By John Reichard, CQ HealthBeat Editor

April 11, 2008 -- Senate Finance Committee Chairman Max Baucus, D-Mont., wants to boost payments to primary care physicians in the physician payment package he aims to take to the Senate floor in mid-May, lobbyists say.

The Medicare Payment Advisory Commission (MedPAC) approved a recommendation this week that Congress make an "adjustment" in Medicare payments for primary care services, calling for an unspecified payment increase lobbyists are calling the primary care "bump."

The advisory commission is concerned that the Medicare program and the nation generally will increasingly face a shortage of internists and family practitioners who provide basic medical services. MedPAC analysts believe that having an ample supply of such primary care physicians is one of the keys to improving U.S. health care. If each patient has such a physician, their treatment is more carefully supervised, improving preventive care and eliminating duplicative testing, analysts say.

Because salaries are relatively low, fewer and fewer medical students are choosing to go into primary care, even as the need for such physician grows, MedPAC analysts noted this week.

But the MedPAC recommendation says the adjustment should be "budget neutral," meaning that any increase in payments for primary care services must be offset by commensurate decreases in payments for specialty care.

Specialty group representatives at a meeting with Baucus Friday on his physician payment proposal balked at taking a hit under budget neutrality.

Medicare has previously made some budget-neutral payment changes to narrow the wide gap in reimbursement for primary versus more lucrative specialty care. The reaction of several specialty groups was that "'we have paid several times for different things and we don't want to pay for it,'" one lobbyist said.

Baucus may face a delicate enough task negotiating the physician payment package, which he hopes to take directly to the Senate floor in mid-May, without also having to resolve further disagreements within the medical profession over specialty versus primary care. Baucus has said he does not plan to mark up the physician measure in the Finance committee.

The package he outlined Friday calls for an 18-month postponement in scheduled Medicare payment cuts to doctors along with an across-the-board increase in payments to doctors of 1.1 percent during that period. It's unclear whether he can find payment offsets to fund the package, however, and Baucus refused to discuss potential "pay-fors" at the meeting.

Baucus excluded the American Medical Association from the meeting Friday, saying he wanted to encourage candor on the part of other medical groups that have not always agreed with the AMA.

When asked for AMA's reaction Friday to an 18-month package with a 1.1 percent increase, a spokeswoman for the medical organization said, "The AMA is committed to working with members of the Senate Finance committee, [Senate leaders], and key House members on both sides of the aisle to address important Medicare issues, and we applaud the desire to stop the Medicare physician payment cuts for 18 months. Key details are still under discussion, and we look forward to reviewing the complete Medicare physician payment package."

By Leah Nylen, CQ Staff

April 11, 2008 -- When overhauling the health care system in coming years, Americans should consider European models, a panel of international health experts said Friday.

But U.S. health care system authorities cautioned that the country probably could not adopt European practices wholesale because of differences in government structure and public attitudes.

The event, hosted by the Alliance for Health Reform, featured German and Dutch specialists who outlined how their health systems differ from the United States'.

In Germany, consumers can choose public, or statutory, health insurance or they can select private coverage, according to Reinhard Busse, a professor of medicine at Technishe Universitat Berlin. About 87 percent opt for public coverage, which allows consumers to select from among approximately 250 different "sickness funds."

Both employers and patients contribute money to a general health fund run by the government. The health fund then pays out a flat amount to the sickness fund for each insured person it represents.

According to Busse, most actual health care mechanics are delegated to the sickness funds but the government plays an important role in regulating costs.

"The government is not controlling [the system] but steering it," he said.

Under changes to German law instituted in 2007, both public and private insurers are required to offer at least basic coverage to anyone who applies.

In the Dutch system, all citizens over the age of 18 are required to purchase private insurance, said Wynand PPM van de Ven, a health insurance professor at Erasmus University Rotterdam. Consumers can choose insurers and contracts, and—like in the German system—open enrollment is required of insurers.

Consumers pay a premium to their insurer of choice and also an income-adjusted contribution into the Risk Equalization Fund (REF). The fund then makes payments to insurers to help cover individuals who have higher risk factors, such as chronic diseases.

Although the system incorporates choice, van de Ven emphasized that the government still has a hand in risk equalization and maintaining transparency among insurers.

"It is a not a free market," van de Ven said. "It needs a visible hand to make the invisible hands work well."

Patricia Danzon, an expert in health insurance and risk management at the University of Pennsylvania, emphasized that the United States could learn a great deal from the individual mandate in both models.

"Experience shows that in today's labor market . . . the employee mandate just doesn't bring in everybody," Danzon said. "We need to move away from employment as a basis [for health insurance]."

With an individual mandate, she said, "It's not just the sick people out there looking for coverage."

