Core Component #6: Financing with Savings from Medicare


Dozens of research projects and small demonstrations and pilot programs have shown that better geriatric medical care for frail elders regularly improves care and saves money. Some examples of effective interventions are illustrated in Table 3.1 on pages 57-66. Despite very promising results in so many innovations, these programs have not spread and often have not even been sustained after the initial grant funding has been used. If these innovations were new pharmaceuticals, they would be “breakthroughs” and major entries in the marketplace; but these are prosaic reorganizations of how to deliver optimal care, and our largely fee-for-service Medicare system has not generally had a way to promote uptake of innovations that will reduce services and thereby reduce revenues to providers.

The lack of attention to efficient improvements in eldercare occurs in the context of evidence of remarkable waste in health care generally. Berwick and Hackbarth in 2012 estimated that at least 20% of health care expenditures were utterly wasted in that they provided no value to the patient.[159] In the last few years, health care policy has implemented novel payment arrangements that aim to deliver higher-quality and more appropriate services to Medicare beneficiaries and thereby create savings, using the strategy of sharing the resulting savings between providers and the Medicare Trust Fund to create financial incentives for providers. Medicare programs providing shared savings include Accountable Care Organizations (ACOs), Bundled Payments for Care Improvement (BPCI), and Independence at Home (IAH). For much longer, capitated Medicare programs such as Medicare Advantage managed care and PACE have been able to create and retain savings, whether those savings were used to expand services or to enhance their margins.

This growing use of savings in Medicare services as the financial incentive for reforms in serving frail elders opens the important possibility of assigning a portion of the savings to buttress home and community-based services that would otherwise be unavailable because they are not covered by Medicare or financed in any other way. Improving these supportive services will have a substantial effect in further reducing medical care costs; but even more, they will enhance the experience of advanced illness and disability for elders and their families. The MediCaring Community would take this concept one step further by monitoring and improving frail elder care for the entire community.

Leaving the details of implementation to the next chapter, this chapter responds to these key questions:

6.1 What is the estimated magnitude of savings from more appropriate medical care for frail elders in a MediCaring Community?

6.2 Will more LTSS also yield reductions in the use of medical care?

6.3 How should savings be allocated and what will be the effects?

6.4 How will the MediCaring Community initiative evolve with the increasing numbers of frail elders?

[159] (Berwick and Hackbarth 2012)

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