UnitedHealth says Medicare can save big without big cuts

WASHINGTON - Most people in the Medicare reform fight argue about how much patient benefits and doctor and hospital reimbursement rates must be cut to deal with the burgeoning federal budget deficit.

UnitedHealth Group's Simon Stevens talks about saving more than half a trillion bucks over the next decade by doing neither.

"It is very important that the debate does not become a stylized arm wrestle between those two alternatives," Stevens, chairman of the UnitedHealth Center for Health Reform & Modernization, said in an interview last week.

The UnitedHealth Center has entered the Medicare deficit discussion in a surprising place. As think tanks and business groups line up on the side of raising eligibility ages or other austerity measures, the country's biggest private health insurer suggests ways to save the country's biggest public health insurance program without cutting services.

A new report from the UnitedHealth Center outlines ways to change Medicare from a fee-for-service program that pays doctors and hospitals per procedure to a results-driven, managed-care model that coordinates payments, offers greater rewards to medical professionals who give quality care and reduces the costs to senior citizens who make the healthiest choices.

The blueprint for a more efficient government program derives mainly from what Minnetonka-based UnitedHealth has seen administering health care for giant private companies that self-insure. Private success stories need to drive public reforms, said Stevens, a Brit who served as health policy director for Prime Minister Tony Blair.

"If we don't manage to generate improved quality and savings from this kind of approach," he said, "then it will ... fall back to either benefit cuts or more constraints on doctors' and hospitals' payments from Medicare and Medicaid, which in time will make it harder to find providers who will care for them."

By instituting a modernization program, the UnitedHealth report said the U.S. could save $542 billion in federal Medicare and Medicaid spending over the next decade. A move from fee-for-service to case management in traditional Medicare would save $202 billion from 2013 to 2022, UnitedHealth said.

Another $153 billion in savings derived from streamlining the treatment and payment systems for people who qualify for both Medicare and Medicaid. These so-called "dual eligibles" make up a small percentage of Medicare recipients, but they are covered by what Stevens called "a patchwork quilt of funding streams and services and all kinds of disconnects" that, unchanged, will cost the government $5 trillion in the next decade.

Health improvement programs such as diabetes prevention and weight control could save $53 billion, UnitedHealth said.

Other specific programs include better hospital discharge planning to prevent unnecessary, expensive readmissions and putting nurse practitioners in nursing homes to help treat residents and keep them from going to the hospital for minor ailments.

The idea of overhauling traditional Medicare stands in stark contrast to another Medicare reform plan announced last week. The Business Roundtable, a group representing more than 200 of America's most powerful CEOs, including UnitedHealth's Stephen Hemsley, never mentioned changing traditional Medicare.

Rather, it proposed to solve Medicare's looming financial crisis by raising the eligibility age from 65 to 70 and offering more government-paid access to private insurance plans, such as UnitedHealth's own Medicare alternative.

Stevens acknowledged "lots of advantages" to privately administered senior health care. But he pointed to "a standoff between those who think you have to preserve Medicare exactly as it was in 1965 vs. those who think the only answer is [privatization]."

Having the think tank of a big corporation talking about improving delivery without reducing benefits "is a very good development," said Harvard economist David Cutler, a health care specialist. "Most of the debate is about cut, cut, cut. ... Often, people are willing to listen to businesses when they won't listen to academics."

But how much politicians dealing with the deficit will listen is unclear, Cutler cautioned. UnitedHealth and other advocates of modernization cannot offer precise savings figures for programs that have yet to be tested.

The Congressional Budget Office, which provides House and Senate members with official costs and savings figures for policies and legislation, tends to downplay or even ignore numbers like the ones UnitedHealth now offers, experts said.

Attaching a specific value to savings realized by changing health care delivery and using preventive medicine is "the big challenge" for reform programs like the one advanced by UnitedHealth, said Katherine Hayes, director of health policy for the Bipartisan Budget Center.

The center is developing a Medicare reform plan of its own. It is looking at every option, Hayes said, including raising the eligibility age.

Meanwhile, Stevens says UnitedHealth will be "continuing to create facts on the ground" using the experiences of the 75 million Americans the company helps care for in some way.

Making that data available to policymakers is the best hope of overcoming what Stevens calls the Catch-22 of modernizing to save Medicare: "People in principle can see this makes sense. But you don't know until people start doing it."

Jim Spencer • 202-383-6123