How Would You Fix Medicare and Medicaid? 6 Hospital Leaders Respond

To say a lot rides on the country's Medicare and Medicaid programs might be an understatement. Months of national debt ceiling talks have involved the slashing of Medicare and Medicaid funding, but uncertainty continues to hang about their futures. Hospitals are closely intertwined with Medicare and Medicaid, and six hospital leaders weigh in on the issues and obstacles that face the two biggest insurance programs in the United States.

Questions: What are some of your ideas on how Medicare and Medicaid can be fixed? How fixable are they, and what problems and hurdles need to be overcome?

Jeff Fee, president and CEO, Providence St. Patrick Hospital (Missoula, Mont.).Jeff Fee
We have to have a capitalistic model or a model more analogous to the public education system. All indications show that it won't be a purely capitalistic model, based on political rhetoric and future models. Until you fundamentally change the way you pay providers, if you want to save Medicare, you have to change the way Medicare pays providers and have it focus more towards management of patient population. There's no incentive for us to do anything other than volume, and it's leading to unsustainable escalations of overall costs.

I think the Program of All-Inclusive Care for the Elderly is a better model for patient care, without question. The main goal of that model is to keep the patient in the lowest cost setting — at home. Not many people want to die in a critical care unit. Most people want to be surrounded by their family at home. The point is, the cost of patient care is lower, patient satisfaction is higher and it's a dramatically different care model. It does a lot better job of aligning incentives for patients.

Instead of having ideological commentary, I approach it from a pragmatic standpoint and see where the juggernaut is going. Outcomes need to yield a better care model for the patient and a more sustainable cost model for our nation. I'm not one that advocates for feeding the pig because we're putting too much money into healthcare, and we have to get away from incentives around volume. There are some surgical specialties and fee-for-service things shouldn't go away all together, but delivery should be completely incentivized to put the patient in the lowest cost setting.

Steve Lipstein, president and CEO, BJC HealthCare (St. Louis).
Steve LipsteinMedicare and Medicaid are very important programs in America. They've become a key part of American healthcare insurance coverage, as there is no private insurance market for people over age 65 or at the lower end of the income scale absent a government or employer sponsor. You often hear in America, spoken by political leaders in particular, that America spends almost 17 percent of its national income on healthcare, yet America has poorer health outcomes and shorter life expectancy than other nations with developed economies. It is important to recognize other countries spend more on social services as a percentage of their national incomes than we do here in the United States. Social services expenditures include income, housing and food support to life people out of poverty. Healthcare outcomes and health status in particular are not correlated with how much we spend on healthcare. They are correlated with individual life circumstances: income and poverty, education and literacy, obesity, smoking history, the presence of a physical or emotional disability and substance abuse.

When Medicare in particular measures health outcomes because they want to reward those medical professionals who produce the best outcomes, they don't take into account a patient's income, literacy level, obesity, education, or other life circumstances. And there is much evidence to suggest it is easier to produce good health outcomes in communities that are characterized by high income, high education levels and good health status.

The Medicare program now is beginning to pay for performance using value-based purchasing and accountable care organization models. Medicare will pay more to hospitals and physicians who produce better outcomes at a lower cost. But we have to ask: Will ACOs serve vulnerable populations if an easier and more reliable path to financial success comes with locating in high income, high education communities? Everyone wants to improve outcomes, and nobody is advocating for the status quo. But Medicare doesn't make any adjustments for individual patient life circumstances in making outcomes and cost comparisons of medical professionals. De facto, Medicare is placing physicians and other medical professionals at financial risk for the demographics of the citizenry.

An important fix for Medicare would be to introduce the development of a life circumstances index, something akin to the current Medicare case mix index used to differentiate patients according to medical condition and severity of illness. A life circumstances index would take into consideration a patient's individual income, English reading literacy, education level, obesity, smoking history, the presence of a physical or emotion disability and substance abuse history. Medicare needs to take into account real world accounts of patients. Medicare needs to develop policy that acknowledges the real world circumstances of individual patients, circumstances that are determinative of health status, health outcomes and health costs. Absent such policy changes, my worry is Medicare will discourage medical professionals and hospitals from serving patients in disadvantaged communities. And absent medical professionals who are willing to serve in large, inner-city neighborhoods and smaller rural communities, we only reinforce disparities in health outcomes instead of eliminating them.

Many state Medicaid programs are challenged financially and unable to pay adequate reimbursement rates to medical professionals. Medicaid programs typically pay physicians and hospitals significantly below what it costs to provide care to those patients. The cost then gets shifted to businesses and patients who are commercially insured. Medicaid needs to be become more mainstream in America as opposed to being considered a health insurance program only for the poor. A worthy goal for our society is that everyone should have health insurance coverage, and with that coverage comes mainstream access to the American healthcare system.

We need to have public sector solutions for those patient populations who are not attractive risks for the private insurance market, specifically the elderly and the poor. There are ways in a modern society to assure access and to make the system more affordable simply by adopting standards that apply to all different insurance programs, hospitals and providers. If we can implement standards that eliminate non-useful variation and waste and that improve health outcomes, we can make the system more affordable.

Patrick Quinlan, MD, CEO, Ochsner Health System (New Orleans)Dr. Patrick Quinlan
There is a two-pronged approach to implement real change. The first step is to recognize the root cause of the problem of healthcare is the disease load and less about how healthcare is delivered. To make the point, if no one was sick, we wouldn't have a healthcare problem. Fifty to 75 percent of diseases in this country are lifestyle related, meaning that if we shrink the problem — specifically smoking, obesity and inactivity — the problem of healthcare delivery becomes a lot more manageable. But unless we reduce the disease load in this country, we're on the road for higher costs, a sicker population and rationing. The second prong would be how to manage those who are ill. There's ample evidence in the 1990s that systems were able to manage the health of populations with good medical and financial outcomes.

