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June 22, 2009

Washington Health Policy Week in Review Archive d64ac7da-015e-4a3d-938f-65bdfb4c042c

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House Democratic Plan for Overhaul Would Require Individual, Employer Mandates

By John Reichard and Jane Norman, CQ HealthBeat

June 19, 2009 -- An 852-page "discussion draft" released Friday by the Democratic chairmen of three House committees would penalize individuals if they do not carry health insurance and employers if they do not offer it, while creating a new government-run insurance plan to compete with private health plans.

Americans going without coverage would have to pay a penalty equal to two percent of their adjusted gross income, while employers would have to pay a penalty equal to eight percent of their payroll expenses, according to the draft, released at a mid-day press briefing.

The plan would provide more generous subsidies to lower income Americans to buy coverage than are contemplated in the most recent version of a health overhaul plan under development by the Senate Finance Committee. Unlike the Senate proposals, the House draft maps out a clear public plan option and employer mandate, attempts to fix the physician pay rate in Medicare and makes changes in the Medicare Part D prescription drug law.

Doctors and hospitals could choose whether to participate in the new public plan, said House Energy and Commerce Committee Chairman Henry A. Waxman, D-Calif. But the bill says that providers who participate in both Medicare and the public plan would receive a 5 percent higher rate than Medicare for the first three years. If they don't participate in both, they would get just Medicare rates.

It also appears that in the House approach there would be just one "exchange," or marketplace for insurance plans, in contrast to Senate plans that would offer state-by-state localized exchanges.

Markup of the plan by the three committees is expected after the July 4 recess, the Democratic lawmakers said, with approval on the floor by the time the House recesses in August.

Under the House draft, families and individuals with annual incomes up to four times the poverty level would be provided subsidies to buy coverage through the new insurance exchange that eventually would be opened to all employers. "Affordability credits" to buy coverage would be phased out at an income level of $43,000 for individuals and $88,000 for a family of four. The aim is to provide the most generous credits to those who are just above new proposed Medicaid eligibility levels. The exchange would administer the affordability credits.

President Obama issued a statement praising release of the draft. "Today, the chairs of several committees in the House of Representatives unveiled their health care reform proposal," Obama said. "This proposal would improve the affordability, availability, and quality of health care and represents a major step toward our goal of fixing what is broken about health care while building on what works."

Individuals would have to purchase coverage under the plan but in return would be guaranteed a minimum level of benefits including mental health, dental, and vision care coverage. They would have the option of enrolling in the new government-run insurance plan that according to the Democratic authors of the plan would not have an unfair advantage over the private sector.
The public plan "will create a new choice in many areas of our country dominated by just one or two private insurers today," says a summary of the draft. The public plan "will be subject to the same market reforms and consumer protections as other private plans" offered in insurance exchanges, according to the draft.

Insurance companies would no longer be able to engage in discriminatory practices such as refusing to sell or renewing policies due to an individual's health status, and coverage of treatment could not be excluded due to pre-existing conditions. Lifetime and annual limits on benefits would be banned and the ability of insurance companies to charge higher rates due to health status, gender or other factors would be limited. Premiums could vary based only on age, geography and family size.

According to a Democratic aide, no Congressional Budget Office estimates would be released Friday of the cost of the plan, which is being closely watched because of sticker shock induced earlier in the week by estimates of Senate Democratic proposals. Democrats at the briefing did not explain how the overhaul will be paid for, but the fine print of the draft includes Medicare cuts. Democrats did not specify how many of the 47 million uninsured Americans would gain coverage in their plan.

Democrats at the briefing were mum about a whole slew of provisions in the text of the draft that have aroused great controversy in years past. For example, the draft would give the secretary of the department of Health and Human Services authority to negotiate prices of prescription drugs covered in the Medicare Part D prescription drug program. In addition, it would reduce to fee-for-service levels the payment rates paid to private health plans in the Medicare Advantage program. Health insurers have loudly protested those cuts in years past.

Also, within a year of enactment, insurance companies would have to meet a requirement that 85 percent of their premium revenue be spent on medical services.

