For the “You Heard it Here First” file: I have been working on electronic prescribing (eRx) standards for some time, but the recent signing into law of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (DIMA) has put these efforts into overdrive. It’s amazing to see how fast this is all moving now. Trouble is, no one talks about the fundamental problem with Medicare – the third rail that guarantees political suicide for anyone who whispers of it in Washington. Here goes:
The more successful we are in improving the quality of healthcare for seniors – even as we improve the efficiency and cost effectiveness of the delivery of that care – the more Medicare will cost.
Huh? Reducing costs will cost more? Yup. Ultimately, our quality efforts will be rewarded in the form of longer lives for seniors. These seniors will still need medical care as they live longer than they otherwise would have and who no longer pay the taxes that support the increasing costs incurred because we are doing the best possible job at caring for our elders. No matter how long you live, you always live the last six months of life where a huge portion of our lifetime healthcare costs are incurred. Truth is an inefficient, lousy healthcare system that encourages bad personal health behaviors is the only way we can afford Medicare in its current manifestation. Proof? I think it was Poland who did a study about smoking in their country. They concluded that smoking was good for the economy because citizens dutifully sickened and died at a cost-efficient age shortly after retirement.
Yes, it’s depressing but true. The problem is compounded by the fact that there is very little personal incentive for seniors to do anything but try and utilize the maximum possible healthcare resources for their own benefit. That’s certainly understandable – it’s human nature to take what is offered; people shouldn’t be expected to behave differently. The trick is to align incentives a la A Beautiful Mind-style game theory modeling.
So how do we fix Medicare? The answer can be found in an illustration from The Little Prince. Remember the picture about the snake who swallowed the elephant? Long snake with a big lump in the middle where the elephant is being slowly digested. Looks sort of like a hat. Remember yet? You can see a picture at http://theliterarylink.com/prince1.html
That’s pretty much the shape of the New Improved Medicare (NIM) I’m suggesting.
Here’s how it would work. Benefits in NIM begin at birth but are restricted to preventive services that focus on treatments that focus on long-term outcomes – vaccinations, screening, health monitoring, nutritional counseling, antihypertensives, lipid management drugs, basic physicals at 10-year intervals, etc. This is the front end of the snake. Private or publicly supported insurance for low income people would cover everything else pretty much as we do today. At 60 (not 65 like Plain Old Medicare – POL), the elephant part kicks in and seniors get the option to start a 27-year full-on benefit that covers everything – bypass, knee replacements, expensive chemotherapy – whatever is needed to address a person’s health issues. The benefit lasts for 27 years because 87 is about the average life expectancy for people in the US and 60+27=87 (but you had probably already figured that out already – sorry about that).
If the senior is healthy, though, he or she can opt to keep using the head-of-the-snake portion of the benefit and delay the 27-year benefit for as long as desired – typically until an expensive healthcare issue comes up. Then the elephant starts and lasts 27 years. After that, the tail kicks in. The tail is TLC – tender loving care that covers anything that a senior would need for good supportive or palliative care – pain management, nursing care, etc., but not “heroic efforts” or high-cost services. The senior could always pay for additional medical services using NIM-negotiated rates, but the elephant – the stuff that we all pay into and pay on behalf of the people ahead of us – is no longer covered by NIM.
One more thing – if the average benefit for the elephant portion is, say $7,000 per year for every senior (the current estimates for DIMA), then the typical 27-year spend per senior would be $189,000. If a senior gets through the elephant without spending, say, 80% of that total or $151,200, he or she gets to extend the elephant until reaching that 80% mark.
So let’s say we pass a law today that launches NIM in 15 years – 45 year olds can start thinking now about how they want to play the NIM game. Want to live to be 100? Start living healthy now and hold off on the elephant for as long as possible. Wouldn’t it be great to not even tap into the elephant until you’re 85? Think of how great that would be. You could stay on private insurance, which would be cheap because there’s no catastrophic coverage; that’s taken care of by the elephant and can be switched on at any time. If you’re worried about the tail or want to have long-term, major benefits, you can open a Medical Savings Account or purchase a supplemental insurance package early on – insurers would be able to work out the actuarial risks of this sort of plan pretty easily.
Seems simple enough, no? Let me know what you think at email@example.com.
Just remember, you heard it here first…