Hands on My Medicare

The effort by the House of Representatives to restructure Medicare created an outpouring of contention in recent weeks. The bill, proposed by Rep. Paul Ryan (R-WI) would replace the current defined-benefit model of Medicare with a voucher, averaging $11,000 per year, to be used for buying insurance coverage, starting in 2022.

Ryan and the House Republicans are right to call attention to the rising cost of Medicare and its contribution to the nation’s debt problem. But this is not the way to solve the problem. It’s painfully obvious that the amount of the voucher would not cover the cost of health insurance for most senior citizens, and since the amount of the voucher is indexed to the CPI, whereas healthcare costs are rising at a rate exceeding the CPI, the shortfall would only get steeper in the years beyond 2022. Forcing seniors to somehow come up with that difference would not only cause mortgage-bubble-scale financial problems for the economy in the years ahead, it would also impact the medical device industry in a negative way, since there would be far fewer paying customers for big-ticket devices or procedures.

What the Congress really needs to address is how we can reduce the costs of medical care—and both government-funded and private medical insurance. One of the ways we do that is by looking at unnecessary cost drivers. The medical device industry has its own equivalent of the $600 hammer uncovered in the Defense Department procurement scandals of the 1980s. The unnecessary cost is not in materials or labor, but rather, the excruciating delays and repetitive clinical trials required by both the FDA and CMS in order to get a new product to market. Imagine how much more your cell phone or car or toaster would cost if there were a delay of one, two, or three years added to the product launch period.

Of course the government would not save money if it had to pay for every device that manufacturers came up with. But there should be a fast track for new medical technologies that can demonstrate that they save money compared to current processes. This concept should be familiar to any company that has implemented cost-improvement programs that reward staffers for ideas that save the company money.

There’s also room for participation from private insurance firms. Instead of improving bottom line by denying coverage to individuals in need, entrepreneurial insurers could earn long-term profit by underwriting a new therapy, demonstrating that it saves money in its patient pool, and then passing that information on to CMS for the government to use. Rather than basing coverage decisions on Medicare decisions, private insurers could spur both innovation and debt reduction by being proactive in covering new medical technologies.

James Cavuoto
Editor and Publisher