The American Nurses Association (ANA) believes that the Medicare program is critically important to older and disabled Americans and their families. The program is, however, facing serious long-term financial challenges which are a result of the combined effect of an aging America, greater longevity, and increasing health care costs. ANA's recommendations are intended to ensure that the Medicare program remains viable and able to provide beneficiaries with accessible, affordable, high quality health care.

ANA believes that Medicare must remain a broad-based social insurance program that is available to all eligible individuals regardless of income. To ensure that Medicare is able both to deliver high quality health care and remain financially sound, the Medicare program must expand from the traditional "medical model" of care, where the emphasis is on treatment of disease and in which there is little coordination of care among providers, to include beneficiary-focused coordinated models of care, which focus on primary health care, prevention, wellness, and early intervention for beneficiaries. To that end, ANA recommends a number of specific structural and benefit changes:

1. combine Medicare Part A (hospital fees) with Medicare Part B (physician fees) and have a single deductible amount ($500);

2. add a $3,000 "stop-loss" provision (a $3,000 cap on beneficiaries' annual out-of-pocket payments, including deductibles and co-payments);

3. eliminate Medigap;

4. reduce the age of eligibility for Medicare with a voluntary buy-in option for persons aged 62-64, with a similar option for displaced workers aged 55-64;

5. add prescription drug coverage (with a $250 deductible and a 20 percent co-payment);

6. ensure parity in payment for mental health services;

7. expand home health coverage to avoid institutionalized health care;

8. include additional preventive/screening services (such as wellness programs, domestic violence screenings, and dental care) with no co-payment or deductible;

9. employ beneficiary-focused coordinated models of care, such as:

   • using nurse case managers to manage/coordinate care and prevent unnecessary or inappropriate inpatient hospitalizations, emergency room visits, and nursing facility admissions;

   • expanding and incorporating Community Nursing Organizations (CNOs), which receive capitated payments for community nursing and ambulatory care services provided to Medicare beneficiaries;

   • implementing disease management programs for beneficiaries with chronic conditions;

   • expanding nurse managed clinics, which provide accessible and affordable patient care, especially in underserved areas;

   • providing improved end-of-life care, including the appropriate use of pain medications/palliative measures, and easier access to hospice benefits; and

   • encouraging utilization of preventive and self-care measures.

ANA recognizes that the Medicare program will need additional revenue to address both its projected financial situation and the additional costs incurred by adopting ANA's proposed enhancements. The demographics of the next 50 years demand a reallocation of the Federal budget; just as we build schools when the population of children increases, so should we acknowledge and address the increasing health care needs of an aging, older society through additional Federal spending. In addition to changes in the Federal budget, ANA recommends raising the additional needed revenue by:

• extending certain elements of the Balanced Budget Act of 1997, including continuing update reductions beyond 2002;

• transferring DRG payments from acute care hospitals to account for increased post-acute care;
• integrating physician/other practitioner and facility payments for inpatient care;

• using competitive bidding and competitively set rates;
• reducing taxpayer subsidies for those beneficiaries who are able to pay more; and

• raising new or increased revenue through taxes or the budget surplus.

ANA believes that significant long range cost savings will be achieved by moving away from Medicare's costly "medical model" and toward nursing's emphasis on early intervention, prevention, and primary care. However, ANA also recognizes the need to identify specific short-run revenue sources to ensure the solvency of the program. In Appendix B, ANA has included cost estimates which address the cost savings and proposed revenue needed to fund this proposal.

The American Nurses Association (ANA) is pleased to present this proposal to reform the Medicare program. Nurses are uniquely positioned to offer a plan to address the problems facing Medicare, and -- as both the caregivers and advocates of patients in and beyond the Medicare program -- they understand the health care system from both the health professionals' and patients' perspective. As the nation's largest organization representing professional nurses and as the first health professionals' association to endorse the creation of Medicare in the 1960s, ANA has an unparalleled record of support for this critically important program.⁽¹⁾

ANA hopes that the work of the National Bipartisan Commission on the Future of Medicare will, prompt a national debate about necessary reforms to the Medicare program. Nursing has much to offer in this debate and looks forward to working with policymakers, members of Congress, and the Administration to ensure that Medicare's promise to future generations is fulfilled.

Introduction

ANA believes that Medicare must remain a broad-based social insurance program that is available to all eligible individuals regardless of income. As a government-sponsored program that insures the nation's elderly and disability populations, Medicare faces some unique and difficult challenges, particularly in its financing. But while the fiscal problems facing the Medicare program demand immediate action, it is clear that Medicare is experiencing many of the same problems and constraints that affect the rest of the health care system. In fact, the long-run cost trends for Medicare and private insurers are remarkably similar: both are driven by system-wide factors such as rapidly advancing medical knowledge and the increasing availability of procedures, resources, equipment (including high-tech equipment), and services.

