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Appropriate Care Setting Protects Medicare’s Future

As our two presidential campaigns aggressively tout their domestic policy agendas, health care providers, stakeholders and patients are collectively holding their breath regarding a problem that, without dramatic intervention, is all but certain to occur: Under current law, the Medicare Trust Fund will be insolvent by 2024.

Experts agree that the trajectory of health care spending is unsustainable. By 2021 less than 10 years from now health care expenditures are expected to be almost 20 percent of the gross domestic product, of which the federal government will be responsible for half. Medicare, a program that for 45 years has secured better health and financial security for older Americans, will be unable to maintain that promise for millions of seniors and Americans with disabilities.

As we move toward this uncertain future, the time is ripe for innovative solutions that offer the promise of better quality of care, reduced costs and sustainability for Medicare. While many policymakers and stakeholder groups are investigating methods to make these savings and improvements a reality, viable and lasting solutions have emerged one in particular that could save $70 billion to $100 billion over 10 years and extend the life of the Medicare Trust Fund by more than two years.

In a study released by the Alliance for Home Health Quality and Innovation, researchers from Dobson DaVanzo and Associates analyzed Medicare claims data to demonstrate that the clinically appropriate and cost-effective placement of patients within the current delivery system has potential to reduce overall Medicare spending and transform the health care system both by improving and facilitating better care transitions and enhancing care coordination across post-acute care settings.

We know there is considerable overlap in where beneficiaries are receiving post-acute care, which leads to unnecessary spending and poor care management. Modeling conducted by the research team suggests the utilization of a clinically appropriate and cost-effective care model, which shifts patient care settings under the current delivery structure with incentives for clinically appropriate, patient-centered placement, could reduce Medicare spending by $34.7 billion over a 10-year period (2014-23).

Additionally, more innovative payment reforms and not across-the-board cuts could reduce post-discharge spending by 7.5 percent, or $100 billion, over the next decade.

This new research also makes it clear that provider incentives to deliver more efficient and effective patient care can lead to significant cost savings through improved chronic care management, preventive care and fewer avoidable hospital admissions.

This research echoes what other policy experts, providers and lawmakers have long recognized systemwide changes to better coordinate how care is delivered and reimbursed are critical to securing the future of the Medicare program.

How do we do that? We must find ways to contain costs for older Americans, particularly those with chronic diseases who drive up spending through increased levels of hospitalizations and demanding care needs. Models of success demonstrate that shifting patients to a more cost-effective setting when clinically appropriate and locally accessible options exist can effectively cut spending while continuing to ensure patients are receiving high-quality clinical care.

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