Language in the draft also would cut Medicare payments in the home health, skilled nursing, long term care hospital, inpatient rehabilitation, psychiatric hospital, hospice, dialysis, and outpatient hospital sectors.

"We're going to take substantial steps to phase out the doughnut hole" and to phase out the controversial payment formula used to set Medicare payment rates to physicians, said Waxman. The "doughnut hole" is the gap in the Medicare drug benefit in which seniors must pay 100 percent of prescription costs. The Pharmaceutical Research and Manufacturers of America is negotiating with the White House over a plan to fill part of the gap, industry sources say.

The House Democratic plan would offer "affordability credits" for individuals and families with incomes between 133 percent of poverty, which is $29,327 for a family of four to 400 percent of poverty, which is $88,200 for a family of four. The amount of the credit is reduced as individual and family income increases.

Only those who seek coverage in the exchanges would receive the credits. In the fifth year after the exchange begins, childless adults eligible for Medicaid and who had health coverage for the previous six months would have the choice of enrolling in Medicaid or gaining access to coverage in the exchange with the assistance of affordability credits.

Individuals and families below 133 percent of poverty would be eligible for an expanded and improved Medicaid program, fully financed by the federal government in recognition of state budget problems, a summary says. Reimbursement rates for primary care providers would increase to improve participation in the Medicaid system.

All Americans would be required to hold insurance except in cases of hardship. Those who choose not to obtain insurance would be subject to a "modest penalty" based on two percent of adjusted gross income minus the "threshold amount," which is the total value of exemptions and standard deductions for the adults in the household. The total penalty is limited to the amount of the average national premium in the exchange. There is no penalty assessed on dependents who are not covered, on people living outside the United States, on non-resident aliens and on those with a religious conscience exemption.

Employers could choose between providing coverage for workers or contributing on their behalf. Employers that choose to contribute will pay a fee based on eight percent of their payroll. Those that refuse to do either would face a penalty of $100 a day per worker, beginning on the first day workers go without coverage.

Employers would contribute 72.5 percent of the cost of premiums for full-time employees' health plans and 65 percent for a family policy. For part-time employees, employers could contribute a share of the expense or contribute to the exchange for employees to seek coverage there.

An exemption would be put in place for certain small businesses and a new small business tax credit will be available for firms that want to provide health coverage but can't now afford it.

"Our discussion draft reflects months of hard work and the views of many of our colleagues," said Education and Labor Committee Chairman George Miller, D-Calif.

"The draft is a very practical one and it's a uniquely American proposal," Waxman said.

A new independent advisory board made up of practicing providers and other health care experts, headed up by the surgeon general, would recommend a new essential benefit package based on standards set in the law. It would serve as the basic benefit package for coverage in the exchange and over time would become the minimum quality standard for employer plans. The basic package would include preventive services with no cost-sharing, mental health services, dental and vision coverage for children and there would be a cap on the amount of money a person or family spends on covered services annually.

On prevention and wellness, community health centers would be expanded.

Increases would be made for the National Health Service Corps, and there would be more training of primary care doctors and scholarships and loans for individuals.

Major delivery system reform would be made in Medicare, including testing of concepts such as accountable care organizations and bundling of acute and post-acute provider payments. A centerpiece would be complete reform of the physician payment mechanism in Medicare, the Sustainable Growth Rate (SGR), with an update that wipes away accumulated deficits, and rewards primary care services. House Ways and Means Health Subcommittee Chairman Pete Stark, D-Calif., said in an interview Friday afternoon that the SGR revision would be off budget, meaning pay-fors would not be required.

The bill funds the new comparative effectiveness research trust fund with a tax on health insurance plan. It uses transfers from various other health-care trust funds for the first three years then assesses a flat fee per covered person to generate enough money to produce $375 million in 2013.

Drew Armstrong, Richard Rubin and Alex Wayne contributed to this story.

