By John Reichard, CQ HealthBeat Editor

August 16, 2006 -- Could Republicans and Democrats actually be listening to each other when they discuss how to tackle the growing national headache of rising health care expenditures? Remarks last week by economists of varying political persuasions fueled suspicions that might be the case.

Albeit it was a highly limited sample, three current or former members of the White House Council of Economic Advisors discussed the issue at a meeting sponsored by the American Risk and Insurance Association in terms that suggest the coming national debate over health care entitlement programs might be less hidebound than in years past.

Absent was the usual pattern of Republicans talking about chopping entitlements without addressing the impact on health care and of Democrats emphasizing the need to protect health status while saying little about how to cope with costs.

On the one hand, former Clinton adviser Peter Orszag talked about how "we could be wasting a lot of money" in Medicaid in the absence of standards of personal responsibility in the program. Orszag also talked about changing the way employer-provided health insurance is taxed, an idea identified more often with Republicans seeking to make individual consumers more sensitive to health care costs.

On the other hand, Bush economic adviser Katherine Baicker pointed to European health care as a measuring stick for the performance of the U.S. health care system, suggesting that the American system is sorely wanting in efficiency. And former Bush adviser Douglas Holtz-Eakin stressed the importance of ensuring the debate isn't just about dollars. "The worst way to do health care reform will be to cut the federal budget and just make sure we don't spend money," he said.

Their remarks come when the new Treasury Secretary, Henry M. Paulson, has named control of entitlement spending as one of his priorities and when the White House is increasingly talking about reining in Medicare spending.

If those efforts are going to go far, they may need to emulate the relatively nonpartisan tone of the Aug. 8 panel discussion.

Quality Versus Quantity
Baicker, a recently appointed member of the White House Council of Economic Advisors, helped set that softer tone by saying, "I would be much less concerned with how much money we're spending on health care if I thought that we were getting our money's worth."

Leading GOP advisers aren't known for comparing the United States unfavorably to European and other nations, but Baicker didn't shy away from noting findings that the United States spends more on health care than other nations, in some cases without better treatment results.

"We spend more than twice as much of our [gross domestic product] on health care as our comparable trading partners in the OECD [Organization for Economic Cooperation and Development], and it doesn't seem as though our health outcomes are twice as good," she said.

"In fact, our rate of health care spending is increasing just as quickly as theirs, so it's not that we've reached some plateau before they have. We're growing just as quickly, and we're starting out at a much higher level."

"There's ample evidence that our dollars could go further if you look at international comparisons," she summarized.

Baicker also emphasized that there are big geographic variations in spending within the United States with no apparent payoff in higher quality in higher-spending regions. The Medicare Payment Advisory Commission (MedPAC) has identified the elimination of such variations as a potentially fertile source of savings for Medicare, but academics more than politicians talk about the promise of ending those variations.

"There is dramatic variation in how much we spend per Medicare beneficiary," Baicker commented. "We spend more than twice as much for a Medicare beneficiary in Miami as we do in Minneapolis, even after you take into account age differences, gender differences, other demographic differences, even illness differences," Baicker said.

"They don't start out sicker. They don't end up healthier. And in fact they don't even report that they're happier with their health care. So it's really unclear what it is we're buying with those extra dollars. The areas where we are spending more money per Medicare beneficiary, they are less likely to get what is fairly universally acknowledged to be higher-quality care."

Beneficiaries in higher-spending areas use many more specialists, see many more physicians in general, and spend much more of their last six months of life in the intensive care unit, she said. "Each of those specialists that they see may be less likely to ask, 'Gee, did you get your flu shot? When was your last mammogram?' "

"It's a failure of coordination of care," Baicker continued. "So if we were to find a way in the Medicare program to coordinate care for their patients better, we might spend less" and patients would quickly be getting higher-quality care, she said.

Orszag, now a researcher at the Brookings Institution, agreed, "we spend a lot of extra money for things that don't bring significant health benefits." "That is the opportunity," he added, "because it suggests that we can constrain health care cost growth in ways that don't actually, materially, adversely affect health outcomes." Orszag also agreed that paying higher rates to higher quality providers who follow best practices "is part of the way forward."

Orszag also noted "West Virginia and some other states have moved toward a compact of personal responsibility in exchange" for certain Medicaid benefits—something he said should be explored. "Basically, you need to take steps to take care of yourself and actually show up for medical appointments and vaccinations and what have you, and in exchange, we'll provide health care. In the absence of the personal responsibility component, we could be wasting a lot of money."

