As the Trustees note, "These projections demonstrate the need for timely and effective action to address Medicare's financial challenges. Consideration of such reforms should occur in the relatively near future. The sooner the solutions are enacted, the more flexible and gradual they can be."

One possible solution is the competitive approach used for Part D where beneficiaries and their caregivers, with support from Medicare and many local partners around the country, are using information on prices and coverage to choose prescription drug plans that best fit their individual needs in terms of formulary coverage, monthly premiums, and other benefit features. Competition, together with good information on quality and price, has the potential to lead to cost savings in many other areas of Medicare as well. CMS is beginning to implement competitive reforms in durable medical equipment, Part B drug pricing, and other areas.


Additional reforms and initiatives can help address Medicare's financial condition by shifting the program's focus to preventing costly complications and getting the right care to each patient - rather than simply paying more for more medical services and for more complications. Such initiatives and proposals include:

* Basing payment levels on provider reports on quality and their ability to prevent costly and life-threatening hospital acquired infections;
* Providing transparent quality and cost information to beneficiaries and providers;
* Developing and testing strategies to pay more for better results rather than more services;
* Implementing competitive bidding approaches to the delivery of care;
* Promoting the adoption of interoperable health information technology;
* Implementing reductions in market basket rates of growth, as proposed in the President's 2009 Budget, including a proposed 0.4 percent reduction in the growth rate of Medicare payments if Congress does not pass a specific alternative proposal to achieve needed improvements in sustainability; and
* Increasing the share of program costs paid by the highest-income beneficiaries, as proposed in the 2009 Budget.

The Medicare trustees are Treasury Secretary and Managing Trustee Henry M. Paulson, Jr., Secretary of Health and Human Services Michael O. Leavitt, Labor Secretary Elaine L. Chao, and Social Security Commissioner Michael J. Astrue. Two other members are appointed by the President and represent the public. These two positions are currently vacant. Kerry N. Weems, Acting Administrator of the Centers for Medicare & Medicaid Services, serves as Secretary to the Board of Trustees.

The report is available at: http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2008.pdf.

Back to HCB News

More Industry Headlines