Annals of Long Term Care

Author Affiliations:

Dr. Stefanacci served as a CMS Health Policy Scholar
for 2003-2004. He is Director of the Center for Medicare Medication Management and the Geriatric Health Program at the Mayes College of Healthcare Business &
Policy, University of the Sciences, Philadelphia, PA.

Dr. Spivack is Associate Clinical Professor of Medicine, Columbia University, New York, NY; Consultant in Geriatric Medicine, Greenwich Hospital, Greenwich, CT;
and Medical Director, LifeCare, Inc., Westport, CT.

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When Medicare was created in 1965, the average lifespan for those 65 years of age was four years, and this was being paid for by ten taxpayers for each Medicare beneficiary. The number of Medicare beneficiaries at this time was under 10 million. This was at a time when there was not much in the way of innovative expensive therapies. Today, the Medicare system still has an eligibility age of 65, while those at that age can expect to live, on average, an additional 20 years. In addition to the significant increase in the number of Medicare beneficiaries—which now exceeds some 40 million—there are now seemingly endless supplies of innovative expensive therapies. Unfortunately, this explosion in demand and supply is not being supported by greater resources; in fact, those supporting each Medicare beneficiary is actually decreasing, so that today the number is only three taxpayers supporting each Medicare beneficiary (Table I).

So with baby boomers aging into Medicare and genetic decoding promising expensive personalized therapy in the face of economic uncertainty, the question is: What is Medicare going to do to survive?

The short answer is that there are only three ways to make Medicare last longer and bring the costs down:

1. Spread the costs of Medicare among Medicare beneficiaries.
2. Reduce provider prices.
3. Optimize utilization and benefits, and focus on quality of care.

Spreading the Cost

An obvious starting point to extending the reach of Medicare resources is by spreading the costs to others. Medicare has already moved in this direction by adding a premium-adjusted means test to Medicare Part B premiums.

Prior to the Medicare Modernization Act (MMA), all Medicare beneficiaries were treated the same with regard to premium. MMA, among other things, changed that. Now, Medicare beneficiaries with incomes over $85,000 for individuals and twice that for married couples will be subject to monthly premiums above $96.40 for Medicare Part B. At minimum, the increased premium over the base of $96.40 is $10 per month but reaches over $70 more per month for those individuals earning above $170,000.

This same means testing likely will be applied to Medicare Part D prescription drug premiums as well—all in an effort to spread the cost, or rather shift some of the costs from Medicare to the beneficiaries.

Another more sophisticated method of cost shifting that has been proposed is reference support. This is a system of coverage where beneficiaries are provided a base benefit, while additional benefits require payment by the beneficiaries themselves. An example would be a “special” hip prosthetic: Medicare would pay for a base hip prosthetic, and the differences in price for the “special” prosthetic would be the responsibility of the patient.

Medicare is also shifting financial burden to Medicare beneficiaries regarding vaccines. Historically, Medicare had covered vaccines under Medicare Part B. Under the Part B program, beneficiaries, at most, are responsible for just 20%. By shifting all vaccines except influenza, pneumococcal, and hepatitis B to the Part D program, beneficiaries are now responsible for much more.