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MedPAC Says Medicare Should Stop Rewarding 'Volume Instead of Value'

By Jane Norman, CQ HealthBeat Associate Editor

June 15, 2009 -- The Medicare Payment Advisory Commission (MedPAC) said Monday that the Medicare program's spiraling and unsustainable costs must be tamed, but for now stayed away from specific recommendations to toss into the debate in Congress over the health care overhaul.

"To achieve better care coordination and efficiency, Medicare must change the way it pays health care providers," said a statement from Glenn Hackbarth, chairman of the closely watched commission, which must produce two reports annually for Congress. "Current incentives reward volume instead of value and costly care instead of efficient, effective care. When providers don't work together, quality suffers and costs increase—which benefits neither the patient nor the Medicare program."

The 275-page report adds that if current spending and use trends continue, the Medicare program is "fiscally unsustainable" over the long term. Care coordination is rare, specialist care is often favored over primary care and the quality of care is often poor, it says. The fee-for-service system rewards additional care regardless of its quality and payments are separated into categories, or "silos," that don't encourage coordination.

Mark E. Miller, executive director of the commission, said at a reporters' event four issues explored in the June MedPAC report likely will be of particular interest to lawmakers immersed in the health overhaul and trying to figure out how to meet twin goals of curbing costs and enhancing quality. Those issues are graduate medical education (GME), accountable care organizations (ACOs), physician resource use measurement and the impact of physician self-referral on use of imaging services.

"This particular report does not have recommendations but it does have comments and analyses that are informing ongoing debates right now on the Hill," said Miller, adding that the cycle of deliberations among commissioners means that sometimes recommendations emerge, and sometimes they don't, but might later.

Medicare is such a big payer and driver of health spending that changes in its makeup would deeply influence other health care spending.

MedPAC did state in its report that a process to approve so-called follow-on biologics—the term for lower cost versions of existing biotech drugs—is needed both to increase price competition and help control costs for Medicare, which spent $13 billion on biologics in 2007. While the Food and Drug Administration would have jurisdiction over whatever regulatory process is set up, Medicare has a "strong incentive" to make sure it gets better value, the report says. It's possible, for example, that a drug's payment could be linked to beneficiaries' outcomes. In March, though, several commission members expressed concerns that they needed more information before making recommendations on Medicare payment structures for follow-on biologics.

On the question of ACOs, MedPAC says they have the potential to promote better care coordination among providers, a perpetual problem for Medicare and its fee-for-service systems that too often lead to high volume. While ACOs could be voluntary or mandatory, an ACO in general would be held responsible for the health of its Medicare patient population. In the model studied by MedPAC, an ACO would be made up of primary care physicians, specialists and at least one hospital.

An ACO would have to be fairly large, with at least 5,000 patients, to be able to determine whether actual improvements are occurring, says the report. If it manages to achieve both quality and cost targets, the members of the ACO would receive a bonus; if it fails, payments from the government would be lower. "These financial incentives may lead to slower growth in Medicare spending," the report says.

Each ACO should have a spending target set in advance, perhaps based on past experience plus a national allowance for spending growth per capita, the report says. It's possible that could eventually compress regional variations in spending.

Medicare spent $9 billion subsidizing graduate medical education in 2008 and didn't get enough bang for its buck, MedPAC says. "Our medical schools and residency programs need to emphasize a set of skills and knowledge that will equip students and residents to practice and lead in reformed delivery systems that work under restructured payment incentives," the report says.

Specifically, residency programs don't offer enough formal instruction and experience in multidisciplinary teamwork, cost awareness in clinical decision-making, comprehensive health information technology and patient care outside hospital settings, the report says. For example, residents spend large amounts of time caring for acutely ill hospital patients, which is good but which also means they don't spend time outside the institution at doctors' offices, nursing facilities or in patients' homes, says the report.

On physician resource use management, the report notes that MedPAC in 2005 recommended that Medicare measure doctors' use of the resources that provide patient care. That has begun under legislation approved by Congress, the Medicare Improvements for Patients and Providers Act of 2008. MedPAC says that the methodology used should be transparent to all participating physicians and ensure they can change their behavior on the basis of feedback.

