Dr. Mark McClellan

Dr. Mark McClellan, who will step down Saturday as administrator of the Centers for Medicare and Medicaid Services, met with reporters at a Monitor-sponsored breakfast on Friday.

As head of an organization that dispenses some $610 billion in healthcare payments, Dr. McClellan's vision and management savvy have gotten positive reviews from such dissimilar editorial pages as The New York Times and The Wall Street Journal.

The questioning began with the financial challenges an aging population poses for the healthcare system in general, and Medicare in particular.

McClellan said, "I want to distinguish steps to make our healthcare system work better at the lowest possible cost for aging Americans, and steps to make ... our Medicare and Medicaid sustainable. The aging of the baby boom is putting big pressure on both."

Turning first to the healthcare system as a whole, McClellan said, "the best thing that we can do is to take further steps to improve the efficiency in the way that it works, of getting more for the dollars that we spend. Steps like paying more for value, shifting benefits so that they are up to date and stay up to date, getting patients more involved because care is increasingly about prevention ... all of those steps can help us get the overall cost of care down...."

There is substantial waste in the healthcare system that can be eliminated, McClellan said. "Because of medical errors, misuse of treatments, overuse and underuse, by many estimates up to 30 percent or more of our healthcare spending is going for the wrong thing. We need to be making much more progress on getting that right."

McClellan, the older brother of former White House press secretary Scott McClellan, then turned to steps that could put the Medicare program on a sounder footing for the future. "Anything we do to avoid unnecessary spending, to get overall costs down, is going to help with sustainability," he said.

But McClellan said he favored "reduced subsidy levels" from Medicare "for wealthier Americans."

"I do think we need to continue to take a close look at what Medicare can support for the long term. In 2007 we are implementing an income-related premium in Medicare. What that means is that the wealthiest beneficiaries will still get a significant subsidy for their Medicare benefits. The overall Medicare subsidy next year is going to be worth more than $7,000 a person, and even the wealthiest beneficiaries will continue to get most of that subsidy. But steps toward having people with the most means use their own savings and their own resources to pay for part of their care, while keeping the whole Medicare program up to date, making sure it is available and providing effective coverage for everyone, can be a very important step toward making the program sustainable," he said.

The challenge of making Medicare sustainable was a key part of a speech last week by Federal Reserve Board Chairman Ben S. Bernanke. The Fed chairman stressed the country's need to boost saving to pay for the effects of an aging population. He noted that Medicare's cost is projected to rise from 3 percent of gross domestic product (GDP) today to 9 percent in 2050. That is more than the country now spends on both Social Security and Medicare.

Bernanke said the choices for dealing with the financial costs of an aging population are higher taxes, less non-entitlement spending, a reduction in outlays for government programs, a sharply higher budget deficit, or some mix of all these.

McClellan cited the recently enacted Medicare prescription drug benefit as an example of the gains that can come from competition and from consumers making frugal choices.

"The average costs that the [providers] say they need for 2007, or their bids for providing the drug coverage, turned out to be about 10 percent lower on average than had been the case for 2006. So drug costs to taxpayers will be on average about 10 percent lower in 2007 than in 2006," McClellan said.

"Another way to look at it is that the bids the plans made for 2007 are about one third lower than had been predicted a little bit over a year ago in the middle of 2005 because of ... very strong and aggressive competition and people choosing low-cost plans," McClellan said. He noted that, "something like 75 percent plus of our beneficiaries chose plans which cost less than the average."

McClellan brings a strong academic background to his work. He earned his bachelor's degree from the University of Texas, his master's degree from Harvard University, his medical degree from Harvard-MIT Division of Health Sciences and Technology, and his PhD from Massachusetts Institute of Technology.

Not surprisingly, McClellan is optimistic about the role medicine will play in the country's future. "If you look ahead in the 21st century, this really should be what many experts have called and the economists have called the biomedical century. Healthcare and biotechnology and innovation in medicine are areas where the United States can lead the way for the world in innovation, can lead the way for the world in helping people live much longer and much better lives," he said.

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