Recent trends toward "managed care" as a means of saving costs have frequently had significant adverse effects on high quality health care and on the health system in general. Too often, "managed care" has really meant "managed costs" -- and the coordinated care, early intervention, and patient choice so imperative to a patient's well-being has been lacking. ANA believes that incorporating beneficiary-focused coordinated models of care into the nation's health care system will move the system away from "managing costs" and toward "managing care." These beneficiary-focused coordinated models of care (which are described in Section V) -- many of which have been developed and strengthened since the inception of Medicare -- can play an important role in improving Medicare, by both enhancing the quality of care and reducing its projected fiscal problems over time.

ANA believes that employing appropriate beneficiary-focused coordinated models of care, together with a number of other important systemic reforms, will result in better, more responsive care and lower costs while maintaining the basic operation and benefits of the program.

I. Overview

Early in the 21^st century, the Medicare program is expected to experience significant and increasing financial stress. Starting around 2010, the retirement of the "baby boom" generation will accelerate growth in the elderly population. This larger elderly population, many of whom will experience greater longevity, will add to the existing upward trend in cost per Medicare beneficiary, resulting in large and possibly unsustainable Medicare costs. As a result of these projections, the United States Congress created the National Bipartisan Commission on the Future of Medicare (the "Bipartisan Commission")⁽²⁾ to find ways to strengthen the Medicare program and prepare it for the retirement of the "baby boomers."

The Bipartisan Commission was charged with developing a proposal that addresses the financing of the entire Medicare program and issued a "call for solutions," inviting interested parties to submit ideas for restructuring Medicare for the future. In September 1998, ANA testified before the Bipartisan Commission regarding its historical support for and positions on the Medicare program. Since then, ANA has developed this proposal for consideration by the Congress, the Administration, and the general public.

II. Size and Nature of Medicare's Fiscal Problems

A. Rates of Growth

The 1998 long-range forecasts of Medicare spending produced by the Trustees of the Medicare Part A and Part B Trust Funds project that, absent any changes, over the next 75 years Medicare will grow from 2.6 percent to almost 7 percent of the U.S. economy.⁽³⁾ For comparison, the entire Federal budget accounts for just 20 percent of the U.S. economy, a level that has remained fairly static over the past three decades.⁽⁴⁾ To illustrate the extent of financing that the Medicare program would need to support such a level of funding, the Trustees calculate the taxes that would be required, providing a single summary measure of projected Medicare financing needs.⁽⁵⁾ For Part A, the Trustees calculate that an immediate increase in the hospital insurance payroll tax from 2.9 percent to 5.0 percent would put the Part A Trust Fund on a sound basis for the 75 year projection period.⁽⁶⁾ For Part B, there is no dedicated payroll tax, but the Trustees note that Part B spending would consume approximately one-quarter of all personal and corporate income tax receipts by the end of the projection period.⁽⁷⁾

Taking the Trustees' projections as the spending baseline, there is little available data or agreement regarding the level of cost reductions that would be required to address Medicare's fiscal needs in the 21^st century.⁽⁸⁾ In part, this is true because even a small change in Medicare's benefits structure or costs could have significant effects on future spending, making estimates of future spending highly uncertain.⁽⁹⁾ Largely, however, this is true because a decision regarding the requisite level of cost reductions depends on the willingness of policymakers to seek additional revenue, a fundamentally political decision.

B. Impact of "Baby Boom" Generation

Although some of the future cost growth of Medicare will result from the aging of the "baby boom" generation, growth in the number of elderly (including increased longevity) is not the only or primary reason for the projected growth in Medicare costs. At the peak of the "baby boom" retirement (circa 2020), about one-third of projected Medicare Part A cost growth will be due to the increase in the number of enrollees (2.7 percent per year). The remaining two-thirds of cost growth will be due to increasing costs per enrollee.⁽¹⁰⁾ The retirement of the "baby boom" generation will add to the underlying trend in Medicare cost growth and heighten the financial problems.

The "baby boom" generation -- more ethnically, economically, and educationally diverse then previous generations -- will also likely value services that are different from those offered by the current Medicare program. For example, many "baby boomers" have become accustomed, through managed care programs now available in many workplaces, to the easy availability of preventive services, alternative approaches to care, and provider choice. Their willingness to accept the constraints of the current Medicare program as they become the program's beneficiaries should be an important consideration in ensuring the continued political viability of Medicare and the level of financial contribution that can reasonably be expected from beneficiaries.

