The oldest baby boomers have begun what promises to be a seismic shift from enrollment in private health insurance to Medicare, driving what some believe is an unsustainably high rate of healthcare spending and creating a domino effect that could significantly affect the economy and the taxpayers who fund Medicare.
Projections show that national health expenditure growth is expected to average 5.5% annually to reach $5.7 trillion by 2026. That growth rate would be higher than the projected increase in gross domestic product by 1 percentage point from 2017 to 2026, pushing health spending’s share of GDP from 17.9% in 2016 to 19.7% by 2026.
As a result, the Medicare trust fund could be insolvent by 2028. What’s more, an increase in spending of 0.75% in the federal debt could comprise 129% of GDP by 2040, and Medicare, which had been started with 4.6 working people per beneficiary, will be reduced to 2.5 workers per beneficiary by 2040.
Greater reliance on Medicare Advantage
As the dominoes fall, programs created to reduce the spending burden for 2040 face depletion. Hospital Insurance Trust Fund Payroll taxes are not growing as fast as Part A spending, and the fund could be insolvent by 2028 to 2030. Supplemental Medical Insurance covers Part B and D financed by premiums (25%) and general revenue (75%). Reset each year, general revenues account for 42% and will increase to 48% by 2030. Federal borrowing for a 75-year projection is $28 trillion.
The consequence is a deepening reliance on Medicare Advantage plans, a form of private insurance that provides Part A and B health services to beneficiaries. If more cuts to Medicare occur this year, then deductibles and cost-sharing for older adults in original Medicare likely will increase, which will make MA plans that much more attractive for the nation’s aging population.
MA plans provide an alternative to traditional fee-for-service Medicare and have been a commercial success, accounting for 17.5 million (30.6%) of all Medicare enrollees and $204.7 billion (28.9%) of Medicare’s 2017 gross spending budget. A subset of MA plans are designed exclusively for people who either require or are expected to require at least 90 days of skilled services from nursing homes, assisted living facilities or other long-term care facilities.
For MA plans and risk-bearing entities to remain sustainable, they must adopt innovative quality and risk programs to meet the growing demand for effective risk, quality and care strategies, including value-based contracting and end-to-end solutions to optimize the opportunity.
Value-based contracting can improve MA outcomes
Value-based contracting can drive utilization patterns and improve clinical outcomes among chronically ill, elderly MA members. In the future, more clinicians will need to bear the monetary risks associated with healthcare utilization. The MA program provides a unique milieu for investigating provider groups that have either risk-bearing or fee-for-service contracts with private health plans.
Full-risk capitation combined with a revenue gainshare agreement sparked a clinical practice transformation at the provider group level, associated with increased office-based care and decreased hospital-based services. The clinical practice transformation resulted in a 6% survival benefit and lowered the hazard of death by 32.8%.
MA plans should look at the full spectrum of the patient and apply an end-to-end solution. When done effectively and efficiently — and combined with payment reform — it’s possible to enhance care coordination using analytics, in-home care, retrospective solutions and care management to significantly improve outcomes.
For example, MA plans can gain clinical insight into risk-adjusting conditions to enhance their traditional analytical platforms. The best way to do this is with a Physician Record Review, a two-stage retrospective chart review process from a 1) certified coder and 2) board-certified physician.
To gain a robust view of members and their care needs, providers also can rely on prospective health assessments. PHAs help to lay the groundwork for developing more accurate reporting documentation, improving patient engagement and adherence, enhancing disease management and reducing utilization.
This kind of full-spectrum, end-to-end approach to care can help providers identify gaps in care and manage patients more productively. It also can help health plans that are serving as intermediaries execute solutions and assume risk. The greatest benefit goes to the patient, who will be guided toward more preventive care and self-management early in the care process.