Opinion: A way out of the Medicare maze

Medicare and how we pay for it has been the most vexing issue to confront President Obama and Congress as they struggle (or in some cases saunter) toward trying to put our financial house in order.

Social Security has only a few moving parts that need to be fixed to give it long-term effectiveness and affordability. But fixing Medicare so it is sustainable and does not bankrupt the country, yet still gives quality healthcare to our seniors, involves addressing a complex and constantly changing matrix.

Until recently, no one has really come up with good ideas. Most suggested solutions are either unacceptably draconian relative to their impact on doctors and hospitals (such as punitive provider cuts) or politically radioactive (such as premium support).  

At the same time, it is obvious to all that without controlling the rate of growth of Medicare costs there simply is no way to address the ever-expanding federal debt. Medicare alone is estimated to have somewhere between $50 trillion and $60 trillion of unfunded liability. 

This is a cost that our children and their children will have to bear. If it is not stabilized in a significant way, it will inevitably lead to a federal fiscal crisis and a reduction in standards of living. 

The good news, however, is that some very smart people who have been examining how the system of medical provision can be changed so citizens get better quality care at lower costs have come up with a simple, effective and accountable proposal. It should move us a significant distance down the road toward addressing the overall Medicare problem.    

These folks are the doctors at the Dartmouth Institute for Health Policy and Clinical Practice. This is the leading research center in the country for studying outcomes in medical practices. The experts there have developed what is known as the Dartmouth Atlas — the end product of a massive study over many years of how outcomes, procedures and costs are related across the country.

Their proposal involves “a mechanism to reward health systems using a percentage of Medicare reimbursements to achieve cost and quality targets. Systems that meet these targets are remunerated with full payment of the quality/cost reimbursements; Providers that partially meet quality/cost targets receive partial reimbursements; systems that do not meet either cost or quality targets do not receive supplementary remuneration.”

To state it another way, this is a carrot, rather than a stick, approach based on definable standards that assure higher quality outcomes at lower costs. It is based around the retention of a certain percentage of the Medicare payments by HHS, the department of Health and Human Services. The money is only released as these standards and outcomes are met.  

The reason it can be introduced at this time is that as a result of the significant amount of research and information developed at institutes like Dartmouth, reasonable and obtainable goals can be set based on a provider-specific mechanism.  This allows the approach to avoid the inequalities of one-size-fits-all provider cuts.

At a 6 percent retention rate, the savings over 10 years are estimated to be about $400 billion; at 15 percent (which would be on the high end) the savings would be over $1 trillion.   

This approach, when coupled with the president’s proposal on changing the consumer price index  and other acceptable ideas, means a real and significant entitlement cost-containment initiative is possible. 

It should easily be acceptable to both sides.   

It is a clear path out of what has, so far, been an unsolvable Medicare maze.

Judd Gregg is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee and as ranking member of the Senate Appropriations subcommittee on Foreign Operations. He also is an international adviser to Goldman Sachs.