What Could Medicare Do To Drive Change

Posted by Don McDaniel on Aug 29, 2017 11:00:00 AM

There’s been a lot of discussion about reforming our health care system over many Medicare written on chalkboard with stethescope.jpggenerations and presidential administrations, and most recently in the run-up to and immediate period after the election of Donald Trump. Republicans promised for 7 years to repeal and replace Obamacare only to (so-far) fail miserably at walking-the-walk.  I believe the political milieu, is at best a red herring, innocuous and really noise.  The fact is the value movement that we’re talking about in health care is really a market movement.  The proverbial train has left the station and market principals are already starting to disrupt the industry.

I was participating in a recent panel about innovation in healthcare, and the moderator asked the panelists, “what one thing would you do to change the status quo, to drive innovation?”. My colleagues, all experts, but all practioners in the “old health economy” shared all the conventional wisdom; all the responses were, at best, representative of incrementalism.  I had the luxury of answering last, and used the time to my benefit for once.  I suggested that completely privatizing Medicare would be my choice.  Privatizing or “Marketizing” Medicare would expose one of the world’s biggest monopolies (short of true single payer government plans) to market forces.  From a budgetary perspective, privatizing Medicare from its current defined-benefit approach to a defined budget, or defined-contribution model would allow CMS to more predictably budget for growth in the program, and leverage the market of many willing sellers of insurance and services. 

The government could start to rein in program increases, and transition higher income seniors into a cost- sharing model.  Medicare could create a reference-pricing catalogue, allowing market participants to leverage the massive purchasing history of the program.  Privatizing Medicare would enhance competition among private insurers who, in turn, could build exciting new collaborations with physicians and community-based providers.  Such a move will also profoundly impact the delivery system.  As Medicare represents a sizeable portion of many physicians' book of business, a migration of that segment to a value-based construct will have a jarring – though positive – long-term effect on physician practices.  Medicare will represent the “tipping point” for many community provider organizations that decide they now have an opportunity to practice under a market-oriented system.

Even with the promise of value-based care, the variability in adoption of value-economics by clinicians is still quite broad; forcibly moving the ~ $600B Medicare program to a private market would drive hundreds of thousands or providers to change their respective business models very rapidly.  


Topics: Value-Based Healthcare, medicare, Healthcare Innovation

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