Physicians' fast-growing use of diagnostic imaging tools in their offices also is tackled. MedPAC says that although the rate of growth slowed in 2007, there continue to be concerns that some of the increased use in imaging is not warranted, and there's evidence that imaging services are mispriced under the physician fee schedule, thus creating more of a financial incentive to order more imaging. Controlling for all other factors, physicians who use imaging in their own offices order it more often than those who refer patients outside their offices, MedPAC says.

MedPAC is an independent congressional agency established by the Balanced Budget Act of 1997 to advise Congress on issues surrounding Medicare, with public meetings in which commissioners, who have backgrounds in health, debate complex technical aspects of the program.

Under legislation introduced by Sen. John D. Rockefeller IV, D-W.Va., (S 1110) the agency would gain more power to order changes in Medicare, and the president is said to be interested in making MedPAC recommendations mandatory unless changed by Congress. Miller said he would not comment on those "MedPAC on steroids" proposals.

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Nursing Home Surveys to Focus on Residents' Needs, Rights

By Melissa Attias, CQ Staff

June 19, 2009 -- Nursing home surveys will now place a stronger emphasis on residents' rights to live with dignity in environments that accommodate their needs and preferences, according to guidance released Friday by the Centers for Medicare and Medicaid Services (CMS).

The new guidance, which became effective June 12, strives to create a more home-like environment for the nearly 1.5 million individuals who live in approximately 15,800 nursing homes on any given day, CMS said in a news release.

"These groundbreaking revisions matter in the daily lives of people who live in the nation's long-term care facilities," said CMS Acting Administrator Charlene Frizzera in the news release. "The improvements in the guidance are intended to support efforts underway to transform nursing homes into environments that are more like their homes through both environmental changes and resident-centered caregiving."

Among other things, the new guidance says residents have the right to entertain non-relative visitors 24 hours a day subject to "reasonable restrictions," choose their roommates if it can be accommodated, be groomed as they wish to be groomed, choose their own schedules (including waking, eating and bathing), individualize their physical environments and have at least one window facing outside that sits at or above the exterior ground level.

CMS inspects nursing homes periodically to ensure that they meet federal regulations that require facilities to provide each resident with "good quality care" and a "good quality of life," the news release said. The agency also publishes guidance, such as the report released Friday, to aid surveyors in interpreting the regulations, CMS said.

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Senate Finance Delays Action on Health Bill

By Richard Rubin, CQ Staff

June 17, 2009 -- The Senate Finance Committee is tapping the brakes on its drive to overhaul the health care system, delaying a scheduled June 23 markup, possibly until July.

Chairman Max Baucus, D-Mont., said it is too early to know when he will release details of his bill or set a markup date. "When we're ready, we'll be ready," he said after a closed-door committee meeting on Wednesday. "We're not there yet."

Baucus had planned to release a chairman's mark June 19, in preparation for a markup next week. But he has been struggling to produce a bill that will cost less than $1 trillion over 10 years and include an equal amount of offsetting revenue or savings.

One estimate from the Congressional Budget Office (CBO) put the price tag on his preliminary plan at $1.6 trillion.

"These numbers are not still all in yet, and we have to wait until we get them, some of these numbers, as senators make up their minds on policy," Baucus said. "It's just taking time here."

Kent Conrad, D-N.D., said the cost could be reduced by addressing a subsidy to help lower-income individuals purchase health insurance and the "affordability index" that determines eligibility for new health-insurance exchanges. The CBO, Conrad said, concluded that the latest versions of those provisions would push more people off employer-sponsored insurance.

"To the extent we can, it's important that people stick with employer-based coverage, otherwise more people wind up in the exchanges," he said.

Republicans welcomed the markup delay, saying they worried that the process—driven by President Obama's October deadline—was moving too quickly and could cause unintended consequences. "This is not the way to do one-sixth of the American economy," said Orrin G. Hatch, R-Utah, who said he did not blame Baucus. "We're likely to make some terrible, horrific mistakes."

