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Inside the MedPAC meeting, where the tough cost calls get made

By Alec MacGillis
Anyone in the Washington area who wants a glimpse of what the future of American health care will increasingly look like if health-care reform legislation passes can head over to the Ronald Reagan Building and International Trade Center Thursday or Friday for the big MedPAC meeting.

Haven't heard of MedPAC? Well, you might soon. It's the 17-member commission that advises Congress on Medicare -- most notably, recommending payments rates to hospitals and other medical providers. And under the legislation now inching toward the finish line, it or a commission like it would be empowered to take a far greater role in overseeing Medicare, with authority -- of greater strength in the Senate than House bill -- to make the hard decisions to slow growth in health care spending, free of the political pressures that are now brought to bear on Congress.

When Sarah Palin warned about "death panels," it was partly MedPAC that she had in mind.

The commission is meeting to review its recommended payment rates for next year, a process that is, on its face, exceedingly dry and sober, but with enormous stakes for the medical industry, which helps explain the dozens of suits packed into the room to watch. And as it turns out, the commission got word this week that the stakes could get even larger -- Senate Democrats are working on a deal that would involve dropping the "public option" in exchange for, among other things, letting people between age 55-64 who are without employer-provided health coverage buy into Medicare. If that were to happen -- and hospitals and doctrs are already gearing up to make sure it doesn't -- that would mean several more million Americans whose health care would be paid at rates determined by the 17 people in this room at the Ronald Reagan Building.

Some highlights from today's proceedings:

1. For all the talk in the current health-care debate about the financial crisis that rural hospitals face because of low Medicare reimbursements, rural hospitals are actually doing slightly better on Medicare than urban hospitals are -- their operating margins on Medicare patients in 2008 was 6.4 percent below their reported costs, below the 7.3 percent loss that urban hospitals report and the 7.2 percent loss for all hospitals.

2. The growth in hospital costs slowed in 2009 as they looked for efficiencies during the recession, so that the overall operating margin on Medicare patients is expected to drop to a 5.9 percent operating loss from the 7.2 percent loss in 2008.

3. MedPAC continues to believe very strongly that it is wrong for hospitals to complain loudly about the gap between their costs to provide care and what they get reimbursed by Medicare. MedPAC staff members noted Thursday that hospitals that have the highest share of Medicare and Medicaid patients actually report costs that are closer in line with what Medicare pays, suggesting they have found ways to make do with Medicare rates. It is hospitals that still have a large share of private-paying patients that report the biggest gap, suggesting that their costs are much higher because they are able to afford bigger budgets on their private-payer revenue and have not tried as hard as other hospitals to trim costs.

And it's not just the bare-bones, lower-quality hospitals that report lower costs and smaller losses on Medicare patients. The commission released new data showing that, if one ranks hospitals by three key measures of quality and cost-effectiveness, the top 218 performers have costs that are at 91 percent of the median for all 2209 hospitals.

"Sometimes in discussing payment policy, it's easy to get the impression that hospitals have some fixed level of cost and it's immutable, and if Medicare doesn't pay, it must be paid" by shifting costs to private payers, commission Chairman Glenn Hackbarth said about the new data. "What this shows is that it's hardly immutable. There's a broad distribution ... and we need to identify levels [of payments] that reward efficient providers. What we want to do is increase the dynamic where hospitals are constantly looking at the low end of the [cost] distribution and saying, how do we get there?"

The commission gets back underway at 9 a.m. Friday, with discussions on the Medicare Advantage program, and assessing payment adequacy for inpatient rehabilitation facilities. The good seats go fast!

By Web Politics Editor  |  December 10, 2009; 4:06 PM ET
Categories:  44 The Obama Presidency , Health Care  
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"And it's not just the bare-bones, lower-quality hospitals that report lower costs and smaller losses on Medicare patients. The commission released new data showing that, if one ranks hospitals by three key measures of quality and cost-effectiveness, the top 218 performers have costs that are at 91 percent of the median for all 2209 hospitals."


This is the dramatic answer to the false rhetoric about Medicare "cost-shifting."

If they don't want to accept Medicare, let them refuse Medicare patients and actually learn about basic business math and basic stuff like overhead and marginal cost. The basics.

No, Medicare doesn't "cost shift"onto private insurance.

Medicare provides more patients (due to ability to pay), and thus

MEDICARE SUBSIDIZES PRIVATE INSURANCE by sharing overhead operating costs.

Without Medicare, hospitals would have to put all of those overhead costs right onto private insurance alone. That would be a rather dramatic example of reality.

Posted by: HalHorvath | December 12, 2009 3:08 PM | Report abuse

I am just wondering how all the Sarah Palin fans feel about her raising money for abortion?

She is scheduled to speak at a (socialist) Canadian Hospital I'm sure for a hefty fee.

The almighty dollar is HER God.

Posted by: JRM2 | December 11, 2009 3:09 PM | Report abuse

RE: New Medpac AKA

At least the current version of Medpac, is a TRULY independent commission----------all 17 members are appointed by the Inspector General of the GAO, the investigative arm of Congress.

That's as good as "independence" gets in DC.

IMAC's raison d'être------ policy insulation from the political temptations offered by special interests---- is the REPUTED reason that a NEW Medicare commission MUST report to the President---instead of, to the "untrustworthy Congress", who, Obama must believe, always takes a bite out of the devils' K-Street apples.

So Obama asked Baucus et al for a new Medicare commission (IMAC aka Medpac on steroids) that Obama will fill with his political appointees--------

thus IMAC becomes the antithesis of independence.

But the irony is that Obama has shown that he can be GREATLY swayed by these same special interests,
----- it just takes a bigger APPLE than K Street offers a member of Congress---think of Obama's $150M deal with PhRMA!!!

James C. Capretta, former Bush OMB director writes in The New Atlantis:

-----"The president......... wants to create a new and very powerful executive branch agency, the Independent Medicare Advisory Council (IMAC),

----"which would be accountable only to him and have the authority to re-write the Medicare program from top to bottom by executive memo. Now that’s audacious."

"Of course, if the president approved the council’s original package of recommendations, it is unlikely he would sign a congressional disapproval resolution overturning them."

"So, as a practical matter, the proposal would force Congress to find a two-thirds supermajority to stop presidentially-approved IMAC recommendations from going into effect."

"Nonetheless, the audacity is something to behold."

"Certainly unilateral executive branch authority to re-write entitlement programs from scratch would have come in awful handy during the Reagan and Bush years."------

Think of it----any decision of IMAC (new Medpac)--whose ONLY mandate is to FORCE more and more spending CUTS ON Medicare for years to come -----so no matter how onerous the result of these draconian cuts----bad decisions can be ONLY be overturned with a super majority...

that's 67 senators, and 291 representatives(of 435 total, 256 are DEMS).

-----WOW, voters would never have a voice about Medicare ever again!!!!

Speciously, Medpac on steroids has been compared to the Base Closing Commission(BRAC)-----but there is a one substantive similarity---THE NAME......

Just like the Base Closing Commission (BRAC), IMAC (Medpac on Steroids)-----will be the:


Posted by: johnowl | December 10, 2009 7:57 PM | Report abuse

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