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GOP Tax Writer Eyes Next Steps for Overhauling Medicare

By Melissa Attias, CQ Roll Call

May 18, 2015 -- With legislation to replace Medicare’s physician payment formula now law, Rep. Kevin Brady said his House subcommittee is moving forward aggressively on the next phase of Republican efforts to overhaul the health program: tackling the way Medicare reimburses other providers.

The Texas Republican said in an interview that the Ways and Means Health Subcommittee would kick off a series of Medicare hearings this week with the goal of introducing legislation in the fall to revamp the payment system for hospitals and post-acute care. He’s especially interested in making inpatient and outpatient payments compatible, calling the current system extremely complicated.

“It is a demolition derby of reimbursements, difficult for hospitals, difficult for patients,” Brady said. “We think we can do better.”

The effort will build on responses to a 146-page discussion draft that Brady released in November, feedback that he said was both specific and constructive. A hearing on competition within Medicare will be first up Tuesday, followed by others on physician shortages, disparities in rural health care, and hospital payments.

Whether legislation would move as a single bill or a series of measures has yet to be decided, but Brady said he likes the idea of moving bite-sized pieces that work toward a broader goal. He plans to coordinate closely with the Energy and Commerce Committee, which shares jurisdiction over most health issues, and is optimistic about the potential for bipartisanship, citing recently-enacted provisions to address fraud in Medicare.

“I see that as a good model for us working together on these issues, not that we’ll agree on every one of them,” Brady said. The fraud legislation was incorporated into the law (PL 114-10) that replaced Medicare’s physician payment formula, which Brady considers the first step toward saving the health program for the elderly and disabled.

Brady said the physician payment formula, known as the sustainable growth rate, or SGR, “simply sucked up all the oxygen” and left other health care proposals offered by both parties neglected. He emphasized that the hospital payment effort will require a lot bipartisan work but maintained that there are fixes to confusing Medicare regulations and reimbursement approaches.

A third and final piece of Brady’s vision for Medicare, which he hopes to turn to next year, would involve overhauling nothing less than the design of the program through steps such as simplifying the parts of the program that cover hospital and physician services and instituting a cap to protect seniors from very high out-of-pocket costs.

He also wants to identify additional options for seniors within the program, chief among them being the "premium support" model championed by Wisconsin Republican Paul D. Ryan as an add-on in later years. That controversial model would provide beneficiaries with a set payment from the government to apply toward premiums.

Like a tax overhaul, Brady said overhauling Medicare is a key priority for Ryan, the former Budget chairman who now sits at the head of the full Ways and Means Committee.

The hospital piece of his agenda includes thorny issues, including outlining the role of government contractors paid to challenge hospital reimbursements and revisiting the so-called two midnight rule Medicare uses to define a hospital inpatient stay.

While Brady envisions the Medicare hearings going through July, the Supreme Court’s ruling in King v. Burwell—the case challenging the availability of health law subsidies in states using the federal insurance exchange—could change that timetable. A decision against the Obama administration would be “an all hands on deck effort,” he said.

Other action is expected to include a markup taking aim at provisions of the 2010 law, such as the 2.3 percent excise tax on medical devices. Brady also said the committee is “getting close” on a package of changes to Medicare Advantage, the program in which private insurers manage program benefits, that could include demonstrations on value-based insurance design and benchmark flexibility.

“For too long, like physicians, health care policy has been held hostage to the SGR,” Brady said. “It’s really an exciting new day.”

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