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News Break: How the White House Hopes to Control Health Care Costs


You've heard the line that "entitlement reform is health reform." Yesterday, at a meeting between Barack Obama and Senate Democrats from the Finance and HELP committees, that line grew up and graduated into something altogether sturdier: A policy. Senate sources confirm that the president argued in favor of a genuinely major Medicare reform -- a reform that could make Medicare the nation's most important laboratory for health care reforms.

You probably haven't heard of MedPAC. Most people haven't. It stands for The Medicare Payment Advisory Commission and it's an independent congressional agency formed in 1997 to advise the Congress on matters relating to Medicare. The commission is staffed by experts who are appointed for three-year terms, and its existence is due to a simple insight: Medicare payment policy is too technical for the Congress. There aren't five senators with an informed opinion on the "equipment use standard" for imaging machines, much less 50, and much less 100.

Every year, MedPAC releases a "report to the Congress on Medicare payment policy." The report contains acres of analysis (this year's "assessing payment adequacy and updating payments in fee-for-service Medicare" was particularly thrilling) and a final chapter on recommendations. The recommendations tend to be smart, aggressive, reforms. The sort of reforms experts agree are needed, but interest groups effortlessly stymie. The recommendations don't, in other words, matter. None of it does, really. The report sits on a shelf.

But what if it didn't? What if MedPAC had power?

That's what the White House wants. There are, I'm told, two policies under consideration. The first is a version of Senator Jay Rockefeller's MedPAC Reform Act. This legislation would move MedPAC into the executive branch. The commissioners would be approved by Congress and appointed for six-year terms. Beyond that, it would largely be an autonomous agency, able to set Medicare payment rates, conduct trial programs, and fund policy initiatives.

The theory is that it would act as a Federal Reserve for Medicare. "Congress has proven itself to be inefficient and inconsistent in making decisions about provider reimbursement under Medicare," said Rockefeller. "Congress should leave the reimbursement rules to the independent health care experts.”

That's the plan Obama spoke of favorably in yesterday's meeting. But what hasn't been reported is that senior administration officials are also considering another variant: This plan would package MedPAC's yearly recommendation and fast track them through Congress for a simple, up-or-down vote. No filibuster. No changes to the package of recommendations. Health reform, under this scenario, would become a yearly legislative project.

And that's how some in the White House would prefer it. The health system changes too quickly for Congress to address through massive, infrequent, efforts at total reform. New technologies and new care structures create new problems. A health care reform package signed in 2009 might miss some real deficiencies, or real opportunities, that present themselves in 2012. A health reform process that recognizes that fact is a health reform process that is continual, rather than episodic.

But the reason health reform is so infrequent is that it's structurally difficult. Small tweaks are too technically complex for Congress to easily conduct and so are dominated by lobbyists. Large reforms attract broad interest but are impeded by polarization and the threat of the filibuster. The MedPAC changes under discussion are, in other words, nothing less than a new process for health care cost reforms. They empower experts who won't be intimidated by the intricacy of the issues and sidestep the filibuster's ability to halt change in its tracks.

MedPAC, of course, is restricted to Medicare. But there's little doubt that where Medicare leads, the health care industry follows. Private insurers frequently set their prices in relation to Medicare's payment rates. Hospitals are sufficiently dependent on Medicare that a reform instituted by the entitlement program becomes a de facto change for the whole institution, and thus all patients. A process that empowers Medicare to aggressively and fluidly reform itself would end up dramatically changing the face of American health care in general.

Thus far, we've heard a lot of talk about cost control. But this is the first time, at least to my mind, that we've seen anything that actually looks able to deliver on controlling costs. To flip the old line, this is where health care reform becomes entitlements reform.

(Photo credit: Chip Somodevilla -- Getty Images Photo )

By Ezra Klein  |  June 3, 2009; 9:30 AM ET
Categories:  Health Reform  
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MedPAC routinely cuts Medicare payments to physicians, and private insurers follow suit.

This is the only method of cost containment, since rationing expensive medical treatments is politically untenable, as is reining in the medical malpractice industry to limit the huge cost it imposes.

Doctors routinely respond by seeing more patients (but only for 15 min at a time), ordering more unnecessary or marginally necessary tests (for money and to avoid lawsuits), and recommending more followup appointments and referrals.

