UnitedHealth: 5 Ways to Trim Medicare by Half a Trillion

UnitedHealth, the nation’s largest health insurer, believes it has found the path to reduce Medicare by $542 billion over the next 10 years. Reading between the lines of some 31 pages of proposals, much of those savings will result from efficiencies found on the provider side.

UnitedHealth’s Center for Health Reform & Modernization this week issued a working paper entitled “Medicare and Medicaid: Savings Opportunities from Health Care Modernization.” Another subtitle for the paper could have been, “Lessons from the private sector on how to contain medical costs.” Many of the opportunities identified by the Center originated with programs they currently have with their for-profit customers.

The five major themes of the working paper that, if implemented, would reduce Medicare spending by more than half a trillion dollars in a decade are:

• Transform Medicare and Medicaid fee-for-service programs;
• Provide beneficiaries with information and incentives to use high-quality providers, improve their health, and choose appropriate care;
• Reduce avoidable and inappropriate care with clinical interventions;
• Deploy technology broadly to improve and streamline care;
• Implement payment reform.

Each of these themes comes with specific recommendations, and while there is little proposed in the report that could be considered groundbreaking or new, it does give a window into where insurers intend to nudge federal and state governments with regard to healthcare reform.

Some of the proposals by UnitedHealth’s researchers recommend that management of current programs be transferred from the government to insurers. For example, one recommendation to transform Medicare fee-for-service is to “provide seniors in traditional Medicare with comprehensive care management services.” According to the report –

One possible additional model for Medicare comes from observing the path that many of the most sophisticated and largest u.S. employers have taken to modernize how they manage their own employees’ health benefits, often on an ‘administrative Services Only’ (aSO) basis. this means that while they technically self-insure, those employers contract for the external expertise needed to help them manage the health care needs of their workforce. employer sponsors generally pay their health plan partners a service fee determined on a per-employee basis for both core and additional services.

Other proposals do not bode well for providers. Under “provide information and incentives in Medicare to help seniors choose the best healthcare,” the report’s authors suggests rewarding seniors for selecting a provider that provides the best service at the lowest cost.

This option would create incentives for participation in voluntary, tiered networks by Medicare beneficiaries – who could benefit from incentives such as lower cost sharing, rebates, or benefit enhancements by choosing providers who scored well on quality and efficiency standards that are clinically-led and evidence-based. States also could receive financial incentives and new authority to steer dual-eligible consumers to those high-quality provider networks.

Almost as an afterthought, the authors add, “Providers also would have incentives to improve their performance.” As providers have learned from implementation of the Patient Protection and Affordable Care Act, “incentives” usually mean that providers who perform the best will have their reimbursements from Medicare cut the least.

UnitedHealth already plays a big part in the implementation of ACA reforms, and from this report, it has looked ahead to find ways it can play an even larger role. Even more importantly, UnitedHealth has identified how to improve services to Medicare recipients while at the same time save the federal government a lot of money. This is a powerful argument. The American Medical Association, American Hospital Association, Healthcare Financial Management Association, and other organizations representing providers should take this tact and follow suit with proactive proposals of their own.