While the opportunities afforded by the German and Dutch models hold some promise, it would be a mistake to push for wholesale adoption of either, said Stuart Butler of the Heritage Foundation.

"We tend to have 'love at first sight' " with some of the models, Butler said. "But it's important not to do that. It's important to recognize we have different values we have to take into account before applying this to the U.S."

For example, Butler noted that while there is a mandatory auto insurance requirement in the United States, only about 80 percent of U.S. drivers are actually insured.

The U.S. political system is also very different from those in Europe, Butler said, saying federalism could make it difficult to impose a nationalized health system. At the same time, some of the ideas of the European models, such as risk equalization, could work well if applied at the state level.

"The state system is integral to the United States," Butler said. "But it allows us to experiment in a way we can't at the national level."

Danzon agreed that some of the changes could not work in the United States, citing cost regulation mechanisms used in Germany and the Netherlands that might violate American anti-trust laws. She also did not recommend their prescription model, which relies on reference pricing and, in her view, could undermine innovation at pharmaceutical companies.

By Drew Armstrong, CQ Staff

April 9, 2008 -- A House subcommittee Wednesday approved legislation to block for a year Bush administration moves to cut federal Medicaid funds for specific purposes, shifting costs to the states.

The House Energy and Commerce Health Subcommittee approved the bill (HR 5613) by voice vote, after adopting by voice a substitute amendment by full committee Chairman John D. Dingell, D-Mich.

Dingell's substitute embodied a compromise with committee Republicans, who generally supported his legislation but voiced some concerns about it during meetings prior to the markup.

Specifically, the substitute clarified the bill's language to ensure that it would block only the seven new Medicaid regulations lawmakers oppose, and would not block other new administrative regulations in the future.

In return, full committee ranking Republican Joe Barton of Texas said he would support the bill, and urge the White House not to oppose it.

The administration previously said President Bush would almost certainly veto the bill. But a veto threat could prove hollow if Republicans in both chambers support the legislation, because Congress might be able to override any veto. A two-thirds vote of members present and voting in each chamber is required for an override.

Medicaid is a joint state-federal health program for the poor; the federal government pays about 57 percent of the costs on average—an estimated $204 billion in fiscal 2008. States and the federal government have long argued over how to share the program's costs.

The Congressional Budget Office estimates that Dingell's bill would cost about $1.65 billion, because the budget office has already assumed the savings from the regulations in its "baseline" financial projections.

That cost would be offset in part by anticipated savings from a provision to require electronic verification of assets of people applying for Medicaid. Another offset would take money from the Physician Quality Improvement Fund, borrowing from the fund's 2013 allocation, and repaying the money a year later.

The bill also would include $25 million each year to fight fraud and abuse in Medicaid.

The seven regulations put forward by the administration would together save Medicaid about $17.8 billion over five years, according to the CBO. They are intended to:

• Limit state Medicaid payments to public hospitals, which would reduce federal payments as well.
• Narrow the services the government would pay for under case management plans that some states provide patients.
• Prohibit federal reimbursement for the costs of transporting Medicaid-eligible children to school and administering Medicaid services at schools.
• Narrow the types of "rehabilitative" services that the federal government would pay for.
• End federal Medicaid reimbursement for students at teaching hospitals.
• Narrow outpatient hospital services eligible for federal reimbursement.
• Limit taxes that some states charge health providers as a way to reduce Medicaid's draw on their budgets.

The rule on case management is already in effect; others would take effect shortly. Dingell's bill would postpone the seven regulations until April 2009, after a new president is in office.

A similar bill (S 2819) has been introduced in the Senate by Edward M. Kennedy, D-Mass.; John D. Rockefeller IV, D-W.Va.; and Olympia J. Snowe, R-Maine. In addition to the rules targeted by the Dingell bill, it would postpone two others: one involving a board that hears appeals of Health and Human Services policies and another regarding the State Children's Health Insurance Program.

Rockefeller is expected to press the Bush administration on Medicaid regulations later today, when Dennis G. Smith, director of the Center for Medicaid and State Operations at the Centers for Medicare and Medicaid Service, is scheduled to appear before Senate Finance.

Smith said last month that the administration

By John Reichard, CQ HealthBeat Editor

April 10, 2008 -- The Medicare Payment Advisory Commission voted late Wednesday to recommend a pilot program testing the feasibility of issuing single payments for episodes of treatment that would be shared by both the hospital and the doctors involved in delivering care.

Hospitals and doctors are now paid separately for treatment involved in caring for a heart attack patient, for example. By issuing a single payment for selected medical conditions, Medicare may be able to spur the two types of providers to figure out new processes of care that lead to less duplication and waste, commissioners hope. Doing so would leave them more money to share from their bundled payment once treatment is completed.

