Former HHS secretary Leavitt: Why it's time to stop kicking value-based care can down the road

Mike Leavitt
Mike Leavitt, Department of Health and Human Services secretary under President George W. Bush, spoke with FierceHealthcare about the moment's biggest health policy concerns. (Leavitt Partners)

As the buzz around a single-payer health system based around Medicare grows, a former Department of Health and Human Services secretary says it's crucial to keep eyes on a more pressing problem: Medicare is running out of money.

The policy conversation should focus on ensuring Medicare’s long-term sustainability and addressing its impending insolvency. The Medicare Hospital Insurance Fund, or Part A, could run out of money by as early as 2026. 

“We ought to deal with the reality of the mess we have before we begin to expand,” Leavitt said. 

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.

Leavitt said he foresees Medicare Advantage (MA) and Part D as guides for the future evolution of health policy. Success in those programs prove that arming consumers with information and choices can drive a more effective and competitive system. He also projects an emphasis on integrated care delivery that has value packed in.

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

And, he said, the high projected cost of a "Medicare for all" approach is “impossible to ignore.” Researchers have estimated that these policy proposals could cost as much as $32 trillion over the course of a decade. 

In a whitepaper published last week, Leavitt argued that a bipartisan commitment to value-based care would be crucial to avoid Medicare’s impending financial woes. FierceHealthcare talked with him about that incoming crisis and other hot-button health policy issues—here's more from our conversation: 

The future of value-based care 

Leavitt said that one of the key lessons he took away from his time at HHS is that Medicare is one of the most powerful tools available to policymakers to change the healthcare system at large. It’s why the program is—and must be—the driving force behind the broader industry transition away from fee-for-service payment. 

Though the value-based care discussion is “alive and well,” Leavitt said there’s still a ways to go. 

“I’ve been fond of saying we’re 25 years into a 40-year transformation,” he said. “It was evident within years of the advent of Medicare and fee-for-service that we had a series of incentives that were going to drive problems.”

RELATED: 5 healthcare predictions that didn’t come true in 2018 

Medicare’s ubiquity is what makes it the most crucial piece of the puzzle, Leavitt said. If Medicare can move more fully away from fee-for-service, it would prevent a more “un-American” solution, like rationing care, from taking hold. 

Despite that risk, Leavitt said it’s clear the issue is still being “kicked down the road.” 

“We’re in kind of a race,” Leavitt said. “There are two alternatives: shift to a uniquely American values system, or you can stay with a fee-for-service system and just adopt a strategy that we’ll just reduce the amount of money.” 

Healthcare costs and spending have reached nearly 20% of the U.S. gross domestic product, and Leavitt said “there’s not a place on the economic leaderboard” for a country that pays out so much for healthcare. 

“The dilemma is, we’re a compassionate country … and we need to be, but on the other hand, we can’t give up our economic leadership,” Leavitt said. 

The Trump administration's push for value 

HHS under Secretary Alex Azar has made value-based care one of the department's core agenda items, and Leavitt said it’s clear HHS and Center for Medicare & Medicaid Innovation head Adam Boehler are committed to an “aggressive” market-based approach. 

Their efforts demonstrate that Azar and his team at the department have learned the same lesson: take advantage of Medicare’s reach. 

RELATED: CMMI’s Adam Boehler wants to ‘blow up’ fee-for-service 

The administration’s embrace of and focus on market-based solutions, with MA and Part D as models, show promise, he said. The transition toward MA is “telling” of where the future lies. 

“That’s what they control, and that’s what they’re continuing to drive,” he said.

Defining value in the latest innovations 

A wrinkle in the conversation about value is how to define it for some of the latest therapies, which may have a limited target audience but can extremely beneficial—even curative—for that patient population. 

It will require a “new formula for innovation,” Leavitt said. For example, a new product that’s approved by the Food and Drug Administration will have to have a value proposition alongside its billing number and approval. 

RELATED: The challenge of designing new payment models for drugs 

That proposition, he said, would be the clear statement of how that new medical device or drug or chemical bends the cost curve, or avoids piling on healthcare costs. 

And there’s good news: This is a trend that’s starting to get a foothold in the industry, Leavitt said.  

“You see that across the board, it’s rapidly becoming part of the equation for drug companies, device companies,” he said.

Suggested Articles

Employers that are most effectively controlling cost growth are throwing as many strategies as they can into the mix, according to a new report. 

Many adults are avoiding high drug costs by not taking the medication as prescribed.

Maryland legislators passed a bill that would help people who are uninsured enroll in coverage through their tax returns, plus more payer headlines.