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Embedding automatic and gradual budgetary adjustments in Social Security and Medicare would substantially lessen the risk of runaway federal debt. Implementing these adjustments would be more complex in Medicare than in Social Security. The first step should be to inject more discipline into Medicare by modifying its Supplementary Medical Insurance trust fund. A second step should be to eliminate fragmentation in the insurance benefit. With these changes, Congress could balance automatic adjustments between revenue and spending parameters and manage spending by imposing more restraint on payments to service providers and higher costs for beneficiaries. Ensuring permanent Medicare trust fund stability would be consistent with the program's original design and would lessen the frequency and intensity of divisive solvency-restoration debates., The federal government's responsibilities increased dramatically in the second half of the past century. Unfortunately, the processes by which elected leaders plan for and control the financial effects of those [...]

With the right rules, transparent pricing for medical services, which has bipartisan support, could lower health care costs without harming quality. Regulations forcing providers to disclose their charges online have [...]

Medicare's rules specifying payments for covered services are among the most powerful levers in health care. Private insurers use the same codes and formulas as their starting points for payments to avoid reinventing the wheel even as they are forced to 'plus up' the amounts to appease their affiliated providers. (Medicare's size allows the government to adopt take-it-or-leave-it terms.) While the differential between what Medicare and commercial plans pay is said to validate the benefits of price regulation, the empirical bases for the government's rates are not well understood. A partial review shows a pattern of combining dated, imprecise cost reports with idiosyncratic and opaque adjustments that were not constructed to guarantee the best outcomes for the dollars spent. Properly designed competitive pricing, with a focus on value and not just cost, could be used to tether more Medicare payments to the rates that will incentivize efficiency and innovation, leading to optimal patient care. As the debate over how to control health care costs without compromising quality continues, Medicare's regulated prices should not be given unquestioned status as the best available options., Health policy research in recent years has focused regularly on the spread between Medicare's and commercial insurance's payments for the same services and products. The comparisons are usually straightforward because [...]

Chairman Whitehouse, Ranking Member Grassley, and distinguished members of the committee, thank you for the invitation to participate in this hearing. The Medicare HI Signal The headline focus of today's [...]

The UK National Health Service (NHS), now in its 75th year, has devoted supporters inside and outside the country who admire its egalitarian ethic and public-service orientation. However, the rapid deterioration of its performance in recent years, and especially after the COVID-19 pandemic, is too glaring and dangerous to overlook. A major challenge is the health service's near-exclusive reliance on political and bureaucratic processes for resources and organizational direction. Free care at the point of service and publicly owned hospitals sustain the NHS's popularity, but long waits for needed care, even when the services are 'free,' harm patients. Neither major political party appears ready to explore systemic reform, but if political conditions create an opening, UK leaders might consider moving the NHS closer to the public-private models found in other European economies, as has been suggested at various points in its history and also recently. The lesson for other countries from the NHS's ongoing crisis is that full governmental control of medical care brings risks, not just potential and often-overstated rewards., On February 15, 1944, with D-Day approaching, British Prime Minister Winston Churchill chaired a cabinet meeting with an agenda that went beyond the ever-present military and diplomatic concerns. In particular, [...]

Policymakers in the United States have an opportunity to convert bipartisan support for transparent health care prices into savings for patients and taxpayers. While significant new federal rules are forcing more disclosure of previously unseen fee schedules, they need refinement to help consumers play a more active role in the market. The current reliance on pricing tied to insurance billing codes instead of meaningful bundles of services is a major impediment. Four changes to the current suite of requirements would improve results: (1) pricing disclosure of standardized, consumer-focused bundles of services; (2) mandatory (and enforced) provider participation in the disclosure system with regularly scheduled updates; (3) guaranteed access to care for all consumers at the disclosed prices, irrespective of their insurance coverage; and (4) coordination of insurance payments with transparency efforts to ensure patients can benefit fully when choosing low-priced options., The marketplace for medical services is undergoing notable change with the implementation of new federal price transparency rules. Hospitals and insurance plans, heretofore permitted to shield the prices they charged [...]

The US is an outlier among advanced economies in that its national government does not fully control, through regulation and budgeting, health insurance coverage and the provision of medical care. [...]

The HI Trust Fund's Shortfall Points to Much Larger Fiscal Challenges This subcommittee is to be commended for holding this hearing because the subject matter it will address--the financial outlook [...]

