medicare is a hollow promise for them.

The Trustees will meet in the next couple of weeks, and the picture will be worse -- much worse. The downturn in the economy means that the Part A bankruptcy date is not 2019, probably 2016 or earlier. Those that are 58 this year -- and everyone younger -- are staring into the chasm of a bankrupt Medicare system.

This is bankruptcy in the real sense of the word. Last year, the Part A Trust Fund was projected to spend more in benefits than it received in tax revenue. Interest on existing assets kept cash flow from being negative. This year cash flow will be negative. The carefully husbanded assets of the Trust Fund will begin to be liquidated. (For a household, this is the equivalent of paying bills from the savings account because spending is exceeding income.) Actuarial tables in the Trustees Report will project the rapid emptying of the Part A savings account until it is exhausted. As the trust fund is being depleted, the mismatch between costs and revenues will grow such that by the time the Trust Fund goes to zero, revenues may only be 80-75 percent of costs.

There is no provision in the law for what happens once the Trust Fund is depleted. Payments can't be made unless there are dollars in the Trust Fund. The likely current law scenario would be that providers would be paid only as tax dollars come into the Trust Fund. With a 75-80 percent cost to revenue gap, this would mean some providers would have substantial delays in payment. Given current Medicare margins, many providers would simply quit taking Medicare patients.

The projected exhaustion date will fall during the term of an eight-year Obama presidency. The President's Budget Framework did not directly deal with the question of solvency, presumably leaving that to larger "reform." However, when the Trustees Report is published in the coming weeks, Secretary Geithner (managing Trustee), Secretary Solis, and Secretary Sebelius (if confirmed by then) will not be able to hide behind the shapeless and shifting promise of reform. The Trustees Report will make it clear that Medicare cannot wait for reform. Reading the report will also make it clear that raising taxes is not the answer. An increase in the FICA tax would have to be substantial to restore balance to the Trust Fund and would be especially hard on the working poor, many of whom have no Federal income tax liability -- but do pay FICA taxes. Quoting from last year's Trustees Report: "...if no changes were made until the year the trust fund would be exhausted, then the required increase (emphasis added) would be 4.45 percent of taxable payroll..."

True market-based reform of the health care system could cure Medicare's ills. However, it is doubtful that true reform will happen, and it is even less likely that it will happen this year. As the wheels fall off of this year's reform effort, the Congress must immediately turn to fixing Medicare.

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When a little country-bumpkin economist from rural New Jersey, such as I, mingles with the sophisticates of Washington, D.C. at their cocktail parties, he hears the sophisticates breathe darkly over their cocktail glasses scary phrases such as "the Medicare mess," or "the unsustainability of Medicare," or "Medicare needs to be restructured," or, most scary of all, mutterings about "the perils of socialized medicine." Oooooh!

Obviously, these phrases are code for utterly serious problems that are well understood by the Washington sophisticates, but whose meaning eludes the little country bumpkin from rural New Jersey.

Out in the New Jersey hinterland, where we bumpkins live, Medicare is not viewed a "mess." On the contrary, it is still, after all these years, considered a highly popular program, much loved by America’s elderly and younger people with renal failure or on permanent disability.

Why else would the overwhelming majority of Medicare beneficiaries to this day stay with the government-run, traditional Medicare program established in 1965 when they have the choice to opt out of it and into private insurance that is paid extra by the taxpayer to be able to offer the elderly extra benefits? Country bumpkins wonder about that.

Medicare was passed into legislation at a time when about 40% of America’s elderly lived below the poverty line and when African-Americans (then known as "Negroes") were routinely rejected by hospitals reserved for whites only. Almost overnight the program endowed millions of poor, elderly Americans with the purchasing power needed to procure state-of-the-art American health care. Furthermore, almost overnight Medicare served to racially integrate a hospital sector that had hitherto maintained hideous racial distinctions among suffering human beings, putting Medicare in the vanguard of America’s civil rights movement.

Medicare was established by a generation of Americans who, unlike their children and grandchildren who work and live mainly for themselves, were genuine American patriots, willing to sacrifice heavily for their country. This Greatest Generation, as it has been called, suffered through the Great Depression, valiantly liberated the world from tyranny in WWII and then came home to bestow on their children and grandchildren a wonderful array of physical and social infrastructures, among which Medicare ranks as a proud monument. The WWII generation had come to appreciate that good fortune in life is, for a considerable part, mere luck of lineage or circumstance and that the blessings of good fortune should be shared.