Baucus has been trying to move a bipartisan bill, courting his panel's top-ranking Republican, Charles E. Grassley of Iowa, and Olympia J. Snowe of Maine, among others.

Grassley said Wednesday that several major issues remain unresolved, including a government-run insurance plan, a mandate on employers and financing.

To cover the cost of insuring more Americans, the Finance bill is expected to rely on cost savings from Medicare and a new cap on the value of employer-provided health benefits that are exempt from taxation.

Grassley said the $1 trillion cost target set by Baucus was welcomed by Republicans, although he does not view the figure as a "line in the sand."

Grassley said the delay in moving the legislation is due in part to the need to allow time for CBO to do its work. "Whether it slipped a day or a week, I don't really know," he told reporters on a conference call. "But part of that is scoring by CBO. They're very sophisticated in their approach. We don't necessarily get the information to them on time.

House Ways and Means Chairman Charles B. Rangel said the Finance Committee delay might prompt the House to move more quickly on health care. "A lot more pressure's going to be put on us to get something done before the July recess, but I don't know," Rangel, D-N.Y., said after meeting with committee Democrats Wednesday.

Rangel said he expects to have a preliminary draft—without financing options — prepared by the end of the week, with a more specific plan next week. An aide said a hearing is likely next week.

Rangel said he is trying to satisfy diverse views on his committee and "trying to perfect the delivery system and the cost containment of the bill, and at same time not to deviate beyond the concepts of the White House health reform [proposal]."

Joseph J. Schatz contributed to this story.

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Idea of Co-Ops Gain Favor in Health Overhaul

By Jane Norman, CQ HealthBeat Associate Editor

June 17, 2009 -- The idea of including non-profit cooperatives in a health overhaul bill appears to be gaining favor among lawmakers as they try to find ways to promote greater competition in the insurance market. Both President Obama and House Minority Leader John Boehner, R-Ohio, also have spoken favorably about cooperatives in recent days.

The biggest advocate for the cooperatives is Democratic Sen. Kent Conrad of North Dakota, a Senate Finance Committee member, who proposed last week that publicly owned cooperatives could be more acceptable to some senators than a government-controlled public plan option that's opposed by most Republicans and some Democrats. Some liberals might be getting on board, too.

Sen. Tom Harkin, D-Iowa, a member of the Senate Health, Education, Labor and Pensions Committee, said Wednesday he has been working with Conrad on how such cooperatives could be structured. "I'm intrigued by it," said Harkin, one of the most liberal members of the Senate and a strong supporter of the public plan option. "We're just seeing how it might work."

Consumer health cooperatives, as envisioned by Conrad, would operate at the state or regional level and offer health insurance to their members. They would be governed by boards made up of members and would have to meet the same rules and regulations as private health plans in the insurance exchanges.

He said that the country could be divided up into different cooperative regions, with 500,000 to 1 million consumers in each. The co-ops would operate with their own boards, but under parameters set by the government. "It might be a way of having a public plan that is really consumer driven by these co-ops," Harkin said.

Senate Majority Leader Harry Reid, D-Nev., told reporters on Tuesday he wants a public option in the plan because he believes "our country is being run by the insurance industry" and that more competition is needed. But he also said that he recently had a "very important" conversation with Democratic Sen. Jack Reed in which Reed said that health insurance cooperatives have worked in his home state of Rhode Island and in other states. Reed is a member of the HELP Committee and wants to push the idea there, said Reid.

"I do not know if that satisfies all my desires," added Reid. "It's not really a government plan, but I'm not sure that government has to be involved in making insurance companies honest. If these cooperatives can do it, I would be satisfied with that. But that's—that is a page that hasn't been turned yet, but I was very, very impressed with my conversation with Jack Reed last week."

The top Republican on Finance, Sen. Charles E. Grassley of Iowa, said on Wednesday that committee members continue to discuss "maybe encouraging some cooperatives moving into health insurance the same way that maybe 150 years ago county mutuals got together to have fire insurance for farmers because nobody else would insure farmers because they were so far from a fire station, you know, things of that nature."