But doctors' offices and hospitals do not have a tradition of teaming up to deliver care, commissioners noted in discussing the bundling option at their meeting in March. Other recommendations approved by the panel for their June report to Congress include starting providers on a "glide path" toward learning the kind of cooperation needed to make effective use of the bundling tactic, commissioners said.

Those other recommendations aim to motivate doctors and hospitals to begin analyzing the health care resources they consume in delivering care, with an eye toward promoting efficiency and reducing hospital readmissions, which are generally seen by analysts as a sign of ineffective care.

One of the other recommendations states that "Congress should require the [Department of Health and Human Services] Secretary to confidentially report readmission rates and resource use around hospitalization episodes to hospitals and physicians. Beginning in the third year, providers' relative resource use should be publicly disclosed."

The other says that "to encourage providers to collaborate and better coordinate care, the Congress should direct the Secretary to reduce payments to hospitals with relatively high readmission rates for select conditions and also allow shared accountability between physicians and hospitals."

The term "shared accountability" is a synonym for "gainsharing," which means allowing doctors and hospitals to share savings from more efficient treatment. Gainsharing is not permitted under current law. A number of medical device manufacturers have opposed gainsharing agreements on grounds that it would lead doctors and hospitals to use cheaper medical devices in order to boost their own profits. The result would be lower quality care, those manufacturers argue.

In addition, the recommendation calls on Congress to "direct the Secretary to report within two years on the feasibility of broader approaches, such as virtual bundling, for encouraging efficiency around hospitalization episodes."

Commissioners regard virtual bundling as an interim step toward actual bundling, but note that it may not be feasible because of its administrative complexity.

Virtual bundling would involve adjusting existing payments to hospitals and doctors based on their levels of resource use, paying them less if they consume resources inefficiently and more if they use them efficiently. Unlike actual bundling that would be tested in the pilot, virtual bundling would not involve reimbursing hospitals and doctors under a single payment.

Actual bundling would involve closer collaboration, MedPAC Vice Chairman Robert Reischauer explained Wednesday. "The virtue of virtual is you don't have to know each other's names and this one you have to be dating each other pretty seriously," he said concerning actual bundling.

By John Reichard, CQ HealthBeat Editor

April 9, 2008 -- The Medicare Payment Advisory Commission (MedPAC) voted Wednesday to recommend to Congress that it revise Medicare payments for treatment in skilled nursing facilities and increase payments for primary care. The panel also was headed toward approval of a recommendation that Congress establish a pilot program in Medicare to provide beneficiaries with a "medical home" to oversee their care.

Commissioners also agreed to recommend the adoption of Medicare payment incentives to motivate doctors and hospitals to work together to find more efficient ways to treat selected medical conditions. The panel will formally present the recommendations in a report to Congress this June.

MedPAC analyst Carol Carter said that the revised payment method for skilled nursing facilities (SNFs) recommended by the panel "would result in payments that are much closer to costs."

Currently, the payments consist of a nursing component, a therapy component, and an "other" component that includes room and board. The revisions would add a "separate non-therapy ancillary component," a term that includes items such as prescription drugs and intravenous therapy. They also would revise the therapy component to base payments "on predicted patient care needs," and adopt a provision for "outlier payments" covering unusual financial losses on patients.

MedPAC also approved a recommendation that calls on the secretary of the Department of Health and Human Services (HHS), which oversees the Centers for Medicare and Medicaid Services (CMS), to require the facilities to report diagnosis information and dates of service on their claims. In addition, the facilities would be required to report "services furnished since admission to the SNF separately" in their assessments of patients, and to disclose nursing costs on Medicare cost reports.

Facilities that have the largest profits under the current payment system would take the largest cuts under the revisions while those that are losing money on the payments would see the biggest increases, according to a MedPAC staff analysis. Non-profit SNFs would average payments that are 7 percent higher than those now while for-profits would average payments that are 3 percent lower.

MedPAC's recommendation for an "adjustment" for primary care services responds to concerns that the Medicare program and the nation generally will increasingly face a shortage of internists and family practitioners who provide basic medical services. MedPAC analysts believe that having an ample supply of such physicians is one of the keys to improving U.S. health care. If each patient has such a physician, their treatment is more carefully supervised, improving preventive care and eliminating duplicative testing, analysts say.

An analysis by MedPAC staffers Cristina Boccuti and Kevin Hayes defined primary care as "comprehensive health care provided by personal clinicians who are responsible for the overall, ongoing health of their individual patients."

The analysts said that most Medicare enrollees "have a usual source of care that they value" but "some access concerns exist. Among those looking for a new primary care physician 29 percent report some difficulty. U.S. medical school graduates selecting family practice and primary care residencies have declined steadily. Internal medical residents are increasingly becoming subspecialists," they added.

