You could write a book on the various experiments that the federal government has undertaken to slow down the growth in Medicare spending. There have been initiatives on paying for better health outcomes among patients and reducing payments for hospital-related infections, and others designed around serious and costly conditions such as end stage renal disease.
But here we are marching toward mid 2011, and the ugly facts of the federal budget deficit are clouding any optimism that clever incentives and smart minds could stall Medicare budget growth. First, consider that frightening statistic about the 70-million-plus Baby Boomers aging into Medicare over the next two decades, a phenomenon that translates into 10,000 Boomers becoming eligible for Medicare each day. Then consider that medical expenses during the last year of life account for more than 27 percent of total Medicare spending. It would be difficult for any cost-cutting initiative no matter how successful to overcome those trends.
Medicare is one of three huge social programs Medicaid and Social Security being the other two that is gobbling up federal spending so fast that the next generation won't have enough money for any other domestic programs for prisons, education, highways and national parks, just to name a few.
U.S. Rep. Paul Ryan's plan to curb federal spending and the deficit proposes to flip Medicare away from a defined benefit system into a defined contribution one and would shift healthcare for seniors toward private payers. It's been both lauded and trashed since it was proposed a few weeks ago, but it's hard to imagine the country is ready to hand over the reins for senior care to Humana's Mike McCallister and HealthSpring's Herb Fritch.
Until then, Medicare managed care plans are likely to continue increasing their rolls as seniors comfortable with managed care age into the program. (This will occur even if accountable care organizations attract the 5 million Medicare beneficiaries that the government predicts). If Ryan's plan, or a portion of it, actually gains momentum, expect the spotlight to shine brightly on Medicare Advantage. ACOs are the hot topic of spring of 2011, but for the long haul, it might be best to bet on the older kid on the block.