Former HHS Secretary Mike Leavitt: Medicare is headed for ‘disaster.’ Here’s how he thinks it can be prevented

Medicare enrollment form and pen
Former HHS Secretary Mike Leavitt says value-based care is the key to avoiding a Medicare "disaster." (Getty/zimmytws)

The Medicare program is on the path toward “disaster,” according to a former Bush administration HHS secretary. Taking on the problem will require a strong bipartisan focus on eliminating fee-for-service payments. 

Former Utah Gov. Mike Leavitt, who served as Department of Health and Human Services secretary in the George W. Bush Administration, wrote in a whitepaper that Medicare’s looming insolvency will pit generations against one another if it’s not addressed. 

Changing demographics in the U.S. mean the traditional model—where young, healthy people pay for care for seniors—isn't sustainable, wrote Leavitt, who now heads healthcare consulting firm Leavitt Partners.

Free Daily Newsletter

Like this story? Subscribe to FierceHealthcare!

The healthcare sector remains in flux as policy, regulation, technology and trends shape the market. FierceHealthcare subscribers rely on our suite of newsletters as their must-read source for the latest news, analysis and data impacting their world. Sign up today to get healthcare news and updates delivered to your inbox and read on the go.

In 1966, there were 4.6 workers paying into Medicare for each beneficiary, and by 2028, that number will drop by half to 2.3 workers per beneficiary. 

This dynamic would increase the burden on the young, who are struggling with expenses and low wages themselves. So, the generational burdens must be adjusted, he said. 

Mike Leavitt
Mike Leavitt (Leavitt Partners)

“This is a classic public policy decision that must be addressed. It is unreasonable to think Medicare can be sustained unless this is changed,” Leavitt wrote. “If we start now, the change can be made over time and with genuine fairness.” 

RELATED: A rapidly depleting Medicare fund could renew calls for major reform 

The Medicare Hospital Insurance Trust Fund, or Part A, is slated to run out of money by 2026, Leavitt said. Addressing this problem, and the growing number of seniors on the program, requires a keen focus on value-based care, he said. 

Three “chronic ailments” faced by the program are linked to volume-based payments: indifference to quality, payment in silos and a “chronic more,” which drives providers to offer more, but not necessarily better, care. Existing value-based models like accountable care organizations and bundled payments are beginning to address these concerns, he said. 

ACOs struggled early on to meet expectations but have turned a corner, especially as providers take on greater financial risk. The Centers for Medicare & Medicaid Services recently overhauled the Medicare Shared Savings Program in hopes of further accelerating that process.

In addition to continuing to support the expansion of these value-based care models, Leavitt said policymakers should look to Part D for further inspiration on overhauling the other elements of Medicare. 

RELATED: ACOs should plan for a shorter path to greater risk in CMS’ overhauled MSSP 

Part D, he said, offers a guideline for greater transparency and competition that could drive prices down. Leavitt oversaw Part D’s rollout in his time at HHS. 

The Trump administration has also emphasized the value of Part D as a model in its efforts to bring down drug costs. It has debated moving certain drugs out of the Part B benefit into Part D to lower spending. 

“[Part B] has not only ensured that seniors get the drugs they need—it has demonstrated that seniors can use an organized marketplace to drive quality up and costs down,” Leavitt wrote. 

Suggested Articles

Humana filed suit Friday against more than a dozen generic drugmakers alleging the companies engaged in price fixing.

Ochsner Health System is partnering with Color to launch a population health pilot program to integrate genetic information into preventive care.

Medicare Advantage open enrollment kicked off last week, and insurers are taking new approaches to marketing a slate of supplemental benefit options.