Quite often we make conclusions: People are sick, so what's wrong with the healthcare system? They're related, but not by much. We need to recognize that disease is the problem, not payment. So what can we do about Medicare and Medicaid while doing this, too? Fifteen percent of people generate about 85 percent of the costs. There is a way of delivering care that can be highly efficient when you practice the right kind: team-based, cause-focused, right care for the right person at the right time.

Any approach has problems, and if you choose to reduce it to the absurd, nothing would work. Don't let the perfect get in the way of the good. The individual and the family have the ability to change. Government can lead the way and point us in the right direction, to make it easy to do the right thing. We don't even talk about the benefits of wellness. To say the problem is in the delivery system and you'll deal with that with price control without reducing disease is like putting a cork in the kettle and thinking it's going to solve the problem. Price control equals shortages. The way we deal with shortages is rationing, and you talk with so many people, we'd have to be more judicious and forced on how to use our resources. We will have missed the huge problem which is to reduce the disease load. Price control method will give you higher costs as well as sicker populations. Disease isn't fair to anybody. We need to take those steps that cause the best outcome.

Mark Robitaille, president and CEO, Martin Memorial Health Systems (Stuart, Fla.).Mark Robitaille
The Florida Medicaid program just had a 12 percent cut to reimbursements to hospitals, and by July 1, 2012, the state is looking to transition all Medicaid patients to for-profit managed companies. The jury is out on how well that process is going to work. Medicaid managed care in Florida has not always provided the coverage and care coordination you'd like to see. To fix Medicaid for that population of patients, the state needs to look at programs in other parts of the country that are much more focused, provider-service networks.

With Medicare, the expectations of the American public are that if there's a technology available, it should be covered by Medicare. Delivery is done on a fee-for-service basis to a large extent. Most patients have relatively little financial risk in the episode of care, so when you have a high expectation and little cost to the patient and combine that with providers getting reduced payments, there is an increased utilization of volume which costs the payor and government a lot more money. The patient has no or little obligation, so you have a situation where there is excess utilization in the system. The utilization isn't warranted, but there's an expectation from patients that they are going to get testing, and if they don't, they feel they haven't been treated as well as they should. If outcomes aren't perfect every time, there's that risk of litigation.

The concept of accountable care organizations, or bundle payments, that is being proposed had a lot of merit, but the government made a mistake by implementing ridiculously low shared savings, excessive quality indicators and little to no control by providers of where the patient will go for healthcare.

Solutions for Medicare include getting people who are actually going to deliver the care involved in the process instead of just publishing regulations. What might work for a two-hospital, $400 million system like ours in Florida is not what's going to work for the Mayo Clinic or for Cedars-Sinai. Also having an income-based premium related to Medicare is probably not unreasonable to preserve the system, and tort reform could see a significant decrease in utilization. But the best way to fix the system is to have a lot more honest dialogue between providers of care and the people writing the rules and regulations.

Craig Svendsen, MD, chief medical quality officer, HealthEast Care System (St. Paul, Minn.).Dr. Craig Svendsen
Medicare paying more for outcomes that are based in evidence and are measurable is a good thing to be putting out there. Somehow, we need to make sure patients or consumers are in the game as well and that the right motivations are there for them to be active in their own care. Shaping co-pays and out-of-pocket costs to favor wellness and proper chronic disease management are examples. We should be looking for other ways for individuals with chronic diseases to be more active in their own care. Those are the types of things that we know have meaning and can decrease the burden the care.

I'm a family physician by background, and I see the positives toward incenting to have advanced care directives in place. I know there are others who view that as limiting healthcare, but time and time again, patients in hospitals are receiving care that they never wanted to have. Had we known in advance through their advanced directive, we could have met what the patient wanted us to do. They could've had a better experience at the time of death, and it could've been less expensive. I'm not saying we should be restricting care, but we need to be asking, "What does the patient want?"

We need to build payment methodologies that support innovation and redesign care. Value-based purchasing programs and incentives are on the right track toward the innovation and redesigning care. I don't believe slashing funds will solve anything and may have the unintended consequence of decreased access to healthcare that is needed and higher costs. Just cutting the Medicare payments to hospitals isn't going to create any innovation or incentives to change. It will only have hospitals looking to the profitable service lines and focusing there to remain in business.

Kevin Unger, president and CEO, Poudre Valley Health System (Fort Collins, Colo.).Kevin Unger
The government will get their biggest bang for their buck by proposing bundle payment methodology. Instead of paying each provider individually, there will be central payment made that needs to be distributed to the different providers.

The threat of bundled payments and the reduction in reimbursement is certainly driving physicians to want to be a part of a health system. It's easier to distribute funds if we're on the same team. I think that's where it's heading, but I don't know if that's the answer. Looking at Medicare and Medicaid, it's tough to get re-elected politically with the decisions that have to be made to make significant improvements in the cost of healthcare. I would make a federal reserve bank for healthcare: a group of people trying to come up with solutions outside of the political realm but have some governmental accountability and authority. Basically, it's a group of individuals who are there to make the decisions, set direction and policy and let us know the direction, but they're not actually part of the political landscape. We're not going to get to the right decisions if politically the decision makers are worried about their next term.

Medicare and Medicaid are administratively burdensome and cumbersome. Just from a billing, coding and collection standpoint, it's just highly complex, and it takes an army to manage. Just meeting all the rules and regulations of being a Medicare/Medicaid provider adds expenses and dollars to the system. Medicare and Medicaid do not cover our costs. We make it up on the commercial side.

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