Medicaid plays a larger role in US health care than was anticipated at its 1965 enactment. The country's heavy reliance on voluntary, job-based insurance leaves gaps in protection for people who are unemployed or who have low earnings and cannot afford premium payments. Further, the disabled and frail elderly need social services in addition to traditional medical care. Medicaid and the Children's Health Insurance Program (CHIP) have, by default, become the nation's safety-net programs for these societal obligations. Medicaid's joint federal-state architecture and open-ended matching system for program financing have facilitated rapid spending and enrollment growth, but they also complicate political accountability, budget and cost discipline, and consistent and fair national administration. Reform can strengthen Medicaid and CHIP by improving incentives for cost control while ensuring all Americans have a basic level of protection. Medicaid and CHIP can support market incentives by filling in gaps and reinforcing competitive pressures where possible., Medicaid is the largest public insurance program in the US by total enrollment, which would surprise many of the people who voted it into existence in 1965. In part, that [...]

Over the past year, the global vaccination campaign to end the COVID-19 pandemic has progressed from tests of vaccine efficacy to over six billion (and counting) administered doses. Highly structured clinical trials facilitated strong statistical examinations of the vaccines because randomization accounts for unobserved confounders that could bias the analysis. Post-approval assessments have limitations because they rely on data from less structured, real-world settings. Several post-approval studies show the existing mRNA vaccines launched initially in the US effectively prevent, as predicted, the worst outcomes of COVID-19, while the vaccines many other countries use are less effective but still invaluable in fighting the pandemic. An observed erosion in vaccine efficacy this year, relative to the clinical trials of 2020, may be a function of the new variants of the virus, waning acquired immunity against infection over time, or other factors, such as the higher incidence of prior infections in the unvaccinated population and the tendency for random error (such as false-positive COVID-19 tests) to attenuate measured efficacy rates. Taken together, the studies make it plain that vaccinating the unvaccinated with any of the globally approved vaccines remains the most important step for lessening the pandemic's severity., Governments worldwide have administered over six billion COVID-19 vaccines since late 2020 (Our World in Data 2021a), using inoculations developed by both Western companies and state-directed enterprises in other parts [...]

The US has mature health-sector institutions and long-standing insurance and care arrangements that limit the scope of potential future reforms. The realistic path is incrementalism one way or another: toward either tighter government regulation of prices paid for insurance and services (especially in private insurance) or a structured market that leads the sector's suppliers of medical services to set competitive prices on their own. How each option would fare when implemented through the nation's actual political and administrative processes is an important consideration. Medicare and Medicaid reveal that payment regulation can produce the desired reductions in spending but also lead to special-interest influence and rigidity. A structured market, with the right safeguards, can deliver strong results by self-correcting and being more resilient to outside manipulation. It will only be adopted, however, if consumers believe it will lead to financial benefits and no risks., Health policy is not implemented in an apolitical vacuum. Market failures in the health sector force political leaders in all countries to actively supervise both their insurance systems and how [...]

Medicare is the most decisive force in US health care. The program's payment regulations heavily influence how hospitals, physician groups, and other providers organize themselves to maximize profits while delivering medical services to their patients (Medicare and non-Medicare alike). Advocates of government-enforced cost control favor using Medicare's payment rules over private options and market incentives to discipline expenses. Market advocates must offer an alternative that builds on the program's existing consumer-oriented features. Program changes should emphasize strengthened price competition, informed and structured coverage options, and better financial incentives for migration toward low-cost, high-value care. Further, the program's trust funds and insurance benefit need to be updated to complement and reinforce market discipline and to limit the financial burden imposed on current and future taxpayers. Market reforms in Medicare would encourage conforming changes in the commercial sector, which is one reason they encounter stiff resistance from advocates of full governmental control., Medicare is the health insurance plan, and regulator, that few facilities or practitioners can afford to eschew or ignore. It is the nation's largest payer of medical claims, and its [...]

Governments of advanced economies should ensure health coverage and ready access to needed medical care for their entire populations. Patients without insurance are at risk of experiencing avoidable health problems and higher mortality because they forgo care or get treatments later than is optimal. The US has moved, in halting steps, toward population-wide insurance enrollment but has not yet made spells without coverage an uncommon occurrence. The United States' reliance on multiple, competing insurance plans to provide coverage is necessary for using market incentives, but it also allows breaks in protection to occur. Policymakers can close many existing coverage gaps and move the nation closer to continuous population-wide enrollment without wholesale change by focusing on three reforms: building a nationwide automatic enrollment system for non-group insurance, giving employers options to increase take-up by more workers, and compromising on Medicaid as the nation's safety-net insurance plan. Immigration reform should address the large number of uninsured persons who reside in the US without proper authorization to do so., The US has made progress toward covering the uninsured in recent years, but it has not fully eliminated breaks in protection. One reason is the view held by some proponents [...]

