Add another victim to the poor economy. Medicare. Eight years from now, unless drastic changes are enacted in healthcare payment, the Medicare Trust Fund will go broke, according to a report released this week by the Medicare Trustees.
That's two years sooner than the same report predicted last year, thanks to declining employment, which leads to declining tax revenue for the program. A continuing trendline like that just isn't sustainable, and neither is the healthcare system as it is.
When I first started covering healthcare, a wise old soul told me once not to expect "real reform" until the Medicare Trust Fund was less than 10 years from insolvency. Well that's now.
Medicare spending is wasteful not only because of unnecessary and duplicative procedures, but because except for a few demonstration projects, it pays clinicians and hospitals only for procedures. That's like buying new engines for cars when they burn up instead of regularly changing the oil—a much cheaper alternative. You change the oil in your car because in the long run, it's much less expensive. (Oh, and there's plenty of Medicare fraud too, but that's a discussion for another day.)
In healthcare, not only are the incentives for providers all wrong, but people get to Medicare in most cases when they are 65 or older and have already developed the diseases that come from a lack of focus on wellness over a lifetime. My dad, as fit a 73-year-old as you've ever seen, was recently told by his doctor that he needed small doses of a cholesterol drug unless he was able to get his blood count down. He didn't want the medicine, so he made sacrifices in his diet and didn't have to take the drug. That saved Medicare a lot, but you can't count on most people to do that—including his son, who's on cholesterol medication now. So I include people like myself as part of the problem. The solution lies in washing down a pill every night that doesn't cost the beneficiary much, if anything, and he gets no reward for trying to stay off the drug.
Some 45.2 million people are covered by Medicare: 37.8 million aged 65 and older, and 7.4 million disabled. Meanwhile, Medicare and Medicaid pay roughly half the freight at hospitals and health systems as it is. If it's insolvent, necessary hospitals start dropping like flies. No one likes to think of such a situation as being even remotely possible in such a rich nation as the United States. But I submit that we're no longer as rich as we think we are. As a nation, we've been borrowing our way into and out of messes for generations now. And the bill is coming due not only in our financial mess but in healthcare as well.
Perhaps that's why there's a growing consensus among stakeholders that they're going to have to sacrifice something in the round of healthcare reform that seems inevitable this year in Congress.
I talked to an influential physician the other day who told me that he saw real changes coming in healthcare, not just in Medicare, because stakeholders see much more value now in being part of the solution to our healthcare cost problem than standing outside the debate and lobbing bombs at those who are trying to solve the problem. That was one of the reasons the Clinton administration failed so miserably at its healthcare reform attempt. The fact that there are fewer bomb-throwers this time around is an important first step, but we'll see how that unity of purpose is tested when we get down to details about what the President and his various task forces on healthcare reform recommend to Congress. They'll also have to answer the most important question of all: How do you fund it? Meanwhile, what are you, as a senior leader, doing to drive value in your services?
Winston Churchill once said that you can depend on Americans to do the right thing, after they've tried everything else. Well folks, we've tried just about everything else. Let's hope our political leadership and the special interests that govern Congress still know how to do the right thing—after everything else has been tried.
We'd better, if we expect Medicare to live past middle age.