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Commonwealth Fund Releases Its Recommendations for Reducing Health Care Spending

By Rebecca Adams, CQ HealthBeat Associate Editor

January 10, 2013 -- The federal government could save $1 trillion over a decade through a series of actions limiting health care spending, according to a report recently released by a 16-member commission organized by The Commonwealth Fund.

The proposals were released in two reports—a 43-page technical paper that provided specific details for 10 ideas and a separate 42-page report that includes introductory background information and then outlines the 10 recommendations to lower spending growth.

Researcher Stuart Guterman said that he hoped the Congressional Budget Office (CBO) would accept some of the proposals as savings that could be credited toward reducing the deficit.

"There are some things that would directly translate to CBO scores and on others, it would depend on assumptions that the CBO was willing to make on the potential savings for some of these policies," Guterman said on a call with reporters last week.

The group said that the $1.04 trillion in federal savings over the decade they are estimating would include $528 billion from Medicare and $369 billion from Medicaid. State and local governments might save an additional $242 billion, mostly because of slower growth in their share of Medicaid costs.

The proposed policies include replacing the current Medicare physician rate formula with a system that would hold physician payments steady for a decade; reducing administrative costs; and offering a new Medicare integrated benefit plan. It also would expand or modify a number of initiatives that federal officials are already experimenting with, basing those payments more on value rather than volume, including enhanced primary care and bundled payments.

The report comes as Congress is seeking ways to reduce the costs of entitlement programs and the deficit. A wide range of groups are in the midst of producing a crush of recommendations that they hope lawmakers will accept. Last week, UnitedHealth Group released its own report outlining how it believed the federal government could save $542 billion over a decade.

The Commonwealth Fund President David Blumenthal told reporters in a conference call that the "extraordinary measures" lawmakers are considering to stave off sequestration cuts "will create receptivity for improvements in the systems that are not only less painful but potential value-adding." He predicted that Congress will examine the group's work because other ideas will be more painful in comparison.

The cost estimates are ambitious, working off the assumption that all of the policies would be put in place in 2013.

Revamp Medical Practice, Medicare Advantage

The Commonwealth Fund report calls for changes to the medical malpractice system that would "reduce the use of defensive medicine by instituting a process for addressing malpractice claims that rewards the adoption of best practices." It also would repeal the Medicare Advantage quality bonus demonstration; expand competitive bidding for durable medical equipment; change payment rates for clinical laboratory, skilled nursing facility, and home health services; require prior authorization for imaging services; and set lower, Medicaid-level drug rebates for people who are dually eligible for Medicare and Medicaid. The group also would encourage the increased use of generic drugs.

The recommendations also include a plan to better coordinate care for high-cost patients with multiple chronic conditions or disabilities and tighten current medical loss ratio rules that require health insurers to spend at least 80 percent of every premium dollar on benefits.

Under a new version of a Medicare Advantage-type plan that the group would create, beneficiaries would get an integrated set of benefits that would aim to take care of patients' medical care and prescription drug needs, including care that is now covered by Medicare supplemental insurance plans. Cathy Schoen, Commonwealth Fund senior vice president and the lead author of the report, described the plan as a generous one, with catastrophic coverage and nominal cost-sharing for recommended primary care. Patients would get incentives to register with a primary care practice to oversee their care, and providers would be required to give patients information about a range of treatment alternatives, including low-cost options, or face payment cuts.

The proposal would call on Congress to set a goal of capping spending at the level that per capita gross domestic product grows over five-year periods, but does not include recommendations on how to enforce such a target.

The Commonwealth Fund contracted with Actuarial Research Corporation to estimate the potential 10-year impact from 2014 through 2023.

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