III. ANA's Medicare Positions

A. Historical Positions

ANA has historically supported both the philosophical underpinnings of the Medicare program and the assumptions behind its existing financing mechanism. As the nation's first health professionals' association to endorse the creation of Medicare in the 1960's, ANA articulated early and strong philosophical support of Medicare. In a 1965 ANA Statement, ANA expressed its support for providing health services through a broad social insurance system:

In 1966, health insurance for the aged will become a benefit of the nation's social insurance system. The American Nurses' Association was an early supporter of this historic social legislation which has become law with passage of the Social Security Amendments of 1965.

It is significant that nurses, as the largest single group of professional persons providing health care for the American people, have given their support to the principle of providing health insurance for the aged through the social security system. Nurses must now help to assure that health services provided through this legislation are of high quality.⁽¹¹⁾

ANA has also always supported the philosophy of Medicare's financing system: that Medicare is and should be:

• a broad-based social insurance program that is available to all eligible individuals regardless of income;

• subsidized through general tax revenues of the Federal government;

• partially financed by a required premium from beneficiaries, with a mechanism for subsidizing low-income beneficiaries; and

• further financed by a dedicated payroll tax, levied in conjunction with Social Security taxes, on both employers and employees.

Some aspects of these assumptions are being challenged in light of the financial problems looming under the present system. Inasmuch as the Bipartisan Commission's work may be considered by the 106^th Congress, ANA has re-examined its position on the Medicare program and its various component parts so that nursing will be able to advocate both for positive and beneficial aspects of the current system and also for important reforms.

B. Underlying Premises

ANA developed its recommendations after considering how the current system works, how beneficiaries interact with the system, and what benefits and/or problems various alternatives are likely to bring:

First, ANA believes that most Americans support the current Medicare program and want it to be viable and successful. ANA also believes that most Americans want any reforms to make the system simpler to understand and to use.

Second, ANA believes that recent changes in the Medicare program ("Medicare+Choice") which allow for the voluntary replacement of traditional Medicare coverage by health maintenance organizations ("HMOs") have created additional confusion. Under even the most optimistic scenarios for Medicare+Choice, mostcurrent and future beneficiaries will remain enrolled in the traditional Medicare program.⁽¹²⁾ Any reform proposal must therefore demonstrate how it would affect costs under the traditional program, or describe how the traditional program would be abolished and replaced with another, less costly program.

Third, since Medicare by itself is only one part of the financing of health care for the elderly, any reform plan must account for other avenues of financing this health care. Nearly 90 percent of beneficiaries already have some form of secondary insurance (i.e., employer retiree benefits, Medigap, Medicaid) to cover the costs that Medicare does not. The widespread purchase of Medigap insurance, for example, despite its significant premiums and its frequently inadequate benefits (e.g., prescription drug coverage is minimal in even the best policy), demonstrates beneficiaries' desire for such coverage. ANA believes that this interest in purchasing secondary insurance is likely to continue.

Finally, ANA believes that any reform proposal must appropriately contain growth in cost per beneficiary. Private plans constrain costs either by requiring enrollees to pay part of the cost of each service, or by "managing" or "coordinating" the delivery of care, or both. The traditional Medicare program has neither of these approaches for controlling its costs: it has no formal approaches to management of care across settings or among providers. In effect, the traditional Medicare program has been, for the average beneficiary, an unrestricted and unmanaged fee-for-service insurance plan with no direct out-of-pocket co-payment liabilities. ANA believes that to control Medicare's costs appropriately, the Medicare program must seek both value and quality in health care services and delivery. The President's Advisory Commission on Consumer Protection and Quality in the Health Care Industry was emphatic in its call for a national commitment to improving the quality of health care throughout the system and recognized the crucial role of both public and private purchasers of health care services and insurance products in achieving this goal. The importance of the Medicare system in leading the effort to ensure high quality care for all Americans cannot be overstated, and nursing would oppose any proposal to reform the Medicare system that jeopardizes quality in an effort to reduce costs.

C. Strategies Underlying ANA Recommendations

ANA opposes limiting access to Medicare based on income or placing undue financial burdens on Medicare beneficiaries; therefore, ANA recommends a combination of approaches for containing current and future costs of the program:

• The Medicare program should implement case management techniques across a wide variety of settings, seeking to identify and manage potentially high-cost medical events. Such events include hospitalization, institutionalization in a nursing home, end-of-life care, and high-cost chronic conditions such as congestive heart failure, chronic obstructive pulmonary disease, and diabetes.

• The Medicare benefit package should be modestly expanded to allow for sensible, efficient, early care, including coverage of outpatient prescription drugs, additional preventive benefits, and a "stop-loss" provision that limits beneficiaries' annual out-of-pocket costs.
• Numerous traditional and non-traditional cost-savings approaches should be applied to traditional Medicare, including selected reductions in payment and program restructuring.
• The Medicare program will require additional revenue, which ANA believes should come from reordered priorities within the existing Federal budget, increased taxes, and reduced taxpayer subsidies for those beneficiaries who can afford to pay more.

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