Medicare Advisers Raised Rates but Complained of Flawed System

Earlier this month, President Obama pitched the economic case for health reform, first waving a paper by White House economists saying lower health costs would create jobs, and then signing a letter to senators outlining plans to repair an “unsustainable” system.

As part of his plan to cut costs, he backed an unheralded proposal to put a little known federal advisory commission in charge of Medicare spending and costs. “He endorsed one way to ensure that cuts would actually be made,” said a Jun. 6 New York Times editorial, “giving an obscure panel, the Medicare Payment Advisory Commission, enormous power to set Medicare payment rates.”

Conventional wisdom is that industry lobbyists convince Congress to ignore the panel’s expert advice, and constantly increase Medicare payments. The truth is, the commission often recommends even higher raises than Congress gives providers. For instance, in 2005, they suggested hiking payments for doctors by 2.8 percent, a year when Congress didn’t boost pay at all.

But, that misses the point, experts say. Elevating the commission, known as MedPAC, isn’t about greasing the path for unpopular payment reductions, an obvious way to save money. It’s about rethinking payment altogether. Even as MedPAC advised upping payments, commissioners quietly insisted for years that Congress should scrap its abstruse, fragmented rules for paying providers.

Congress did not act on the commission’s recommendations for payment policy that would encourage quality, efficiency and access. But experts say lawmakers seeking sustainable reforms will have to revisit those policies.

“This is such a critical juncture, and such a potential sea-change in how, if you’re going to expand coverage, you’ve got to look at payment differently to find that hallowed ground [between coverage and costs],” said Doug Hastings, an industry lawyer who also serves on boards for the Institute of Medicine and National Quality Forum.

The proposal to empower MedPAC was introduced by Sen. Jay Rockefeller, D-W.Va., in May, and would move the commission into the executive branch, give it authority to set payment rates with only yea-or-nay approval by Congress, and perhaps more significantly, to experiment with new models of payment.

“There’s no broad expectation for how this will effect spending,” said a Senate aide close to the plan. “But we believe decisions made by experts will lead to evidence-based [reforms]”

Those decisions could include, for instance, MedPAC’s years-old idea of refining hospital payment “to reward quality and efficient use of resources,” and unraveling “fee-schedule mispricing” problems that encourage physicians to favor expensive treatments.

The nitty-gritty intersection between payment policy and health care costs that Rockefeller foreshadows has been crowded out of the health care debate so far by interest in expanding coverage.

“There’s only so much air time,” said economist Len Nichols, who co-edited “Making Medicare Sustainable,” a wonky selection of articles that lends an intellectual crutch to Rockefeller’s plan. (The Senator’s staff e-mailed Nichols’ article in response to questions.)

“We really shouldn’t be paying fee-for-service,” Nichols added, noting that MedPAC reform was only one way to pursue that goal. “That’s what matters.”

In his book, Nichols and co-authors wrote, Medicare’s current payment system “is the source of numerous negative consequences, including low clinical and health improvement value for dollars spent. Even minor reforms are stymied by Congressional micromanagement or delayed by self-interested stakeholders.”

Meanwhile, Medicare’s trustees, who oversee a trust fund that finances the program now and in the future, have been on a collision course with their own projections of what year the money will dry up.

Since 2002, annual estimates have narrowed the gap by a year or more, with the 2009 report saying the fund would last until 2017–two years earlier than last year’s prediction–making some type of reform more urgent.

To be sure, it’s not at all clear that the proposal has legs in Congress, or among the legions of stakeholders, whose industry makes up nearly 17 percent of the U.S. economy.

Rep. Michael Burgess, R-Texas, a physician, said “I’m not a big fan of commissions, but what a commission is, is a way for congress to weasel out of tough decisions, to insulate us further from the people we represent.” Congress habitually intervenes to increase physician payments, including a 1.1 percent boost last year that Burgess and 382 other members supported. It replaced a scheduled 16-percent cut to keep the program on budget.

Also, one health care lobbyist who asked not to be named because his group had not yet taken a position said he believed his physician group’s members would oppose Rockefeller’s proposal, in part because it would make lobbying far more difficult. “We would lose our voice,” the lobbyist said.

Congress has a good reason to listen to those voices. Health professionals and hospitals, for whom reimbursement is a top issue, gave nearly $120 million to political campaigns in the last election cycle, says the Center for Responsive Politics.

“I find it very dubious that a Congress that won’t delegate any authority to the agency that’s running Medicare would delegate authority wholesale to a [commission] that won’t have any accountability once they’re appointed,” said Gail Wilensky, a former Medicare administrator and MedPAC commissioner.

Though not a fan of the mega-MedPAC concept, she’s sensitive to the problem that Rockefeller and other advocates hope to address. While she was on the commission, a congressman told her he “liked MedPAC’s recommendations when they were the same as what Congressmen wanted to do, and… didn’t like MedPAC so much when they were different.”

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Cost and Quality Medicare The Health Law