Orszag also said that changes in taxation of employer-sponsored coverage should be considered. He noted that the current system gives higher-income Americans bigger tax breaks for the health benefits they get at work. Instead, a refundable tax credit should be considered for health care that doesn't favor higher-income Americans, he said.

Differences in Opinion
But fundamental differences remain in approaches to controlling spending. Orszag and Baicker parted company, for example, on the value of health savings accounts. Baicker said that the way employer-provided health care is taxed discourages people from comparing costs. She complained that if one buys a health policy that covers catastrophic costs with routine care paid out of pocket, routine care is paid with post- rather than pretax dollars. Traditional employer-provided insurance funds routine care with pretax dollars and discourages people from comparing costs, she said.

"If we had health care insurance that looked like other kinds of insurance, we would pay for routine care out of pocket and there would be no tax penalty for doing so," she said.

Baicker suggested that people might choose more efficient care under such a scheme. But Orszag said that approach would discourage people from getting important preventive care and would have limited impact on spending because so much of the nation's health care spending—80 percent, according to Orszag—goes to pay for services purchased above the deductible amounts of catastrophic coverage plans.

But Baicker said her calculations show that closer to 50 percent of health care spending is above the out-of-pocket maximums set by catastrophic coverage plans.

Holtz-Eakin stated that ending health care programs "is not a solution." "Instead, we have to make some fundamental policy decisions in the United States about the degree to which we want to continue to have pay-as-you-go social insurance-style systems, versus systems that look more like self-insurance," with prefunding and individuals responsible for their own end-of-life costs.

"To the extent that we move toward the prefunding model, it will help with our national savings, it will help with the ability to fund a standard of living that's satisfactory for our children, but it will come at the expense of exposing us to more risk at the individual level and we need to decide as a nation where we stand on that."

By Steven T. Dennis, CQ Staff

August 17, 2006 -- The acting director of the Congressional Budget Office said Thursday that the federal budget deficit for fiscal 2006 had shrunk to a "sustainable" level of $260 billion, the lowest in four years.

Donald B. Marron, who became acting CBO director after Douglas J. Holtz-Eakin departed at the end of 2005, issued a sanguine view of the economy and the deficit picture. He described the deficit as below the historical average as a percentage of gross domestic product (GDP) and projected a reduction in inflation coupled with continued economic growth.

"It's a level that's sustainable," Marron told reporters, referring to the deficit, which has dropped to about 2 percent of GDP. Marron said deficits at that level would not cause the national debt to grow faster than the economy as a whole.

The CBO's mid-year fiscal update predicts the deficit will increase in 2007 to $286 billion, drop to $273 billion in 2008, and then climb to $328 billion in 2010. But it would shrink sharply in 2012—to about $54 billion—if tax cuts enacted this decade are allowed to expire on schedule. Marron issued no judgments on whether that was a wise course of action.

Instead, Marron said the government could continue to run deficits in the range of 2 percent of GDP indefinitely, although he acknowledged long-term challenges from the looming retirement of the Baby Boom generation. The bulk of those effects, however, come outside the CBO's 10-year budget window.

The CBO, which had first announced its new, lower deficit projection two weeks ago, cited a wave of higher-than-expected revenue from income, payroll, and corporate taxes. Marron said it was too early to know exactly why that revenue spurted, but he surmised that the still strong housing market and capital gains realizations played a role. The CBO does not expect this year's spurt in revenue to replicate itself, as it expects corporate profits to level off.

President Bush had set a goal of slicing the deficit in half by fiscal 2009 from the administration's projection of $521 billion, or 4.5 percent of gross domestic product, for fiscal 2004.

If the new CBO projections prove accurate, that goal would be met two years early, despite the massive costs of the war in Iraq, a new Medicare prescription drug benefit, continued tax cuts, and unprecedented hurricane relief spending.

Republicans credited themselves for the improving picture. "Thanks to pro-growth policies and a responsible budget blueprint, we're achieving substantial deficit reduction—even with the extraordinary circumstances of the past year, including Hurricane Katrina and the ongoing war on terror," said House Budget Committee Chairman Jim Nussle, R-Iowa.

But ranking House Budget Democrat John M. Spratt Jr. of South Carolina said the new figures are not cause for celebration.

"The administration's supporters may wish to paint this deficit as progress, but a deficit of $260 billion falls far short of the $236 billion surplus booked in 2000 and the $305 billion surplus predicted for this year when the Bush administration took office," Spratt said.

