The Diagnosis and Treatment of MedicareThe Diagnosis and Treatment of Medicare

This book is of interest to health care policy makers as well as physicians who seek to better understand the crisis in Medicare funding and its potential solutions. The book will be useful background to anyone who wants to explain the crisis in understandable terms to consumers, patients, or one's own family. Andrew Rettenmaier and Thomas Saving, of the Washington think tank the American Enterprise Institute, are economists who have precisely spelled out for laymen why Medicare funding, as we know it, is unsustainable. Saving also speaks with the authority of serving as a public trustee of the Social Security system.

Over the course of 14 chapters, the authors carefully spell out the historical roots of Medicare, the current crisis, and why it will be virtually impossible for Medicare to continue to provide first-dollar coverage for retiree health expenses over the next 20 years. They strengthen our understanding that current law does not support cost sharing by consumers in most parts of the Medicare program and that there are few limits on payment of all claims submitted by clinicians and little accountability for the appropriateness of the services. Physicians and other clinicians are paid (though some would say not enough) for almost any service provided in good faith. Additionally, most patients have no direct financial responsibility to restrain demand for any service, leading to few incentives to control costs.

Since cost and coverage are the 2 key drivers of health care policy, the authors spend more than half of the book exploring various proposed models of economic impact and proposed solutions. Several chapters aid and assist us in understanding generational transfer of tax income from current workers to current retirees and the implications that a large increase in federal tax burden will be necessary unless the current model is changed. Rettenmaier and Saving also take the necessary pains to explain several aspects of how age-adjusted utilization by the average Medicare recipient has increased over the 4 decades of the program.

Other chapters explain how means-testing and increasing eligibility would not fully solve the funding problem, in the light of even conservative estimates of the impact of the Baby Boom generation on Medicare spending. There is probably no serious political will to adopt rationing of access to care for chronic diseases.

Saving and Rettenmaier believe that prepayment of Medicare premiums is a key way to accrue dollars to cover calculated unfunded obligations. They believe this model will preserve generational equity without burdening a younger workforce with the increasing needs of a large retiree population after 2020. While this may be an acceptable strategy, my sense is that other think tank leaders would suggest it is not the only solution. Some would argue that the impact of giving Social Security benefits to millions of illegal immigrants is another example of needed equity. The impact of immigration on Medicare may deserve further analysis in terms of these funding projections. Conservative scholars and public policy researchers have rallied around the prepublication manuscript with effusive praise. My concern is that leaders in more moderate or liberal think tanks may not be as generous.

The authors do not develop a serious discussion of the relative merits of Medicare managed care as one of several tools that may be applied to finding realistic solutions. Additionally, there are other drivers of cost that they do not discuss in terms of how those may be better managed by our society. For example, others have pointed out that end-of-life care and the care of expensive chronic diseases drive a large portion of cost. (Individuals receiving such care comprise 10% of the population that generates 50%-70% of medical costs.) Additionally, the behavioral aspect of chronic diseases has been shown to exacerbate costs, particularly relating to management of depression associated with chronic physical disabilities.

In summary, I found the book a worthy read with thoughtful solutions. Some readers may come away with the strong sense that there is a large kernel of truth in the authors' analysis. The real-world solutions, however, may need a better balancing of the economists' approach with an evidence-based medical management model to control costs in a caring, humanistic paradigm.