Medical care cannot be delivered efficiently or equitably through an unregulated market. Patients prefer insurance to out-of-pocket expenses, and insurance severs consumption from point-of-service pricing. Patients rely on expert practitioners [...]

The US can emerge from the depths of the COVID-19 crisis in the coming months if the federal government leads and executes an effective vaccination campaign (and if, as appears to be the case, emerging SARS-CoV-2 variants do not fully evade vaccine-induced immunity). The limiting factors on the pace of population protection are the manufacturing capacity of the approved vaccines' sponsors, the efficiency of administering available supply, and Americans' willingness to take the shots. A system dynamics model of vaccine inventory and daily vaccinations is useful for estimating when important objectives might be met. Under a base case scenario, the US could reach a target of 75 percent of the population protected by the end of July, assuming three million shots per day can be sustained over several months and vaccine hesitancy recedes. The expected arrival of another approved vaccine (from Johnson &Johnson) and the possibility of a slower, or more rapid, pace of daily vaccinations would alter the outlook in different ways., February 2021 In early December 2020, then-President-elect Joe Biden set a goal of administering 100 million COVID-19 vaccinations in his first 100 days in office (Reuters 2020). The pace achieved [...]

Employer-sponsored insurance (ESI) has been a central part of US health care for the entirety of the postwar era and is valued by working-age Americans for its adaptability and the ready access to medical care it provides to its enrollees. It is not without flaws, however. Not all employers offer ESI to their workers, and even when they do, it can be insecure for employees at risk of losing their jobs. Most troubling, its rising costs are becoming a heavy financial burden and inhibit wage growth. These problems are systemic; they cannot be addressed by individual firms that must compete for qualified workers in part through the generosity of their health benefits. Congress should modernize ESI by reforming its tax treatment to control costs and entice more firms to offer plans, ensuring all workers have meaningful choices of coverage, and giving preferential status in the market to high-quality managed care plans and multi-firm private exchanges., The COVID-19 pandemic and the deep global recession it precipitated are crises of such severity that they could lead to permanent changes in American society. In health care, job-based health [...]

The global campaign to identify effective vaccines against COVID-19 has entered the final stage of testing for regulatory approval--Phase III trials--for several promising candidates. Evaluation will be guided by criteria established by the Food and Drug Administration and the World Health Organization. The minimum threshold for efficacy is observed reduction of disease incidence of at least 50 percent, with high statistical confidence of efficacy above a minimum of 30 percent. Full safety reviews of the vaccine candidates may take several months, to ensure any adverse events are given sufficient time to become evident and then studied. For efficacy, however, statistically valid determinations can be made after approximately 150 confirmed cases of COVID-19 among trial participants, which may occur relatively quickly given the prevalence of the virus in many communities. Consequently, on the question of whether a vaccine works to prevent progression from the virus to the disease, a clear signal is likely to occur in a few months after the trial begins rather than over the longer time frames that may be necessary for evaluation of their safety profiles., An intense global scramble is underway to identify and manufacture safe and effective vaccines against COVID-19. Social-distancing protocols, when implemented vigorously, can slow the transmission of the SARS-CoV-2 virus that [...]

The 2020 Medicare trustees' report released in April did not incorporate how the coronavirus pandemic would affect program finances. Even so, the trustees project that the Medicare Hospital Insurance (HI) [...]

The US was facing a challenging fiscal outlook even before the coronavirus pandemic. The current crisis and the financial crash of just over a decade ago have made matters much worse. Both required aggressive policy responses and significant federal borrowing. Federal debt is now likely to escalate more rapidly than even pessimistic scenarios predicted a few years ago. Beyond the crises, the primary causes of fiscal pressure are population aging and rising health expenses. The large federal entitlement programs--Social Security, Medicare, and Medicaid--have grown rapidly over the past half century and are expected to continue doing so in coming decades. When the crisis recedes, Congress should enact reforms that lower the long-term costs of these programs. The emphasis should be on promoting longer working lives, more progressive benefits, and efficiency in the provision of health and long-term care services., Reckless borrowing is one of the main routes to dissipating a country's power and international influence. It would be disastrous globally if the United States were to weaken itself and [...]

