Financial trouble predicted for Medicare

Congressional action to clamp down on program spending could be triggered within two years.

By David Glendinning, AMNews staff. Jan. 2/9, 2006.

Washington -- As Federal Reserve Board Chair Alan Greenspan prepares to depart his position at the end of this month, he is leaving behind dire warnings about the long-term financial health of the Medicare program.

Cutting-edge advances in medicines prescribed by physicians to senior patients were singled out by Greenspan in a recent speech as one of the major causes for concern.

"Technological innovations can greatly improve the quality of medical care and can, in some instances, reduce the costs of existing treatments," Greenspan said to a Dec. 2, 2005, forum at the Federal Reserve Bank in Philadelphia. "But because technology expands treatment possibilities, it also has the potential to add to overall spending."

If the added costs of these physician-prescribed services significantly outweigh any savings derived from reducing the need for more extensive treatments, the Medicare program will have a difficult time maintaining its funding side over time, he said.

Potential increased costs stemming from the use of new medical technology already have caught the attention of Centers for Medicare & Medicaid Services Administrator Mark McClellan, MD, PhD. The agency launched an investigation into recent surges in spending on physician services to see whether doctors are overprescribing certain treatments.

Physician groups such as the AMA counter that doctors simply are following approved guidelines that stress more preventive care and lead to the increased use of new therapies. In the long run, according to these organizations, reduced hospitalizations and fewer medical complications will result in savings to the entire system.