A few minutes into a routine flight departing New York City’s LaGuardia Airport in January 2009, Capt. Chesley “Sully” Sullenberger realized he had no choice but to guide the airplane through an emergency landing in the Hudson River. A flock of geese had taken out both engines.
As Sully began maneuvering the aircraft down, he took a moment to address the passengers, saying simply, and as it turned out, famously: “Brace for impact.” The 150 passengers—all of whom survived—did what they could to prepare during the 90 seconds before the plane hit. Perhaps they tightened their seat belts. Maybe a few summoned the presence of mind to begin processing what was happening and think through what might happen next.
The events that turned an everyday trip into the “miracle on the Hudson” don’t have a direct parallel in the healthcare policy arena. Unlike that fabled flight, warning lights signaling the financial unsustainability of Medicare, and by extension that of the American healthcare system, have been flashing for years. The Medicare Hospital Insurance (HI) Trust Fund has long been in jeopardy. In late 2019, the Medicare board of trustees, in its annual report to Congress, projected that the HI Trust Fund would become insolvent in 2026. But COVID-19 could be the black swan event that takes it down even sooner, all in an environment of massive federal deficit and debt.
As the healthcare industry grapples with this global pandemic, leaders could not be blamed for focusing on today’s crisis and wanting to set any long-term implications aside. The short-term operational impact of the pandemic has been all-consuming. And across the board, providers have been hit by staggering financial impacts.
But healthcare leaders need to muster the energy to look beyond the short term. The pandemic’s effects will reverberate for years. If we don’t act now, the HI Trust Fund could be collateral damage. The Medicare trustees recently warned that the fund could become insolvent as soon as 2023. The Medicare Payment Advisory Commission estimated that keeping Medicare solvent for 25 years would require either increasing the Medicare payroll tax from 2.9% to 3.7% or an immediate 18% reduction in Part A spending. (Payroll tax receipts account for nearly 90% of HI funding.)
But increasing the tax rate—a politically daunting task, to say the least—may not solve the problem during a period when the payroll tax base is shrinking by historic amounts, assuming that the recession, the pandemic or both continue into 2021 and beyond. The alternative path to sustainability—reducing Medicare spending—is more politically palatable and therefore the lever that healthcare leaders are most comfortable using, even though the track record is not promising.
The hard truth is that our country’s approach to reining in healthcare spending growth has been sporadic, fragmented and largely ineffective, since long before the emergence of the novel coronavirus.
As a nation, our quest to bend the cost curve has led us to expand access to health insurance coverage through the Affordable Care Act, increase premium cost-sharing, experiment with alternative payment models (albeit at low penetration levels) and reduce real fee-for-service payment rates, among other strategies. Yet, these multipronged efforts to reduce the total cost of care while maintaining or improving quality have had limited results, at best. The growth in actual and projected healthcare expenditures continues to outpace inflation.
Make no mistake: This scenario was unsustainable in the pre-COVID environment. But given the long-term economic impact of the pandemic on public and private payers as well as the enormous losses incurred by hospitals and health systems, the situation has taken on new urgency. Similar pressures are being exerted on state and local governments and employers that sponsor health insurance.
The hard truth is that we must find a way to sustain the financial health of both the payer and provider sides of the industry while reducing the total cost of care. Unless we can bring rationality to the healthcare system and start making tough decisions, economic crisis conditions will make them for us. And that scenario would be a shame, if not mismanagement.
For healthcare organizations, making tough decisions means proactively moving toward shared risk in order to align fragmented care-delivery models and evaluating ways to reduce the total cost of care. It means redefining the role of the hospital. And it means bringing about transformational change while contending with the ongoing demands of a global pandemic.
That sounds good on paper, but for healthcare leaders, making these kinds of tough decisions will inevitably entail disrupting careers, enduring organizational restructuring and living with long-lasting uncertainty.
A piece of advice for those who accept the challenge of leading the change: Brace for impact. We have more time to prepare than the “miracle on the Hudson” flight crew did, but we’ll need every minute we can get. There will be no miracle rescues here. The sooner we can come to grips with the hard truths of American healthcare, the better our prospects of shaping a sustainable future, not only for Medicare, but also for our nation’s healthcare system.