The Super Committee: Bracing for More Medicare Cuts

I attended a depressing forum on cost-saving ideas for Medicare to present to the Congressional “Super Committee” charged with coming up with $1.2 trillion in budget savings by the end of the year. The tone was ominous, best summed up by Mark Smith, president of the California HealthCare Foundation. “In times of crisis, meat-axes are taken to whole sectors. If you don’t believe me, ask the people who used to work for Lehman Brothers,” he said.

Here’s the backdrop. President Obama in his mid-September budget reduction plan called for coming up with an additional $320 billion in Medicare savings over the next decade, which would be on top of the half trillion dollars in Medicare cost reductions contained in the Affordable Care Act. The president would get there largely by cutting payments to hospitals and other providers, although the president also called for higher premiums on wealthier seniors for physician and drug coverage.

Will the Super Committee look for the same $320 billion in cuts to Medicare? A good case can be made that Medicare’s contribution to the $1.2 trillion recommendation should be less than what the president sought. The Congressional Budget Office’s current baseline projections for federal spending over the next decade has Medicare spending $7.4 trillion out of a total of $44 trillion. That’s 16.8% of ALL federal spending (defense, Social Security, discretionary domestic programs, you name it). Apply that 16.8% to $1.2 trillion and you get about $202 billion as Medicare’s “fair share,” not the $320 billion proposed by the president.

Still, there were precious few ideas at this morning’s forum that would come up with even a fraction of that total. Robert Berenson of the Urban Institute and Steve Phurrough of the Agency for Healthcare Research and Quality, both former top-ranking officials at the Center for Medicare and Medicaid Services, outlined a series of steps CMS could take to get better pricing, stop paying for uncalled for operations, and only pay the price of the “least costly alternative” when medical interventions are comparable. But most of those changes would require Congressional approval (fat chance), and none of the examples given (they spent a lot of time talking about implantable cardio-defibrillators, where an estimated 25% to 30% of the million operations each year are in patients who don’t really need them) raised more than a billion dollars.

Then there’s the question of whether CBO would actually “score” those changes as savings. David Auerbach, a former CBO staffer now at RAND, said the official scorekeeper tends to score savings when there is a track record from pilot programs or solid studies suggesting there is a high likelihood that a change in policy will lead to reduced health care spending. In other words, when it comes to things like using comparative effectiveness research to set prices at the level of the least costly alternative, the answer is no.

So where are we? As the Congressional clock winds down toward the end of the year, a bi-partisan Super Committee is looking for ways to hold down spending while the rest of the Congress (and the 12 members of that committee) need to come up with an additional $300 billion for Medicare over the next decade to avoid sharp cuts in physician reimbursement — the so-called “doc fix.” By my calculation, that’s somewhere in the neighborhood of another $500 billion in cuts elsewhere in Medicare over the next decade. To put that in perspective, that’s an average of $50 billion a year in a program that is slated to grow from $555 billion in 2011 to $966 billion in 2021, according to CBO.

The best hope for avoiding “meat-axe” cuts of that magnitude or the privatization and cost-shifting to beneficiaries sought by Republicans is rapid success of the structural reforms included in the ACA — the formation of accountable care organizations, increased use of bundled payments, and better care coordination. These experiments are being forged under intense budgetary pressure. Anyone who cares about the future of Medicare has to be rooting for their rapid success.

Merrill Goozner has been writing about economics and health care for many years. The former chief economics correspondent for the Chicago Tribune, Merrill has written for a long list of publications including the New York Times, The American Prospect, The Washington Post and The Fiscal Times. You can read more pieces by him at GoozNews, where this post first appeared.

4 replies »

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  2. Improving Our Ability to Assess Health Care Services:
    A Suggestion for the Joint Select Committee and CBO Consideration

    The need –

    This week the Commonwealth Fund released its National Score Card Analysis report, based on 2009 data, that shows a decline in the number of insured. As newer 2010 data are analyzed and reported, changes in the results of Score Card measures will be closely watched. The Affordable Care Act (ACA) was implemented to reverse these trends and provide nearly universal health insurance coverage for Americans. Studies show that health insurance is the gateway to access and use of appropriate health care services. Also this week, Health Affairs held a conference to identify “Saving Money and Improving Patient Care in Medicare: Ideas for the Joint Select Committee. With these events as a backdrop and the need the Joint Select Committee to identify “scoreable” improvements in healthcare delivery, we offer the following:

    1. Improvement in access to healthcare services relies on the political will of the U.S. to fully implement the Affordable Care Act (ACA).

    2. Healthcare costs are now approaching 17% of GNP (or $2.5 trillion). The affect of the ACA on health care costs is a subject of vitriolic debate. Identifying scoreable improvements are urgently needed.

    The problem—

    3. CBO estimates that as much as 33% of healthcare expenditures are wasted.

    4. Chronic medical care is the main driver of our health care system. Eighty percent of health care costs are being spent on those who suffer from chronic conditions and therefore perhaps as much as $660 Billion ($2.5 Trillion x 80% x 33%) is wasted on inappropriate or harmful treatments for chronic conditions.

