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Medicare's Management And Services Outdated, Experts Report

National Academy Of Social Insurance Panel
Urges Reform Using Private-Sector Strategies


For Immediate Release: January 28,1998
Contact: Jill Braunstein at (202) 452-8097


WASHINGTON, DC -- Amid continuing public debate on the future of Medicare, a blue-ribbon panel of experts today proposed sweeping reforms to inject innovation into the traditional "fee-for-service" part of the Medicare program as it heads into the 21st century. The panel's membership is drawn from medicine, public policy, law, and industry, bringing together a wide range of perspectives to help chart the future direction of Medicare.

At the heart of the panel's recommendations, which are spelled out in a new report released by the National Academy of Social Insurance, lies the belief that modern techniques from the private sector and elsewhere can reduce costs and improve services for fee-for-service Medicare. However, legal and political barriers prevent the program from innovating in a timely fashion.

According to the Academy's panel, Medicare must move beyond its traditional role as simply a payer of health care bills to become accountable for the quality and costs of services provided to beneficiaries. That transformation should be explicitly mandated by Congress, the panel concludes. Congress should direct Medicare to experiment on an ongoing basis with new methods developed in the private sector for providing and managing services. Those methods include disease and case management for people with chronic illnesses or other conditions; incentives for beneficiaries to select providers who demonstrate superior quality and effectiveness; and competitive procurement procedures.

"The modernization of fee-for-service Medicare is critical," said panel Chair Paul B. Ginsburg, president of the Center for Studying Health System Change. "Despite growing enrollment in Medicare's private managed care program, fee-for-service Medicare is and will remain the dominant means for delivering services to Medicare beneficiaries well into the future."

"Medicare's fee-for-service program is responsible for serving some of the sickest and most vulnerable people in our society," said Ginsburg, "but it is unfortunately behind the times in organizing services for those people. It needs to test and adapt new ways of organizing, delivering, monitoring and paying for services, while preserving a broad choice of providers, especially for people with special health needs."

The panel notes that services provided under Medicare for beneficiaries with chronic conditions like congestive heart failure, lung disease, diabetes, arthritis and hypertension, or with other special health needs like end of-life care, have been fragmented and uncoordinated. Innovations in case and disease management and preventive services could bring about important improvements in care for those beneficiaries and help to manage costs better, the panel notes.

The study panel also concludes that Medicare's current demonstration waiver authority is far too limited to support the culture of learning and innovation that fee-for-service Medicare requires.

The panel's specific recommendations include the following:

  • Congress should give the Health Care Financing Administration (HCFA) the authority to waive certain federal statutory requirements for fee-for-service Medicare so that it can carry out experiments and innovate.

  • In order to hold HCFA accountable for this increased discretion, Congress should require HCFA to report annually to Congress about how it has used its new waiver authority, along with its results for quality, cost and access.

  • Each waiver experiment should produce evaluation data to help HCFA learn quickly from the initiative.

Together, said Ginsburg, these recommendations provide a framework for modernizing fee-for-service Medicare with new knowledge and breakthroughs from research and industry in the private sector. At the same time, the recommendations ensure needed accountability as Medicare prepares for the next century.

Copies of the panel's report, From a Generation Behind to a Generation Ahead: Transforming Traditional Medicare,
are available free of charge to members of the press.


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The National Academy of Social Insurance convened the 12-member panel to assess the future of fee-for-service Medicare and analyze its options. Its work was supported by grants from The Robert Wood Johnson Foundation and The Pew Charitable Trusts. The Academy is a nonprofit, nonpartisan research and education organization made up of 450 of the nation's leading experts in Social Security, Medicare and other social insurance programs.
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