Presented to the National Bipartisan Commission on the Future of Medicare
Commission Meeting / August 10, 1998 / Washington, D.C.

Testimony of Robert R. Waller, MD
                                   <font size="3" , face="Arial" ,"Helvetica">President and CEO, The Mayo Clinic

         Dr. Waller's Bio. | Meeting Agenda 8/10/98

ADMINISTRATION OF THE MEDICARE PROGRAM

Current Situation

Medicare is a valuable social program, but it has real problems. We must fix it. Who is responsible for these problems? All of us.

Medicare is an extremely complex program:

There are thousands of pages of regulations, rules, manuals, instructions, letters, alerts, notices, etc.

Carriers and intermediaries apply rules differently in different locations.

There are often inconsistencies between rules.

This complexity has a negative impact on patient care:

It steals time from patient care and scholarship.

It dilutes the purpose and value of the medical record, changing it from a medical record to a billing and coding record.

It creates honest differences in interpretation, and breeds mistakes.

The public has been led to believe that the program is riddled with fraud, when in reality, COMPLEXITY IS THE ROOT OF THE PROBLEM. This has contributed to the continuing erosion in public confidence in our health care system. We must all have zero tolerance for real fraud, but differences in interpretation and honest mistakes are not fraud.

We must all work together to make Medicare a better system for everyone -- patients, providers, and the government. We cannot accomplish this in the current environment of continuous accusations of fraud, price controls, and the addition of more layers of regulation.

Goals for Medicare Reform

A. Simplification -- The system must be made less complex, and better
     understood by all participants.

B. Eliminate real fraud

C. Reform -- In the long term, Medicare needs total restructuring based on
     these principles:

1. Patient-centered system

A patient-centered system empowers individuals to select physicians and hospitals via the health insurance plan of their choice.

2. Choice

Choice requires a private market with multiple providers and insurance options, with a financial contribution from the Federal Government and individuals.

3. Competition

Competition based on value is the best way to ensure both quality improvement and cost containment. Competition based on value cannot take place in an environment of price controls.

4. Innovation

Value-based competition is a catalyst for innovation. Research and education are the underpinnings of innovation. They are societal benefits that should be supported by society as a whole.

5. Government Role

The government should coordinate the competition among health insurance plans, and get itself out of the insurance business. A government payment to each Medicare beneficiary should be based on a scientifically valid risk-adjustment method. The government should continue to provide support for research, education, and hospitals serving rural and low income populations.

Is the Federal Government capable of doing this? The Federal Employees Health Benefits Program is an example of how the government can run such a program based on competition and choice, without trying to micromanage those of us who are trying to provide quality care to our patients.

Private Sector Models

We deal with many private insurance companies and payers. We deal with them as partners, through a process of negotiations, establishing goals for quality, cost, and patient satisfaction, and monitoring the results. I do not know of a single private contract to which Mayo is a party that tries to tell us how to document the number of body systems we must examine to bill for a visit, or whether the supervising physician must be in the same room when a nurse tests a patient’s pacemaker. Medicare, however, is currently trying to micromanage most every aspect of the care we provide. This increasing level of micromanagement is unnecessary and often counterproductive.

We believe we do a very good job of managing the care we deliver to patients. By ‘‘managing care’’we mean:

Incentives to encourage analysis of medical quality and effectiveness

Solid data to support change

Integrating services

Bringing research advances to those services

Being more accountable for outcomes, cost, and patient satisfaction

Letting the markets work

A key question is ‘‘Do we manage care, or do we manage providers who manage the care?’’ Much of what is going on in the current environment is managing the providers who manage the care. The more we emphasize this approach, the more we talk about a rapidly multiplying group of workers who oversee the work of others, global budgets, price controls, premium caps, provider fee schedules, regulatory alliances, profit margins, medical loss ratios, and the redistribution of more of the healthcare dollar to the cost of administration.

Our view is that no matter where we practice, the best road to quality is more of managing care, and less of managing the providers who manage the care. We are happy to compete in a marketplace on the basis of quality and cost, and to be held accountable for the care we provide.

Quality

Cost reduction through improvement is the only plausible business strategy for all of us.

Quality improvement is a continuous process. It must be woven into the fabric of how we think, act, and feel. The goal is to constantly improve patient care, not to achieve some defined regulatory standard.

Therefore, is more regulation needed? The problem with trying to regulate quality is that it freezes in place today’s best practice. But health care is constantly changing and improving. If you have placed a stake in the ground and defined ‘‘quality’’ today, tomorrow the stake may well be in the wrong place.