Does Medicare have flaws and problems? Sure. Are these flaws and problems worse than those faced by private employers and their agents in health care, the private insurance industry? Think again! For insight, just look at the pathetic, whining statement just issued by the Business Roundtable to appreciate the fiscal state of employment-based private insurance. In that report the CEO of a private health insurance company laments that "the United States health system spends too much on a system that too often rewards quantity and not quality of the health care services delivered." True, true. But then, why did private health insurers go along with this gig for half a century now? And in what way, if any, have they performed better than Medicare?

Does anyone think that Medicare is the only third-party payer rewarding quantity rather than quality in American health care? Does anyone think that the geographic per-capita spending variations identified by Jack Wennberg and his associates at Dartmouth University exist only under Medicare? Does anyone think that per-capita health spending under the Medicare program has risen faster over the past several decades than under private health insurance? Does anyone think that Medicare beneficiaries have any less choice among health care providers and therapeutic strategies than do privately insured Americans? And, as already alluded to above, does anyone think Medicare is unpopular among the American people?

So what’s with all these mutterings about the "Medicare mess"? And in what way is Medicare or similar programs "socialized medicine"?

Medicare is "social insurance" that procures health care from a private delivery system. "Social insurance" means that the individual transfers risks he or she faces to society as a whole, as, for example, does a State when the economic risks of natural disasters are rolled over to the federal government. Under social health insurance a person stricken, say, by cancer can transfer the economic risk of that natural disaster to the government. The FDIC provides social insurance for depositors at banks against the risk that the bank’s management mismanages the bank. And, as we have learned now, our entire banking sector cannot make it through the day without social insurance.

Under "socialized medicine," on the other hand, government also owns and operates the delivery system. Apparently, Americans hate "socialized medicine," for the mere uttering of the word is the kiss of death to any health reform proposal so labeled. But then this country bumpkin wonders why Americans bestow the purest form of "socialized medicine" -- the VA health system -- on their veterans, whom Americans profess to love. Do Americans secretly hate their veterans?

So, can we agree to leave aside snide and mindless references to "socialized medicine" as a means of to dispensing with any program we do not like and instead switch on the cerebrum, to contemplate carefully the pros and cons of alternative health reform proposals, Medicare included?

Next, what is meant in Washington circles by "the sustainability of Medicare"? Do the Washington folks mean by it "economic sustainability" or "political sustainability"?

If "economic sustainability," then exactly what do people have in mind with that phrase? During the past 4 decades or so, the long-run, smoothed average annual growth rate in real (inflation-adjusted) GDP per capita has been about 2%. Suppose that fell to only 1.5% for the next four decades. The current average real GDP per capita of about $40,000 would then grow to about $72,500 by 2050 in constant-dollar terms. Medicare now absorbs about 3% of GDP, leaving a non-Medicare real per capita GDP of $38,800. It was estimated by the CBO about a year ago that Medicare will absorb about 9% of GDP by 2050. Let’s make that 10%. At these numbers, the non-Medicare real GDP per capita available to today’s little critters who will run America in 2050 will still be close to 70% larger than is our current non-Medicare GDP per capita.

To be sure, our current economic travails and yet other uncertainties make all of these projected numbers fluid. As far as Medicare is concerned, however, I see nothing on the horizon that would make one want to commit suicide today over the economic plight that Americans running the country in 2050 will have taking care of their then elderly. Let them worry about it; not me. Their GDP per capita then should be large enough to do a civilized job vis a vis their elderly

Perhaps by "the sustainability of Medicare" the Washington sophisticates have in mind the political will to raise taxes enough to effect the future transfer of real health care resources (physician visits, drugs, hospital stays, etc) to the future elderly. They have me there, because political analysis is not my department. Perhaps the Washington sophisticates are right on this prediction.

But then, there’s the AARP with its swelling ranks of retiring Baby Boomers and the political clout of future gray power. We shall see how that all works out politically. In terms of the sum of all taxes at all levels of government as a percent of GDP the U.S. now ranks at the bottom of the OECD countries. Perhaps our children as adults will regard raising that ratio a bit politically sustainable. Who knows?

Finally, I have never really understood what is meant by "Medicare restructuring." It is on everybody’s lips in Washington, D.C.; but it seems that it means quite different things to different people. So I would plead with the sophisticates to desist from using merely these code words here and to tell us precisely what particular restructuring they have in mind. It would help in the debate on health policy.

