Medicare has recently announced policy moves designed to improve the value of its spending. Few people would argue with this goal at an abstract level, but what it means in practical terms is less clear.
If we assume that value is maximized when a program’s benefit to patients is greater than the expenditure paid on their behalf or by them, then the most effective way to improve Medicare’s value would be to expand the scope of its covered benefits to include long-term care (LTC), and give patients more choice in determining what mix of care they need and want. Despite the fact that around 7 in 10 people who survive to age 65+ will use long-term care—that is, help and support to deal with disability and function as independently as possible—Medicare coverage today is limited and inflexible in its approach to long-term care. I believe that can change in a way that improves the value of Medicare spending without increasing overall costs — essentially by shifting some spending from low to high value care.
That patients know their own LTC needs best is not a new idea, and it is no surprise that, if they have real choices and access to information on all potential treatment options, patients can make good decisions consistent with their own wishes and values. However, what I suggest would be a huge policy change. Nevertheless, the time is right for such a policy move given the broad consensus regarding the importance of increasing value for health spending. Increasing patients’ flexibility and choice in how they receive their Medicare entitlement would allow them to define value for themselves while also potentially increasing the overall value of Medicare spending.
A Hole In The Medicare Benefit Package
That our current system lacks any coherent means of financing LTC is a major public policy challenge receiving far too little serious discussion beyond just a description of the problem. Medicare does not cover most LTC, but at least 3 in 10 Medicaid dollars pay for institutional and community based LTC for the disabled and elderly eligible for both Medicare and Medicaid; in FY 2012 Medicaid spent $115 billion on these so-called dual eligibles, nearly as much as Medicare spent on inpatient hospital care. Allowing patients to choose care that is valuable to them, including expanded LTC choices, would improve the value of spending while potentially reducing low-value care now financed by Medicare.
For patients and families facing a major life limiting illness, LTC can provide essential help getting in and out of bed, bathing, eating, or keeping one’s home livable. But paying for this care can cause great anxiety, stress, and financial burden. Although Medicare doesn’t cover most such care, it does end up paying for the downstream consequences of inadequate LTC: falls due to dementia wandering or hospital readmissions driven by poor living conditions, for example. Similarly, some “long stay” hospice use may come about as beneficiaries are seeking any way they can remain in their home. Such “back door” long-term care could be the single most valuable service that some patients receive from Medicare, even if it’s actually prohibited under Medicare’s current hospice regulations.
Patient Choice To Seek Value
In a recent study, my colleagues and I asked groups of Medicare beneficiaries with cancer and a caregiver (most typically a spouse or adult child) what aspects of Medicare’s current benefit package would be most valuable to them if they could not have everything. The theoretical tradeoff was made harder by offering participants three now-uncovered benefits: concurrent palliative care (that could be accessed without un-electing curative treatments as required by the hospice benefit), home based LTC services, and unrestricted cash. Many study participants showed a willingness to choose these currently uncovered benefits in lieu of some medical care.
- 52 percent chose LTC
- 46 percent chose unrestricted cash
- 45 percent chose concurrent palliative care
One in five participants chose some level of all three of these currently uncovered benefits, reallocating 30 percent of their total resources toward this care, on average.
It is crucial to note that in our exercise, these benefits were not added on top of existing ones, but represented difficult choices specified in terms of actuarially equivalent tradeoffs. Would patients make choices that improved quality of life and therefore value, while reducing spending on non-productive care if afforded more choice in how they receive their Medicare entitlement? Our work suggests possibly yes, but of course the tradeoffs observed were theoretical. We need to experiment with flexibility in how Medicare beneficiaries receive their entitlement for care, and assess both the impact on value of spending, as well as on overall costs to Medicare and Medicaid — two programs inextricably linked by their care for the most vulnerable dually eligible seniors.
A Policy Outline
The simplest way to increase the value of Medicare spending is to: offer patients more care options that include high-value LTC services; provide good information about those care options; and trust patients and families to decide what care is best for them.
To achieve these goals, policy makers can start by allowing dual eligibles to use some of the Medicaid-based resources they will eventually use, but earlier and in a more flexible manner to meet their long-term care needs. Cost control back stops can be established in case savings don’t materialize across Medicare and Medicaid.
For example, if Medicare Part A savings are not met, payroll taxes would increase — giving the adult children of the elderly a stake in improving the value of Medicare spending while maintaining cost control. If part B targets are not met, Medicare Part B premiums could increase, giving beneficiaries a stake in cost control. (To be sure, any increase in taxes or premiums, even as a fail safe, may be a hard sell to the American public, even if it does produce savings and higher value over time.) Finally, providers should be given greater flexibility to deliver care, both within traditional Fee For Service Medicare and Medicare Advantage. Allow them to bundle and offer LTC services that are not now covered by Medicare in order to determine if such approaches can improve value while at least holding costs constant.
Expanding Medicare to cover long-term care without increasing the overall program budget may sound too good to be true. But I believe it may be possible. And for aging Americans who need long-term care, there is no greater policy priority than determining if it can be done.
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