The recommendation on primary care does not specify how large the "adjustment" should be. Its actual language states that: "The Congress should establish a budget-neutral payment adjustment for primary care services billed under the physician fee schedule and furnished by primary care-focused practitioners. Primary care–focused practitioners are those whose specialty designation is defined as primary care and/or those whose pattern of claims meets a minimum threshold of furnishing primary care services. The [HHS] Secretary would use rule-making to establish criteria for determining a primary care-focused practitioner."

"Budget neutral" means that added payments for primary care would be funded by paying other types of doctors less so that the net effect on Medicare physician spending is neither an increase or a decrease. The sole dissenting vote against the recommendation was cast by Karen R. Borman, a general surgeon with the University of Mississippi Medical Center. Borman said payment rates for general surgery have suffered because of other payment changes in Medicare. "I think we need to recognize that there is a price that is being paid" that is substantial because of the budget neutrality requirement, she said.

Commissioners appeared headed Wednesday toward adopting another recommendation meant to better oversee and manage the health care of Medicare patients, which calls on Congress to "initiate a medical home pilot in Medicare." The recommendation outlined various "stringent criteria" that "medical homes" must meet.

To get the designation, a physician practice would have to show the capability to "furnish primary care" including "coordinating appropriate preventive, maintenance, and acute health care services." It would have to "use health information technology for active clinical support." It would have to "conduct care management and "maintain 24-hour patient communication and rapid access." It also would have to "keep up-to-date records of patients' advance directives" explaining what treatment they'd want if they became incapacitated.

The recommendation under discussion also called for requiring a "physician pay-for-performance program" in the pilot rewarding higher quality and greater efficiency.

And it said that the pilot "must have clear and explicit thresholds for determining if it can be expanded into the full Medicare program, or discontinued entirely."

Other language in the recommendation under discussion would require a participating Medicare beneficiary to sign a document designating a practice as a medical home and requiring notification of the home by the beneficiary if treatment was obtained outside the providers designated by that home. In addition, Medicare would have to provide the home with data on the levels of use by a beneficiary of Medicare-covered services, and the home would have to have a quality improvement program.

Medical homes would receive an added payment each month per participating Medicare enrollee.

Commissioners also weighed recommendations meant to intensify scrutiny by hospitals and doctors of how they provide care to avoid readmissions to the hospital and other forms of inefficient treatment.

Commissioners agreed to recommend that Congress require HHS "to confidentially report readmission rates and resource use around hospitalization episodes to hospitals and physicians. Beginning in the third year, providers' relative resource use should be publicly disclosed." The public would then be able to compare the efficiency of various hospitals and doctors in deciding where to go for treatment.

Commissioners also were expected to approve recommendations relating to "bundled" payment, in which Medicare would issue single payments for episodes of treatment such as heart attacks that would be shared by both the hospital and the doctors involved in delivering the care. The idea is that the single payment would spur them to be more efficient because they'd team up to be more efficient to have more of the payment left over to share after they'd delivered treatment. Doctors and hospitals now get paid separately.

By Christine Grimaldi, CQ Staff

April , 2008 -- Medicare is overpaying for chronically ill patients but getting lesser quality care than other health care institutions, according to a new report.

One-third of Medicare's funding is spent annually on chronically ill patients in their last two years of life, the study noted.

Driving up costs is the amount of services provided, rather than how much each service costs, the Dartmouth Institute for Health Policy and Clinical Practice found.

Patients in different hospitals, regions, or states received different numbers of services and encountered hospitals stays that varied three or four times in length. This has led to discrepancies in Medicare spending, the study said.

Medicare spent $289 billion over five years on the patients studied here, but the program would have saved $50.1 billion, or 17.3 percent, if spending modeled the "gold-standard" Mayo Clinic's region of Rochester, Minn.

"We need to benchmark the best systems and use policy to drive providers toward the benchmark by holding them accountable for the volume of services they deliver," said study co-author Elliott S. Fisher, the institute's director of the Center for Health Policy Research.

Medicare on average pays $46,412 for chronically ill patients at the end of life, but that spending reached a high of $59,379 in New Jersey and a low of $32,523 in North Dakota.

The Mayo Clinic's St. Mary's Hospital spent an average $53,432 caring for patients in the last two years of life, while UCLA Medical Center spent more than $93,000.

The study examined Medicare enrollees who died from 2001 to 2005 that "had at least one of nine severe chronic illnesses." Two-thirds had cancer, congestive heart failure, and/or chronic lung disease.

The Robert Wood Johnson Foundation funded the study with a funding consortium that included the WellPoint Foundation, the Aetna Foundation, the United Health Foundation, and the California HealthCare Foundation.