1. THE COMMONWEALTH FUND Enhancing Value in Medicare Stuart Guterman Senior Program Director Program on Medicares Future The Commonwealth Fund Bipartisan Health Policy Conference Miami, FL January 14, 2007

2. THE COMMONWEALTH FUND Medicare Spending as a Share of GDP is Growing Steadily, and Expected to Increase Sharply Source: Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Insurance Trust Funds. 2006 Annual Report. (Washington, DC: Boards of Trustees, May 1, 2006):33.

3. THE COMMONWEALTH FUND Source: G. Anderson and J. Horvath, Chronic Conditions: Making the Case for Ongoing Care (Baltimore, MD: Partnership for Solutions, December 2002) Two-Thirds of Medicare Spending is for People With is for People With Five or More Chronic Conditions

4. THE COMMONWEALTH FUND Mortality Rate of Medicare Enrollees Medicare Spending Per Enrollee and Mortality Rates Dont Appear to be Related Source: Data from The Dartmouth Atlas of Health Care, www.dartmouthatlas.org Medicare Spending per Enrollee HI ND IA OR SD NM ID MT MN WY UT NE WI WA VA VT ME AR NH IN NC SC GA MO WV KS AZ CO DC KY TN AK OH AL MS US IL DE OK RI MI PA NV TX FL MD CT CA NY LA MA NJ

5. THE COMMONWEALTH FUND Efforts to Enhance Value in Medicare Better coordination of care for chronically ill beneficiaries –Traditional Medicare –Medicare Advantage Better incentives for quality improvement: collecting information –Post information on performance –Study relation of process to outcomes –Indicate what improvements are needed Better incentives for quality improvement: paying for performance –Encourage desired behavior –Counter adverse incentives

6. THE COMMONWEALTH FUND Developing Improvements: Medicare Demonstrations Increase clarity and flexibility in the waiver approval process Expand the array of methods available for evaluating demonstration results Establish a more explicit and transparent mechanism for moving from pilot to policy

7. THE COMMONWEALTH FUND Areas in Which Value Can Be Enhanced Medicare Prescription Drug Benefit –Reaching more beneficiaries (particularly low income) –Better access to low income subsidy (asset test) –Better coordination with medical care –Help beneficiaries get the best deal Physician Payment –The SGR problem: how to control spending without distorting prices? –Pay-for-performance (quality and efficiency) Medicare Advantage –Extra payments –Variation in beneficiary liability –Help beneficiaries get the best deal