A. For large private sector employers, purchasing strategies are producing the
lowest rate of inflation in 35+ years;
B. Medicare has the potential to be highly successful in using purchasing tools
as part of its management strategies for cost control, quality
improvement,
and customer service.
II. A New Strategy Is Needed
A. Medicare’s tools are inadequate to deal with volume,
quality, and cost
issues in its fee-for-service program;
B. After fifteen years, Medicare’s national price control
system -- its major
management tool -- has become a textbook
example of ‘‘regulatory
capture’’, e.g.
1. inpatient services shifted; many small, inefficient providers with
legislatively-protected payment rates; large and rising hospital
DRG margins (15.9%, $10B+/year overpayment)
2. a mindset that accepts the industry’s current cost base + future
revenue growth as a ‘‘given’’ -- and sees
the job of politicians
to be revenue-raisers for the industry or cut benefits.
III. Elements of A Purchasing Strategy
A. Medicare needs a bipartisan political consensus for a
purchasing strategy so it can be run more like a business;
B. Purchasing should be used as a selective tool for large problems
of excessive cost, poor quality and/or substandard service in
specific geographic areas;
C. A purchasing strategy could be widely used, e.g.:
1) Centers of excellence, e.g. cancer; minimum
standards for volume & outcomes for major
procedures
2) Case management for high cost patients, e.g. dual
Medicare-Medicaid eligibles (25%-30% of
expenses for both programs)
3) Better programs for chronically ill, e.g. congestive
heart failure, chronic obstructive pulmonary
disease, and terminally ill patients
4) Standard services and supplies (DME, lab, x-ray,
outpatient surgery, home health)
5) New benefits, e.g. competitive bidding for Rx
coverage from pharmacy benefit manager firms
(PBMs)
6) DRGs and RBRVS were designed so they could
be used for health care purchasing
D. For providers, Medicare direct purchasing offers a strategy that
will reward economy, high quality, and service and an
alternative to being ‘‘down the food chain’’
from managed care
companies
E. Medicare purchasing discretion needs effective political
oversight
F. Medicare needs to learn from a new R&D strategy, best
practices of private purchasers, public purchasers, and health
plans
G. Related initiatives: cost-effectiveness and outcomes research,
more HCFA resources and human capital investments, new
contractors, decentralization, Medigap reforms