Round Pegs and Square Holes: Medicare and Chronic Care

April 2002

It is by now a truism that Medicare’s financing and benefit structures, administrative mechanisms, and operational culture fit poorly with the growing burden of chronic disease experienced by Medicare beneficiaries; Medicare has failed to support health care professionals’ growing sophistication in treating and managing chronic disease. Like all truisms, this one is at least partially true. But like everything having to do with Medicare and most things having to do with chronic illness, the matter is also complicated. Some of what is seen as a “misfit” between Medicare and chronic care may reflect more fundamental problems in Medicare itself, or in American social policy more broadly. Some of what is assumed about professional consensus may be inaccurate. Some favored solutions may cause more problems than they solve. This paper seeks to categorize and describe the major problems in Medicare’s interaction with chronic illness and to identify a number of short- to medium-range policy issues that offer some prospect for early amelioration. Finally, this paper places the Medicare discussion into the context of changes in chronic care within the broader health care system.

While a complete restructuring of Medicare is probably politically unfeasible in the near future, relatively modest changes in the Physician Fee Schedule, the home health benefit, durable medical equipment (DME) policies, occupational and physical therapy, and the rules for transitioning beneficiaries between providers could be effected with fewer political barriers. These policy changes would immediately help beneficiaries with chronic conditions afford and obtain the services they need. Conversely, if the Medicare benefit package were restructured to give all beneficiaries more of what they need: lower out-of-pocket costs, a complete restructuring of the Physician Fee Schedule, expanded preventive services, and comprehensive outpatient prescription drug coverage, for starters, then these broad-based reforms would be of particular help to people with chronic conditions.