The rosier near-term deficit picture painted by CBO follows last month's projection by the White House Office of Management and Budget, which cut its fiscal 2006 deficit estimate to $296 billion from $423 billion in February.

The CBO attributed the bulk of the difference between its projection and that of its White House counterpart to CBO's assumptions that the government would spend less on defense, Medicare, and Medicaid than the administration assumes.

By CQ Staff

August 16, 2006 -- The American Society of Clinical Oncology and the National Comprehensive Cancer Network released details this week on seven quality measures developed to assess care for breast and colorectal cancer patients.

The seven measures, which were published on Tuesday, include recommendations on therapy for patients with tumors larger than 1 centimeter, breast radiation therapy for patients under 70, post-operative chemotherapy for patients under 80, and the amount of time for treating a patient with chemotherapy after diagnosis.

Based on previous measures developed by the ASCO and recommendations by current the NCCN guidelines, the groups examined the measures in regards to clinical impact, scientific acceptability, usefulness, potential for improvement, reliability, and feasibility.

"These measures build on the NCCN Clinical Practice Guidelines, which comprehensively represent the standard of oncology care in the United States," said David C. Hohn, chairman of the NCCN Board of Directors, in a statement. "This is only the beginning of an important collaboration, which will provide measures to evaluate the quality of care delivered to the thousands of cancer patients who rely upon us each and every day."

The ASCO and the NCCN will continue to test the measures and update them regularly to reflect new findings. The groups say that if the measures were appropriately implemented, they could serve as tools for any future pay-for-performance programs.

By Matthew Sedlar, CQ HealthBeat Deputy Editor

August 17, 2006 -- The number of physicians no longer accepting new Medicaid patients has grown over the last decade, even though the program saw modest increases in payment rates and enrollment, according to a report published on Thursday by the nonpartisan Center for Studying Health System Change (HSC).

The report, which examined data from HSC's nationwide Community Tracking Study Physician Survey, finds that one-fifth, or 21 percent, of physicians surveyed were not accepting new Medicaid patients in 2004 to 2005, compared with 19.4 percent in 1996 to 1997. That rate is six times the percentage of physicians not accepting new Medicare patients and five times the rate for private insurance.

According to the report, the findings contradict an upswing in Medicaid payment rates and enrollment over the past decade. Medicaid payments increased from 1998 to 2003—with the exception of some states in the early 2000s freezing or reducing payments because of budget pressures. Program enrollment increased 8 percent from 2000 to 2003, most likely due to eligibility expansions, higher costs in private insurance, and slow economic growth, the report adds.

However, 84 percent of physicians surveyed in 2004 to 2005 cited low Medicaid payment rates as a "moderate" or "very important" reason for no longer accepting new patients. Medicaid reimbursement on average in 2003 was 69 percent of Medicare reimbursement and even lower compared with private insurance, the report says. In addition, 70 percent of physicians blamed billing requirements and paperwork as reasons for no longer accepting patients.

The report also notes that Medicaid care is becoming largely concentrated among physicians who provide a large amount of their care to low-income beneficiaries—such as hospitals, academic medical centers, and community health centers. According to the report, the percentage of Medicaid revenue for physicians who derive 30 percent or more of their revenue from the program increased from 43.1 percent in 1996 to 1997 to 51 percent in 2004 to 2005. Part of this can be explained by small practices, which derive less revenue from Medicaid, becoming increasingly unwilling to accept new patients, as well as more physicians moving from small practices to larger group and institution-based practices, the report says.

"It isn't clear whether the increasing concentration is harmful to Medicaid patients' access to care, since many large Medicaid providers are in areas where enrollees tend to live, such as inner cities and medically underserved areas," said Peter J. Cunningham, co-author of the report and a senior fellow at HSC, in a statement. He added, "But, if large Medicaid providers face increased financial pressures and rising patient demand, quality of care and access to some services could be negatively affected."

Past American Medical Association President J. Edward Hill said on Thursday, "This unsettling data comes as little surprise given Medicaid's high administrative costs and low payment rates, while the overhead costs associated with practicing medicine continue to increase." He added, "This study also serves as a reminder that our nation's Medicare program is at risk of going the way of Medicaid. More Medicare cuts on top of existing inadequate Medicare reimbursement rates threaten to reduce patient access to care."