For example, does restructuring it involve rationing health care among the elderly by price and ability to pay – for example, no Erbitux or Avastin for a 90 year old without means to pay for the drugs out of pocket? Does it mean starting Medicare eligibility only at, say, age 68 or 70, leaving the elderly’s paychecks or savings to absorb health care costs between age 65 and the new eligibility age? Does it mean "privatizing" Medicare, that is, turning the purchasing function of Medicare over to private health plans, even if that costs taxpayers more money? Just what does "restructuring" mean?

Remarkably, although I have heard the term "restructuring Medicare" thousands of times on Capitol Hill, I can’t recall anyone there ever calling for a major research study to explain to the Congress and to the American citizens why it should cost 2 times or more to give an American elderly adequate health care in, say, Dade County, Florida than it costs to care adequately for a similar elderly in San Francisco, in Oregon or in Minnesota. Perhaps there is an explanation. But does not Congress literally owe the taxpayer an explanation for these so-called Wennberg variations? And should not any attempt to restructure Medicare really start with such an inquiry -- now, in 2009?

Congress has been explicitly apprised of these variations, in countless hearings, but has not once shown any interest whatsoever in inquiring whether these variations on Medicare spending per capita are clinically defensible. That odd reaction on the Hill, too, puzzles a country pumpkin such as me.

So I shall sit back and let myself be instructed by other commentary on this blog. Semper discipulus sum is my motto in life.

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Medicare reform and broader health system reform are inextricably linked. We cannot change our Medicare cost trajectories without reforming the broader health system because Medicare buys care from the same inefficient system as the rest of us. Likewise, we cannot create a credible roadmap to a higher-quality, lower-cost (i.e., higher value) heath system without using Medicare as a catalyst for widespread private sector reforms. Moving the Medicare system toward a more value-based purchasing design is an integral part of comprehensive health reform. The two goals should not be viewed as separate, but rather complementary.

The current economic crisis has intensified the sense of urgency with which we must approach our nation's long-term fiscal imbalances. Medicare and Medicaid spending driven by the rate of system-wide health care cost growth are fundamental causes of fiscal stress for state and federal governments. We will not get our fiscal house back in order until we improve the value we get for our health care dollars. Postponing health reform would be an irresponsible economic choice.

The key is to reform the Medicare program in a way that is sustainable over time. Simply slashing benefits, imposing price controls, or instituting spending caps will not address the underlying factors driving excess health care cost growth. Furthermore, these approaches will not solve the long-term problem and will not serve citizens - be they beneficiaries, taxpayers, or both - very well. Instead, we must focus on a systemic approach to control health care cost growth that uses health information technology, best practice information, and realigned payment, cost-sharing, and malpractice incentives.

Medicare can be a catalyst for system reform; however, private sector innovations that follow Medicare's lead will be central to long-run success as well. Medicare reform and system reform are two parts of the same coin. At the same time, properly subsidized coverage expansion will be necessary to enable providers - especially hospitals and small physician practices - to focus on implementing higher quality and more efficient processes rather than worrying about the cross-subsidies that keep our rickety non-system barely afloat today. Comprehensive health reform has three pieces: coverage for all Americans, Medicare-led value-based purchasing initiatives, and private sector leadership toward a sustainable health delivery system within 10 years. If we try to do less, we will have failed to solve the problem once again.

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Medicare needs to be updated for many reasons. Perhaps the most pressing is the scheduled expiration of the Sustainable Growth formula for physician payment at the end of 2009. Other reasons are the need to generate budget savings to help fund overall health reform, and the pressures of the trustees forecast for the solvency of the Part A trust fund. There should also be a reexamination of Medicare benefits to align them with any standard benefit package adopted for the under 65 population in connection with universal coverage. Finally, most Medicare expenses today are a consequence of chronic conditions, and Medicare’s fee for service system is not well suited to the needs of chronic patients for coordinated team care that can better manage the full course of treatment.

Of these needs, the projected solvency of Part A should be the least consequential. Solvency can easily be enhanced by adopting measures to limit unnecessary hospitalization, especially readmissions within 30 days of discharge, or by shifting some benefits from Part A to Part B (as has been done in the past). A relatively slight increase in the payroll tax could also keep the program solvent for many years.

The more fundamental challenge is to slow the overall rise in health costs system wide. Focusing on just Medicare Part A would misdirect our attention and energy, and risks policy initiatives that might make the trust fund look better at the expense of overall cost inflation. So the far preferable strategy for Congress this year is to tackle overall health reform, inclusive of Medicare, in order to align Medicare with the broader reforms that will be necessary to achieve better efficiency and effectiveness throughout all of healthcare.

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