That would be an opportunity to satisfy supporters of the public option and still get some GOP backing, he said in a conference call with Iowa reporters. "Listen, it's probably not too far removed from Republican philosophy anyway that we ought to have more competition, that it should be risk based, in other words, the option to have the same solvency requirements as the other insurance companies," said Grassley.

He also said Democrats on Finance remain warm to the idea, including the chairman. "I think it's being promoted by Senator Conrad, which is very important to have a Democrat promote an option. And it's getting a favorable look-see (by) a lot of Democrats. Beyond that, well, Senator Baucus would be one that would be looking at it," Grassley said.

Obama on Tuesday said in an interview on CNBC that he supports the public plan option but remains open-minded. "And if, for example, the cooperative idea that Kent Conrad has put forward, if that is a better way to reduce costs and help families and businesses with their health care, I'm more than happy to accept those good ideas," said Obama.

Boehner, on CNN's "The Situation Room," said that "it's worth exploring" whether co-ops might be a solution. He added, "I haven't seen how this would work and what the rules would be, but clearly it's an idea that might be able to bridge the differences. But at the end of the day, we want to make sure that doctors and patients are making decisions about what care is in their best interest, not some government bureaucrat in between."

Harkin said portability is an issue and people moving from one region to another would have to be allowed to transfer co-ops. Four or five states might band together in a co-op or a big state like California could have several, he said.

Conrad said in an interview on CNN's "American Morning" on Tuesday that there are co-ops around the country run by members including the Associated Press, Ace Hardware and Land O' Lakes. A large health provider called Group Health Cooperative is successful in both urban and rural areas in Washington state, Conrad said. "We have hundreds of cooperatives around the country that are very successful," he said.

According to a draft outline of Conrad's concept, the co-ops would be non-profit, and could exist at state, regional or national levels. The same standards as private plans would apply in terms of regulation. They could partner with Accountable Care Organizations and other health systems that provide integrated services including doctors, physicians and facilities. A national co-op risk management board would be set up to provide actuarial services. The board would provide actuarial and risk management advice and could ensure that co-ops are in compliance with state solvency and capitalization standards, the outline says.

One note of dissent, though, has come from former DNC Chairman Howard Dean. "It doesn't fix the American problem. I think the co-ops are a fine idea but they won't work," Dean, a doctor who's written a book on health care promoting a public plan, said on MSNBC on Monday. "The co-ops are too small to compete with the big private insurance companies. They will kill the co-ops simply by undercutting them and using their financial clout to do it."

Dean called the co-ops idea "a compromise that's designed to deal with problems in the Senate but it doesn't deal with problems in America."

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CBO Spending Forecast: Silver Lining Hard to Glimpse Amid Storm Clouds

By John Reichard, CQ HealthBeat Editor

June 18, 2009 -- Proposals to expand health insurance coverage through a program of subsidies to lower-income Americans to help them buy policies could permanently boost the government's budgetary commitments to health care by about 10 percent, according to a letter released this week by the Congressional Budget Office (CBO).

"Improving the long-term budget outlook would require addressing that added cost in addition to the budgetary strains anticipated under current law," CBO Director Douglas Elmendorf wrote in his blog on the agency's Web site in releasing the letter.

Provisions to make an overhaul budget-neutral over 10 years carry only so much weight with the CBO, which takes a skeptical look in the report at most of the approaches that lawmakers are talking about to bend down the nation's health spending curve.

"Health care legislation might include provisions that would make it budget neutral over the first 10 years, but such legislation might nevertheless add to budget deficits in later years," Elmendorf blogged.

Released June 16, the letter responded to a request from Senate Budget Committee Chairman Kent Conrad, D-N.D., and ranking member Judd Gregg, R-N.H., seeking the best ideas of the budget office for controlling long-term health spending growth.

CBO's letter "shows that it will not be enough to simply offset the cost of health reform over the next 10 years," the committee leaders said in a statement. "We must also ensure that reform bends the cost curve on health care over the long term."

