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Breaking Traditions: Medicare Innovations Tucked In Law Could Be a Tough Sell

By Rebecca Adams, CQ Staff

April 5, 2010 -- Politicians have for years been caught in a political squeeze when it comes to Medicare. They are under increasing pressure to find a way to control rising costs of the program. But politically active seniors are the ones who scream the loudest when there is talk of cuts.

That dynamic was at work in full force during the development of the health care overhaul. And polls show older voters are among those most wary of the new health care law.

As a result, lawmakers scaled back many of their ideas for transforming the program. Instead, they tinkered at the edges of Medicare by cutting the payments of providers and insurers while appeasing seniors with benefits such as more-generous prescription drug assistance.

But that doesn't mean innovative thinking about Medicare went completely by the wayside. Congress did tuck in important tools that could eventually lead to wholesale changes in the way that Medicare, and potentially the entire health care system, operates.

The law requires the creation of a new Center for Medicare and Medicaid Innovation (CMI) by Jan. 1, 2011, within the federal agency that runs Medicare and Medicaid.

The assumption is that the innovation center will test out many of the ideas that Democrats hope to establish throughout the entire program. If those pilot projects are successful, the Department of Health and Human Services can expand them without congressional approval as long as they won't harm the quality of patients' care or drive up spending.

The challenge for the agency that runs the program, the Centers for Medicare and Medicaid Services (CMS), will be deciding how ambitious to be in developing these ideas, finding ways to sell them so that they are acceptable to the public, and assessing the effectiveness of new ideas in a system that still operates largely under traditional ones.

The new law allows for a remarkable range of experiments that the center could end up funding. Federal money could be used by state governments, for example, to test out single-payer programs, meaning residents would be covered by a unified plan run by a state agency.

Medicare could create teams of medical professionals to assist primary care doctors in monitoring the care of patients with chronic conditions. The idea here is that chronic conditions are responsible for a significant and growing portion of health care costs, and vigilant monitoring can help prevent them from causing a cascade of secondary problems.

Very sick Medicare patients at local hospitals could be monitored electronically by specialists at integrated health systems elsewhere. Programs could encourage doctors to accept salaried positions at institutions, which are easier to regulate than stand-alone medical practices. Another program that many health policy experts are watching because of its potential for cost savings would pay doctors and hospitals one payment to care for a patient, rather than paying for every service the patient needs.

A common goal threaded through many of these programs is to find ways to pay medical providers more for the value of the care they deliver rather than pay, as the current system does, for the volume of treatments. While the health care law is not the innovation-driven model that Obama envisioned when the debate started, it does push the health care establishment in that direction. For example, it creates a new nonprofit organization that will support assessments, often called comparative effectiveness research, to determine what types of medical treatments are most effective. The Patient-Centered Outcomes Research Institute will contract with academia and federal agencies such as the Agency for Healthcare Research and Quality (AHRQ) and the National Institutes of Health (NIH) to carry out research on topics such as what type of care might be most appropriate for patients with chronic conditions.

The Medicare innovation center is in keeping with that idea. The hope is that the center will find ways to save money through efficiencies while improving or maintaining the quality of the medical care patients currently receive. National health care spending has more than doubled as a share of the economy in the past 35 years.

"This is the area where we can have the most transformative change," said Neera Tanden, chief operating officer at the Center for American Progress and a former Obama administration official. "It is moving in the direction where we could really have significant savings over the long term."

Some health policy experts worry, though, that these projects may never grow beyond their initial design. Gail Wilensky, a CMS administrator from 1990 to 1992, recalls projects that proved to be successful in delivering more efficient care but were never expanded to the entire Medicare system. Among the barriers to moving a good idea from a pilot project to a full-blown policy are a change in priorities when a new president takes over, congressional opposition, lack of funding and the departure of champions of the policy.

"If a pilot lowers costs without decreasing quality, or, better yet, does both, it should be automatically part of Medicare," said Wilensky. "The problem is that these take a long time and don't on their own go anywhere. Don't fool yourself that anything will ever actually happen without a triggering mechanism."

Supporters of such innovations are hoping the center will have a more lasting impact than previous efforts. They note that the pilot projects will be different from past projects in several ways. First, the law provides a significant amount of dedicated funding to the programs — $10 billion through fiscal year 2019. Many pilot or demonstration projects in the past have been required to be budget neutral, but the law specifically allows the department of Health and Human Services to invest in the projects even if they cost money in the short term.

Another tool for expanding the programs could come from recommendations of a new commission created in the law. The commission, known as the Independent Payment Advisory Board, would recommend changes that Congress would have to consider under expedited procedures.

The proposals could still face political opposition in Congress, or Congress could reject the board's recommendations. But supporters hope that the projects will be more isolated from opposition than previous efforts.

Robert Mechanic, senior fellow at the Heller School of Social Policy and Management at Brandeis University, is optimistic about the outcome.

Mechanic, who is also director of the Health Industry Forum, a national program that develops strategies for improving health care, said the center would inspire a cultural shift and give medical providers a financial incentive to change the way they deliver care. For example, he said, doctors and hospitals may feel less compelled to run tests that may not be necessary if providers are paid one set price for a patients' total treatment rather than for each individual service.

"It's going to create a lot of energy for delivery systems that have been interested in doing this but haven't had the funding," said Mechanic. "The innovation center gives an opportunity for people to say, 'We can do care more effectively if we had a different payment model.'"

First posted April 3, 2010 6:53 p.m.

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