    5. Although access to healthcare remains the focus of the current political debate, understanding “what works in medicine” will also have a significant impact on improving patient outcomes and reducing both overuse of services and healthcare costs.

    6. Contributing to the waste are treatments used in mainstream medicine that have not been proven by valid scientific evidence. Robert Smith, Editor BMJ (BMJ, 1991) estimates that only 20% of procedures are supported by valid evidence. In the absence of valid scientific evidence, providers rely on the normal heuristic i.e., treat patients to “normal” values (e.g., physiologic parameters, lab values, etc.). However, this tendency also introduces overuse leading to treatment side effects that cause adverse outcomes.

    A recent example of the solution, translation of research findings into policy—

    7. A case in point is epoetin therapy for chronic dialysis related anemia. Medicare has spent as much as $2.5 billion per year for this drug therapy without evidence of clinical benefit or improvement in quality of life. Based on recent reviews of the existing evidence-based literature, both CMS and FDA made changes in 2011 to their epoetin policies that will result in a 25-50% reduction in use of epoetin in 2011. Elimination of overuse of epoetin also improves both patient survival and reduces adverse events.

    The opportunity –

    8. As shown by the case study of epoetin therapy, the role of comparative effectiveness research is critical to deciding what works, what should be covered, and the value of covered services. As defined by the IOM and others, “Comparative effectiveness research (CER) is the conduct and synthesis of research comparing the benefits and harms of different interventions and strategies to prevent, diagnose, treat and monitor health conditions in ‘real world’ settings. The purpose of this research is to improve health outcomes by developing and disseminating evidence-based information to patients, clinicians, and other decision-makers, responding to their expressed needs, about which interventions are most effective for which patients under specific circumstances.”

    9. A new focus of CER is patient-centered CER that involves the patient and other stakeholders in all aspects of the comparative effectiveness research from which questions to prioritize, which outcomes to examine, which populations to study, which interventions to include (e.g., medications, procedures, medical and assistive devices and technologies, diagnostic testing, behavioral change, and delivery system strategies), and finally which datasets to use and which comparative methods are most appropriate.

    10. Randomized controlled trials are important, but only provide insight into clinical effectiveness of a small group of patients in the “ideal setting,” are very costly to conduct, and are very time consuming. Pragmatic clinical studies rely on existing “real-world” data, are comparatively much less costly, can be conducted in a short period of time, and can address many policy questions regarding coverage and reimbursement of existing and new services. Real-world data emanates from electronic patient records, patients registries, claims data etc..

    11. Expanded Medicare claims data containing treatment dose and physiologic response was the source used for three recent pragmatic clinical studies whose results catalyzed Congress, CMS, and FDA to act to further restrict overuse of epoetin therapy. Specifically, pragmatic clinical studies, using causal methodologic techniques led to findings that influenced Congressional decisions to implement the new ESRD Prospective Payment System (PPS) initiated in January 2011. As a result, preliminary data suggest that epoetin use has dramatically declined.

    How to score this opportunity –

    12. Eighty percent of health care costs are attributable to treatment of chronic conditions. Imposition of a requirement to include treatment data (e.g. Medicare’s requirement to include both treatment dose and physiologic response as demonstrated in our epoetin therapy example) on interventions used to other chronic disease conditions, will allow researchers to use expanded claims data to conduct pragmatic clinical studies to assess the value of such treatments. In the epoetin case, researchers were able to identify overuse (~ 50%) of the drug as well as an increased mortality risk of 32% among diabetic vs. nondiabetic dialysis patients. These CER results supported recent CMS and FDA changes in epoetin policy. Physicians and other providers have responded to these changes by reducing: epoetin doses, the number of patients exposed to epoetin, and the number of additional hospitalizations and other services need to treat the side effects from epoetin overuse. Table 1 below suggests criteria that could be used to identify overuse of drugs.

    Table 1. Criteria to identify overuse of drug interventions for chronic conditions:
    – Administering initial doses above the FDA recommended dosage range
    – Administering maintenance doses above the FDA recommended dosage range
    – Continuing to administer doses to hyporesponsive patients after the point at which FDA recommends stop using the drug
    – Titrating doses outside of the FDA recommended dosage range
    – Treating patients above the FDA recommended treatment target (physiologic response) range
    – Treating patients with complications/comorbidities, conditions that were used as exclusion criteria in FDA Phase III pivotal studies a/o approved labeling
    The result—

    13. As evidence-based medicine advances the understanding “what works in medicine,” these studies will lead to more prudent use of other costly health care services, shown to be clinically effective, and ultimately lead to better healthcare for all Americans.

    Submit on 10/20/11 by:

    Dennis J. Cotter
    President, MTPPI
    Bethesda, Maryland

    MTPPI (www.mtppi.org) is a 501(c)3 non-profit institute, established in 1986, that studies the causal relationship between treatment and clinical outcomes for chronic conditions.

  3. No one said anything about medical tourism?
    Providers are supposed to be losing money on Medicare patients anyway.

    During Obama-Facebook conference I think someone asked Obama same question, to which he said, all seniors should get quality medicare on shore.