In the US, the federal government is supposed to defer to the states on matters not reserved for it by the Constitution, such as regulating the medical profession. State medical boards, created and empowered by state legislatures, establish the criteria that must be met before physicians are issued licenses and allowed to care for patients without supervision. Since the latter half of the 19th century, the medical profession has been effectively regulating itself through heavy influence over the licensing process and control of the organizations that certify educational and training institutions. The federal government participates in (but does not directly control) residency programs through partial funding provided mainly by Medicare. Further, it writes the laws that regulate the influx of foreign graduates of international medical schools. The federal government should encourage a more adaptive and flexible pipeline of physicians entering the US market by (1) shifting away from the excessively hospital-centric orientation of current funding for residency training and directing the aid to the residents themselves; (2) promoting new forms of institutional certification with fewer ties to the economic interests of existing practitioners and academic medical centers; (3) adjusting the Medicare fee schedule, which sets income expectations for physicians, based on the market prices revealed through transparency initiatives; (4) promoting and testing a shorter and less costly education option that merges a traditional undergraduate curriculum with medical school; and (5) enacting immigration policies that accommodate a larger influx of well-trained and talented foreign-born physicians., The United States has high expenditures for medical care compared to other industrialized countries. Among the 36 members of the Organisation of Economic Co-operation and Development (OECD), the US ranks [...]

Bringing new, more effective pharmaceutical products to market is expensive, time-consuming, and risky. Intellectual property protections and regulatory requirements help promote that research, but they also give manufacturers a pricing advantage. Government price setting, which some policymakers support, could slow the growth of Medicare spending but is likely to favor short-term cost cutting over the longer-term societal benefits from clinical innovation. The Trump administration has proposed a test of a new Medicare Part B payment system for drugs administered in physician offices and hospital outpatient clinics. The International Pricing Index Model would use private vendors to negotiate prices with manufacturers for Part B--covered drugs. Vendors would be paid using a formula notionally based on prices paid in other high-income countries for the same products. The effect of this policy is an arbitrary payment cut. We propose an alternative market-based approach that would (1) fully empower competing private vendors to negotiate prices for Part B drugs and allow physicians and patients to share in the savings, (2) test a change in the current Part B reference pricing model to include international prices from the few countries that allow manufacturers flexibility in setting their own prices, and (3) use international and domestic clinical data evaluations to inform pricing for products for which there is no effective competition., June 2019 The rising cost of prescription drugs has been a focal point for debate in Washington and across the country. Policies affecting the market environment for prescription drug pricing [...]

Advocates of consumer-directed care are disappointed that the steady shift toward higher-deductible insurance, now underway for more than a decade, has not led consumers to become more active shoppers when getting medical services. The lack of transparent pricing is one factor hindering progress, but there are other impediments too. For instance, consumers enrolled in high-deductible insurance usually have access to preferential pricing negotiated by their plans, which makes shopping less necessary, and patients needing high-cost care quickly satisfy their deductibles, after which they are price insensitive. In this environment, providers have weak incentives to disclose prices that invite comparisons with competitors. Numerous public and private efforts are now underway to make pricing more transparent and usable. While some of these efforts show promise, they are unlikely to boost patient price shopping significantly because of their limitations and because the overall market environment does not accommodate an active consumer role. The federal government is the only entity with power and regulatory reach to redirect how the market functions. It should take two steps. First, it should promulgate a required pricing list for a set of common and standardized services and interventions. Second, it should require insurance plans to provide reference-based payments, tied to in-network rates, for all the services on the federal list. Consumers selecting out-of-network providers with prices above the referenced amounts would pay the difference themselves, while those selecting low-cost providers would get to keep the savings. These changes would allow consumers to play a much more active role in the health system, although that role will remain circumscribed by factors that make consumer price shopping infeasible in important circumstances., June 2019 Americans with private health insurance are increasingly enrolled in plans with high deductibles. (1) It was expected and hoped that a shift toward higher deductibles might help control [...]