If you wonder why your dog gets more sensible medical care than you do, MedPAC is one reason why.

Posted by: Peejay | June 3, 2009 9:52 AM | Report abuse

Hmm. I wonder if they're trying to transform MedPAC into Daschle's vision of a Board/Committee of Health Reform? I hope not as the breadth of their experience and power seems too narrow.

Posted by: ThomasEN | June 3, 2009 10:53 AM | Report abuse

"MedPAC routinely cuts Medicare payments to physicians, and private insurers follow suit."

MedPAC doesn't cut anything. They're purely advisory, though their opinion is influential.

Posted by: steveh46 | June 3, 2009 11:09 AM | Report abuse

Steve is right on that. In the world being promoted here, MedPAC would actually be able to do the cuts.

Posted by: Ezra Klein | June 3, 2009 11:13 AM | Report abuse

Forgive my shorthand when I said MedPAC cuts payments. I meant MedPAC recommends payment cuts, which are adopted by congress in a watered-down form after lobbying by various health care interests.

It's still a messed up system.

The prices are set by the government in a way that distorts markets and does little to contain costs. And the end result is unjust: doctors have to do more to earn the same amount. And doctors aren't the only victims. This encourages self-referral and other forms of over-utilization.

Forgive me if I'm not happy with MedPAC having more power. Maybe I'd be OK with it if there were also a MedPAC regulating plaintiff's attorneys.

Posted by: Peejay | June 3, 2009 12:46 PM | Report abuse

Peejay -- so how does this differ form what happens under private insurance coverage?

Posted by: seerrees | June 3, 2009 1:08 PM | Report abuse

Peejay tellingly said "doctors have to do more to earn the same amount."

Right. Because the US healthcare system's primary goal is to maintain doctors salaries.

Posted by: jeirvine | June 3, 2009 1:20 PM | Report abuse

seerrees - I don't think I made the argument that private insurance would do it differently. But at least private insurers don't have the same power to fix prices.

jeirvine - You have a problem with people having an expectation to get paid more if they work harder?

If the problem with medical care is overutilization, the solution isn't to pay less for the same work, it's to discourage overutilization.

Posted by: Peejay | June 3, 2009 1:40 PM | Report abuse

It is a major step in the right direction to actually control health care costs. Yet let's be real: Does this latest plan being considered include or exclude holistic / natural practitioners, that have mostly been underfunded, or given no funds whatsoever?

Based on how this has been handled for decades, lobbyists representing the financial interests of "Big Pharma", the AMA, and other "big boys" represent "more of the same" while a large percentage of the population that prefer holistic or natural remedies are sidelined because these remedies cost much less, and they do not have adequate funding to challenge the "big boys" and their "PAC" interests.

For more on this, while finding out how you can get a better understanding, go to:

Posted by: HealingNews | June 3, 2009 2:40 PM | Report abuse

The author complains that 535 people are too easily influenced by lobbyists and their money. How would the 10 or so people assigned with doling out billions in profits be protected from the same influence? Don't give me the "because they're just really good people" garbage. It would have to be concrete because those peeps on the MedPAC board would instantly become some of the wealthiest people in this country if they let their standards down for one check and the medical industry would be more than happy to make it happen. As far as citing some type of history for my opinion, the author does it for me. When Tom Daschle left the Senate after proposing changing how Medicare is overseen, he was immediately hired by a lobbying firm, skirting most ethics rules. That lobbying firm dealt with, you guessed it, the health industry. He then would have come back to Washington as head of Health and Human Services where he would have been in a position to do what it was he was paid by the health industry to regulate. The only thing that stopped him was his tax problems. That certainly would not have stopped Obama. So, there is certainly reason to suspect who would be on that board given Obama's total control to assign who is on it. This is a good idea in concept. Making it an executive board under the control of the President is not.

Posted by: Moonage | June 4, 2009 8:00 AM | Report abuse

I have been receiving the medpac reports for years(they were free)..most of the time they recommended positive rate adjustments to providers but their suggestions would get caught up in the politics of the budget. Medpac makes suggestions based on thorough research which isn't a bad way to run the system..

Posted by: notmd | June 4, 2009 2:05 PM | Report abuse

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