Under a proposed regulation for Medicare physician payments in 2007, doctors are scheduled to take a 5.1 percent cut on Jan. 1. Hill said, "If Congress does not stop next year's payment cut, 45 percent of physicians say they will be forced to decrease or stop taking new Medicare patients."

By Mary Agnes Carey, CQ HealthBeat Associate Editor

August 17, 2006 -- Three-quarters of adults believe the U.S. health care system must undergo fundamental change or be completely rebuilt, according to a Commonwealth Fund survey released on Thursday.

Findings from the report, prepared for the Commonwealth Fund Commission on a High Performance Health System, also conclude that 42 percent of the more than 1,000 adults interviewed reported experiencing poorly coordinated, inefficient, or unsafe care at some time over the last two years. One of four U.S. adults reported that their physician had recommended unnecessary care or treatment, and one of six reported their physician ordered tests that already had been done.

Poorly coordinated health care efforts are to blame, respondents said, and they support steps such as expanded use of information technology and physicians, nurses, and other health care practitioners working as a team to improve the quality of care. Ninety-two percent of those surveyed backed the idea of a "medical home," described as a centralized place or physician responsible for providing and coordinating all of their medical care.

"When there isn't coordinated care, there is a higher risk for unsafe care and duplicative or wasteful medical spending," Commonwealth Fund President Karen Davis said in a statement. "Unfortunately, the reality is that too many patients have short-term relationships with their physicians and rarely have easy access to their own medical records."

Not surprisingly, adults who had experienced serious problems with their care were more likely to say the system needs to be completely rebuilt compared with those reporting no serious problems. Forty-three percent of those who had experienced a medical error in the past two years said the system needs to be rebuilt, compared with 27 percent of those who did not experience a medical error.

When asked what the White House and Congress could do to fix problems with the current system, respondents said steps should include lowering the cost of health care—including prescription drugs—and ensuring that all Americans have "adequate and reliable" health insurance.

The survey, conducted in June by Harris Interactive, follows a report done by the Commonwealth Fund Commission on a High Performance Health System that outlined a framework for improving health care in the United States.

Other key findings of the survey released Thursday include:

• Americans of all incomes are worried about health care costs. One-third of adults with family incomes between $50,000 and $75,000 a year and one-fifth with incomes of over $75,000 report serious medical bill problems.
• Thirty-nine percent of those surveyed said they have experienced "serious problems" getting timely appointments to see doctors.
• Ninety-four percent said it was important to have easy access to their medical records and 95 percent felt it was important to have information about the quality of care provided by doctors and hospitals.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

August 18, 2006 -- Medicare beneficiaries received better care under quality improvement organizations (QIOs) in 34 of 41 areas measured by a study published this week in the Annals of Internal Medicine.

QIOs are state-based organizations, staffed with case review and quality improvement medical experts, that contract with Medicare to improve the quality of care given to elderly and disabled Americans. The government spends about $300 million a year for 53 QIO contracts that cover all 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands.

The study found that in nursing homes working closely with QIOs, the number of patients suffering from chronic pain was cut in half. Physicians' offices improved care for patients with diabetes and increased the number of women receiving timely mammograms. The study also found that surgical infections were lowered in hospitals that worked with QIOs.

According to the study, improvements in care were higher for providers with which the QIO worked closely and were greater for the measures for which providers requested and received QIO technical assistance.

In a statement, American Health Quality Association Executive Vice President David Schulke said the study "shows that when QIOs and providers work together, the quality of care improves faster."

On Capitol Hill, leaders of the Senate Finance Committee have urged the Medicare program not to broaden the role of QIOs until questions about possible financial improprieties on their part have been resolved.

In a letter sent in May to the Centers for Medicare and Medicaid Services, Senate Finance Committee Chairman Charles E. Grassley, R-Iowa, and ranking Democrat Max Baucus of Montana urged a "more thorough evaluation" of QIOs' effectiveness in improving quality. In addition, Grassley has raised questions about the salaries and travel expenses of QIO executives and board members.

Separately, legislation (HR 5866) sponsored by Rep. Michael C. Burgess, R-Texas, would boost physician payment while expanding the role of QIOs in Medicare.

The Burgess bill would enact recommendations by the Institute of Medicine to make the quality improvement activities of QIOs available to all providers; guarantee a minimum of funding for QIOs; and require a review of their resources when the organizations' duties are expanded, among other measures. The measure also would establish a system of quality measures in which doctors would voluntarily report data on the quality of their care.