Retired federal workers are among a fortunate and dwindling subset of older Americans who still receive employer-sponsored health benefits. The Federal Employees Health Benefits Program (FEHBP) serves as primary coverage for early retirees and as secondary coverage when retirees become eligible for Medicare at age 65. The high expense of the FEHBP retiree health benefit is contributing to the US Postal Service's financial struggles. Although the FEHBP and Medicare have coexisted for more than a half century, the government has never attempted to combine the resources of both programs into a sensibly designed and coordinated insurance program for former federal workers age 65 and older. The federal government should shift from passive oversight toward active management of the FEHBP's retiree health benefit. Specifically, Congress should convert the benefit, on a prospective basis, into a program that gives each retiree one insurance plan instead of two. There are numerous ways to achieve this objective without shifting costs onto Medicare or the FEHBP. Indeed, an effective reform would reduce overall costs and thus allow both programs to spend less on retiree coverage. Some of the savings should be shared with future federal retirees in the form of deposits into health savings accounts., Congress created the Federal Employees Health Benefits Program (FEHBP) in 1959, six years before the enactment of Medicare, to provide health insurance for federal workers and their families and for [...]

Policy attention is now focused on prescription drug prices, which in some cases have grown sharply in recent years, and the financial burden that high prices can sometimes place on patients. The Trump administration has announced its intention to pursue changes in various policies to bring down prices or to slow their growth. The protection of intellectual property is an important component of dynamic economic growth and medical progress in the US. However, it does create pricing power for the inventors of new therapies, which in turn makes it difficult for policymakers to ensure access to effective care is within reach for all patients and is affordable for tax-subsidized programs. The pricing of prescription drugs occurs in a market influenced by a complex web of public policies and private-sector conventions that were assembled over many years on an ad hoc basis. These policies secure somewhat lower prices for some purchasers but likely raise the prices for others. While there are no simple solutions, policymakers should study the existing arrangements carefully and consider what can be done to promote more supply competition (thus minimizing monopolistic pricing) in all drug categories. They should also think creatively about how to promote more pricing leverage for consumers rather than adopt government price controls. The policy goal is to strengthen countervailing pressure from purchasers to negotiate better prices for consumers, rather than provide preferential pricing for narrow segments of the market., American consumers and policymakers are increasingly concerned about the high cost of prescription drugs. In a recent survey, 40 percent of respondents said that lowering prescription drug prices should be [...]

The executive and legislative branches of the federal government have separate budget processes, reflecting their coequal status in our constitutional structure. The Congressional Budget and Impoundment Control Act of 1974 established the institutions and procedures that guide budgetary decisions in Congress. The budget process has been amended in several important ways since 1974, including with the introduction of caps for appropriated spending and a pay-as-you-go rule for taxes and entitlements, both of which are enforced with automatic cuts in spending if they are violated. The current process was written for a time when appropriations spending was dominant; it does not work as well with so much of the federal budget devoted to spending that occurs automatically on entitlement programs. Further, the current process does not facilitate executive-legislative agreement on budgetary aggregates, which is an important reason for instability and uncertainty in federal finances., The current congressional budget process is not working in important ways. Among the many signs of dysfunction is Congress' regular inability to pass funding measures to keep the government open [...]

The Social Security disability program needs structural reform. There has been a long-term trend toward higher rates of disability among covered workers as the standards for assessing disability have accommodated larger numbers of applicants with musculoskeletal and mental health conditions. Congress should pass legislation soon to test far-reaching changes in the program, including: providing temporary health and income support benefits to some applicants who might be able to return to work with proper medical care and job-placement assistance and experience-rating the payroll tax for employers to encourage them to take steps to prevent elevated rates of disability among their workers., The 2017 report of the Social Security trustees, released in July, shows modest improvement in the financial status of the Disability Insurance (DI) trust fund compared with prior reports. The [...]

The main objective of the Affordable Care Act (ACA) was to increase enrollment in health insurance among those who were previously uninsured. Official estimates from the Census Bureau have consistently [...]

Bringing Market Discipline to Health Entitlement Spending (*) Principles for Health Care Entitlement Reform 1. Citizens, not government, should control health care. 2. Government subsidies should come in the form [...]

Mr. Chairman and members of the committee, thank you for inviting me to participate in this hearing. The nation is facing serious fiscal challenges and has been for many years. [...]

A Market-Based Reform of the Medicare Program Summary of Medicare Reforms 1. Adopt the premium support reform model. 2. Improve the competition between Medicare Advantage and fee-for-service. 3. Promote consumer [...]

If the Supreme Court sides with the plaintiffs in King v. Burwell and related cases, and thus invalidates the payment of premium subsidies in states that have relied on the [...]