Medicare and Health Reform: Part II



In his closing remarks to the Senate Finance Committee last week, Senator Baucus pointed with special pride to the effect the Committee’s reform bill will have on shaping the health care system in the longer run:

One point I want to make… is about delivery system reform.  We are starting here in this bill to finally reform our delivery system so it’s based much more on quality and patient focus, moving ever so slowly, but inexorably, from fee for service….which causes a lot of the waste in our system. We’re not going to see savings, the benefits, to the system for a while… but after four, five, six years from now, we’re going to see the real benefits of reform.

There is no doubt that the Committee’s America’s Healthy Future Act devotes considerable attention to fixing what’s wrong with the existing delivery “nonsystem” and improving government oversight. Title II (Disease Prevention and Wellness), Title III (Improving the Quality and Efficiency of Health Care), Title IV (Transparency and Program Integrity) and Title V (Fraud Waste and Abuse) of the Act consume 143 pages of the 259-page Chairman’s Mark.

And well it should.  As Professor Bill Sage’s aphorism, “It’s the delivery system stupid,” suggests, changing the structure and interactions of health care providers has long been seen as critical to efforts to control cost and improve quality.  Given serious questions about the strength and effectiveness of competition among private health insurers, especially without a public plan option to spur them, Medicare reform stands as the only viable means to bring about delivery system change.  Policy analysts have made the point that “Medicare is the place to start delivery system reform,” recommending payment reforms that reward accountable health organizations and move toward bundled payments  as a means to spur needed integration in health care delivery.

But how quickly can all this be accomplished?

The Kaiser Family Foundation report,  Strategies for Reining in Medicare Spending Through Delivery System Reforms: Assessing the Evidence and Opportunities throws some cold water on Senator Baucus’ hope for realizing significant savings in 5-7 years.  It concludes that some popular ideas–medical homes, electronic health records, bundled payments, accountable health records, and comparative effectiveness  research, while promising significant help in the long run, will need considerable fine tuning and are “unlikely to reduce costs significantly in the next five to ten years.”

At the same time the KFF report describes a number of steps that the Medicare Coordinate Care demonstrations indicate have the potential to reduce Medicare growth in the next five to ten years, such as care coordination and efforts to reduce hospitalizations and readmissions; extending the Resource Use Reporting project to inform physicians about relative resource usage; alteration in the bidding and incentive
structure of the Medicare Advantage plans; and other steps to improve the infrastructure supporting quality and efficiency.  The key question of course is: how do we implement these changes ?

Ultimately, realizing either short or long-term benefits depends on patience and politics.  Pham, Ginsburg and Verdier
have set forth a variety of changes in the  decision making process governing Medicare provider payment and other reforms to the delivery for the program that would serve “to ensure that the crafting and refinement of reforms, particularly those affecting payment for providers, is driven as much as possible by data rather than politics.” Notably the Committee’s America’s Healthy Future Act (at page 189) takes an important step in that direction by creating a fifteen member, bipartisan Medicare Commission that would be tasked with presenting  to Congress for fast track consideration proposals that:

  1. to the extent feasible target reductions to sources of excess cost growth;
  2. to the extent feasible, improve the health care delivery system, including the promotion of integrated care, care coordination, prevention and wellness and quality improvement;
  3. to the extent feasible, protect beneficiary access to care, including in rural and frontier areas;
  4. to the extent feasible, consider the effects of provider payment benefit changes on beneficiaries;
  5. to the extent feasible, consider the effects of proposals on any provider who has, or is projected to have, negative profit margins or payment updates; and
  6. to the extent feasible, improve the quality of care delivered to Medicare beneficiaries;
  7. to the extent feasible, consider the unique needs of individuals dually eligible for Medicare and Medicaid; and
  8. prior to December 31, 2019 not impact providers scheduled to receive a reduction to their inflationary payment updates in excess of a reduction due to productivity in a year in which the Commission’s proposals would take effect.

Professor Greaney’s is a nationally recognized expert on health care law and the Chester A. Myers Professor of Law and the Director, Center for Health Law Studies, St. Louis University School of Law.  Thomas Greaney has spent the last two decades examining the evolution of the health care industry. He is also a frequent contributor at Health Reform Watch where this post first appeared.  His testimony to the Senate on “Competition in the Health Care Marketplace” may be found here.

Read “Medicare and Health Reform: Part I”