Panel Lists Ways to Rein in Medicare Costs

For Immediate Release:

June 16, 2009

Contact:JANE ZHANG

Wall Street Journal

The independent commission that advises Congress on Medicare payments said the federal government must give doctors and health-care facilities incentives to rein in costs in providing care for the elderly and disabled.

President Obama is urging doctors to help him fix health care across the country. He's proposing cuts in federal funding to hospitals, but some say the reduction would endanger the already struggling industry.

"Part of the problem is that Medicare's fee-for-service payment systems reward more care -- and more complex care -- without regard to the quality or value of that care," according to a report from the Medicare Payment Advisory Commission released Monday. In addition, Medicare doesn't "encourage coordination among providers" that can cut down on unnecessary care.

The commission laid out a number of suggestions, including monitoring payments to groups of primary-care physicians, specialists and hospitals. Those providing poor care at high costs would be penalized and those that do well would be rewarded.

Medicare could also discourage doctors from ordering unnecessary, costly diagnostic tests if it lowers "mispriced" payments to imaging services. The commission said that "when physicians have a financial interest in imaging equipment, they are more likely to order imaging tests and incur higher overall spending on their patients' care."

The commission also supported cutting payments to private insurers who run so-called Medicare Advantage plans. In 2009, it said, Medicare will pay about $12 billion more for beneficiaries enrolled in those plans than it would have paid under traditional Medicare.

President Barack Obama, speaking to the American Medical Association's annual meeting in Chicago, also called for cuts to Medicare Advantage, urging the introduction of competitive bidding. That step, he said, "will save $177 billion over the next decade, just that one step."

The commission's recommendations are not binding, and Congress hasn't been willing to make some of the deep cuts the commission has recommended in the past.

With the recession, spending cuts have become more urgent. Medicare trustees have projected that the trust fund that covers hospital services will run out of money earlier than expected, in 2017. Also, Medicare beneficiaries have seen their premium payments for physician and outpatient services grow an average of 9.8% a year between 2000 and 2007 while Social Security benefits grew an average of 4% a year over the same period.

The new report comes as the Obama administration and some lawmakers are considering giving the Medicare commission more power to help rein in health-care costs. In a letter earlier this month, Mr. Obama said he is open to letting Congress vote for or against commission recommendations, but not alter them. And in his AMA speech today, he said he's open to expanding the commission's role.

"In recent years, this commission proposed roughly $200 billion in savings that never made it into law," Mr. Obama told the doctors' group. "These recommendations have now been incorporated into our broader reform agenda, but we need to fast-track their proposals, the commission's proposals, in the future so that we don't miss another opportunity to save billions of dollars, as we gain more information about what works and what doesn't work in our health care system."

Sen. Jay Rockefeller, Democrat of West Virginia, wants to go even further. He is pushing legislation to convert the commission to an independent agency that would have the power to set Medicare payments, much like the Federal Reserve sets interest rates.

That would make it easier for the government to carry out payment cuts for hospitals, physicians and other providers. That could help Mr. Obama achieve the savings he needs to carry out his health care proposal, including the $313 billion in Medicare and Medicaid cuts the president announced Saturday.

But some Democrats aren't comfortable with the idea of taking power from Congress. House Majority Leader Steny Hoyer of Maryland already said he doesn't like leaving Congress with limited options to change Medicare payments.

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