"We have a tremendous opportunity to adopt health care reform that will expand coverage, preserve choice, and improve quality," they added. "But we should not enact any health care reform that does not also reduce federal spending over the long term compared to our current unsustainable course."

Elmendorf's predecessor Peter Orszag, now director of the White House Office of Management and Budget, has talked about potentially powerful ways to lower long-term spending growth, such as evening out geographic variations in the practice of medicine. But the CBO report suggests that the potential savings on that front, while major, aren't as big as some think.

Dartmouth College researchers have estimated that Medicare spending could be reduced by almost 30 percent if outlays in medium and high-spending parts of the country were reduced to the average level in the lowest-spending areas, the CBO report notes. "CBO's own informal comparison of per capita Medicare spending in metropolitan areas, controlling for both the health status of individuals and the prices of health care inputs, implies that the savings. . .might be roughly half of the estimate by the Dartmouth researchers," the report says.

The analysis notes that "many experts think that transformational changes in health care financing and delivery could reduce the federal budgetary commitment to health by more than the 10 percent increase that would result from a large-scale expansion of insurance coverage. Achieving substantial and lasting savings, however, would require fundamental changes in the organization and delivery of health care."

Many analysts point hopefully to tightly organized systems of care such as the Geisinger Health System in Pennsylvania and the Marshfield Clinic in Wisconsin as a way to bend down the spending growth curve. "Examples of efficient care certainly exist today," the report acknowledges, "with many individual health care providers and groups of providers offering both high quality and relatively low cost. Yet applying the methods of those efficient providers through the health care system cannot be accomplished through fiat or good intentions."

The report adds that considerable consensus exists among experts that moving away from today's fee-for-service care – described by some as paying based on "piecework"—would make care more efficient. Measures to do this include paying doctors and hospitals more for better performance. Another way to make care more efficient is to give doctors and patients better information on what treatments work best. "Unfortunately, little reliable evidence exists about exactly how to implement those types of changes—especially at the level of specificity required for legislation."

The report notes current interest in creating incentives for providers to work together more efficiently through the creation of accountable care organizations, or "ACOs" Under this model, "providers would receive bonuses if they held down the total cost of the services their patients received during a year while also meeting requirements for the quality of the care; some versions would also impose penalties on doctors who did not meet those targets." But evidence of savings through such attempts at better coordination is "mixed," according to CBO. "Moreover, expanding this approach to physicians who are not already in an integrated system and may be reluctant to join one raises further issues," such as whether the government would have to offer financial inducements to participate.

"Although many experts agree that this approach should be vigorously pursued, several rounds of successive and significant changes and refinements in Medicare's rules would probably be necessary to yield substantial budgetary savings."
Lowering payment increases to spur greater productivity isn't a sure thing, the study said. Although it would create pressure to find more efficient ways to deliver treatment, it also would "create risks for providers and patients if the efficiency gains were not achieved" – presumably because finances could be strained and care suffer as a result.

Despite its tone of uncertainty about cost control approaches, the report isn't devoid of approaches to pursue—it simply says they are unproven. And in some spots it even sounds a bit optimistic, while warning that much hard work will be involved.

"Experts generally agree that changes in government policy have the potential to produce substantial savings in both national and federal spending on health care without harming health," it notes. "However, turning that potential into reality in a sector that accounts for one-sixth of the U.S. economy is likely to be a prolonged and difficult process."

It refers to capping the exclusion of employer paid premiums exempt from taxation as a "powerful policy lever." Changes in the exclusion "can affect the efficiency of health care financed by the private sector, by giving workers stronger incentives to seek lower-cost health insurance plans. Those steps would well have spillover effects on Medicare."

It refers without comment to a Commonwealth Fund estimate that aggressive "bundling" of services under a single payment could save $200 billion over a 10-year period. And CBO notes that having more information about which treatments work best would still allow doctors and patients to choose the treatment they preferred, an implicit response to criticisms that comparative effectiveness research is a flawed approach that would lead to rationing. Medicare could create payment incentives for doctors and patients to use the most effective treatments without taking them off the table, the report suggests.

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