We have a deal, but we still need solutions

With the passage of the Bipartisan Budget Act of 2013, a compromise reached by Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.), Congress has finally overcome partisan gridlock and agreed on a budget for the first time in far too long. However, while the agreement is a welcome and important development that will help to forestall further stalemates and put the country’s finances in order for the next two years, it is an undeniably small deal, that does little to address and offer actual solutions for some of our nation’s most pressing challenges – including fixing Medicare.
 
Rather than include substantive reforms to the Medicare program, the agreed upon budget reverts to traditional methods of simply cutting pay to providers to yield short-term savings. Specifically, the budget extends sequestration’s 2 percent cuts to Medicare providers for an additional two years through 2023. This method of achieving budget savings is an old reliable for Congress, given that Medicare accounts for hundreds of billions of dollars per year in the federal budget.  And while lawmakers recognize putting Medicare spending on a sustainable path is important, previous attempts using this approach have not met this goal.  Instead of genuine reforms that streamline the program, improve quality and reduce costs, Congress’ habit of simply cutting provider pay, with little to no justifiable reason other than the need to cut something, is doing nothing to improve Medicare or its financial trajectory.
 

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The problem with this approach is that it ignores the root causes of high spending in Medicare.  At its core, Medicare spending is high for two underlying reasons: the volume of beneficiaries in the program, and the nature of their health care needs. With the aging of the baby boomer generation, new beneficiaries are enrolling in the program at a rapid rate – approximately 10,000 each day – which is not matched by the rate of new workers who help cover their costs.  Additionally, these new beneficiaries are living longer and an increasing number have multiple chronic conditions, which are costly to treat. In fact, over half the Medicare population receives treatment for five or more chronic conditions during the year, accounting for nearly 80 percent of spending. If you understand these root causes, it is clear that simply cutting money off the top will do nothing to truly slow spending and, worse, may cause further harm.
 
When Congress makes cuts to the Medicare program as part of a budget deal, it acts as if it is not considering the overall health of the program or, at the least, not considering the ramifications these cuts may have several layers deep in the program. Take, for example, cuts that have been made to the Medicare Advantage (MA) program over the last few years. It seems clear that Congress made these cuts without consideration for how they will impact MA’s progress in identifying and improving care coordination and integrated payment and delivery models, or the fact that studies have shown that MA beneficiaries spend fewer days in the hospital and have lower readmission rates – developments that serve as important stepping stones for broader reform of both Medicare and the larger health system. Similarly, you can be sure that when Congress cuts pay for providers, it does not fully understand the potential impact on access and quality of care for beneficiaries. While these consequences may not be the intent, because Congress too often takes the easy road, and simply cuts with a blind eye, they are real and harmful to the program.
 
While the recent budget agreement is a major step forward for a divided Congress, it cannot and should not be an excuse to ignore the substantive reforms that are still, very much needed. There has been much speculation that with this deal, Congress, no longer under pressure to reach a so-called “grand bargain,” might not have incentive to tackle some of the tougher legislative issues on its plate. While this may be a warranted fear, we see a glimmer of hope in appealing to lawmakers’ desire for creating a more secure Medicare program. We urge Congress to see the recent budget agreement as a starting point, rather than a finish line.  The agreement can be used as momentum for further collaboration on issues important not only to members, but to their constituents – and the preservation of Medicare is undoubtedly one of these issues. To not only preserve, but also to improve the Medicare program, Congress should work together to identify ideas for lowering Medicare’s costs and improving the quality of beneficiary care, while also improving its long term fiscal sustainability. In short, it should use the next two years to focus on comprehensive and systematic Medicare reform, which will ultimately have positive – and lasting – effects for both the quality and financial health of the program, as well as the federal budget.

Holtz-Eakin, president of the American Action Forum, and Thorpe, the Robert W. Woodruff professor and chairman of the Department of Health Policy and Management at Emory University, are co-chairs of the Partnership for the Future of Medicare, a bipartisan organization focused on ensuring the long-term security of Medicare.