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Controlling Medicare Costs: New Board Will Wield Power, But Will Congress Go Along?

By Kerry Young, CQ Staff

April 5, 2010 -- Proponents have called the creation of a new Medicare payment board one of the most promising cost control elements in the entire health care overhaul plan.

That's because beginning in 2014, the 15-member panel of health care experts will have the authority to rein in long-term growth in Medicare spending that Congress could not easily block. The panel — called the Independent Payment Advisory Board — is empowered to make recommendations to the president in January. Those recommendations would take effect unless Congress clears an alternative.

This outsourcing to an independent board is intended to help overcome the political hurdles that slowed or stalled previous attempts at Medicare cost cuts.

"I am not going to sugarcoat it. This independent advisory board is very important to help improve quality of care and to control costs. It does have some teeth in it," Senate Finance Chairman Max Baucus, D-Mont., said March 24. "But I say to my colleagues: If we really want to do something about health care costs in this country, this is a start."

The impetus for the board's creation is clear. Even before the oldest of the baby boomers turn 65 next year and age into Medicare, its annual expenses will top $500 billion, or about 15 cents of every federal dollar spent.

Beyond Medicare, the hope is that the board's work could help trigger savings throughout the U.S. health system by testing new approaches to paying doctors, hospitals and other providers. Insurance companies often follow the decisions made by Medicare, which covers more than 45 million Americans.

Skeptics, however, are dubious that those goals can be achieved. They point out that Congress already has given the board a lot of lead time — its first recommendations aren't due until 2014 — and blocked it from considering cuts to hospitals until 2020. Moreover, the health law specifically bars the board from recommending changes in benefits, eligibility requirements or cost-sharing requirements. It also prohibits recommendations to ration health care, or to raise taxes or Medicare Part B premiums.

Perhaps the first challenge for the Obama administration will be filling the board's 15 full-time seats. The law calls for the members to be appointed by the president and confirmed by the Senate for six-year terms. But it bars those members from working for outside businesses or other groups to prevent conflicts of interest and ensure a full-time commitment.

That may end up ruling out some well-qualified candidates, said Daniel N. Mendelson, president and founder of the consulting firm Avalere Health, and a former associate director for health at the Office of Management and Budget.

"If you end up not letting people who understand about issues on the board, the board is not going to be very powerful," he said.

A more daunting challenge may be in the Senate confirmation process. There have been 16 cloture motions filed on executive nominations since 2009, only one short of the 17 such motions filed during the two terms of George W. Bush's presidency.

Filling even less prominent posts has been difficult. There remain two vacant seats for independent advisers for the Social Security Board of Trustees, which produces a detailed annual report on Medicare's finances. And that board is not that controversial when compared with the Medicare panel, which has taken shots from across the political spectrum.

Conservative Republican Sen. Pat Roberts of Kansas called the new advisory board part of a "rationing apocalypse" and "the infrastructure for the 'Brave New World' of big-government intrusion into health care decisions of all Americans."

Liberal California Democrat Pete Stark, who leads the Health panel of the House Ways and Means Committee, pointed out that if the board fails to send Congress a set of recommendations, the law calls on the Health and Human Services secretary to send a proposal in its place.

"It is one thing to give an independent board of health care experts such sweeping power to change the Medicare program, but it is quite another to give that power to a partisan political figure who reports directly to the president," Stark said.

And that criticism is coming before the board has even been constituted. Once it gets rolling, it is likely to face heavy resistance from the groups who would bear the brunt of any changes. Companies, doctors and hospitals often have the clout to drown out recommendations for new payment approaches or cost cuts, including those from Congress' own board of expert advisers, the Medicare Payment Advisory Commission (MedPAC).

Even with legislative protections built into the process and recently enacted pay-as-you-go rules in place for Congress, these groups will continue to try to exert their influence on what they consider unfavorable Medicare policies. More than four dozen specialty medical associations and trade groups asked Democratic leaders in January to drop the board from the bill.

"What is to stop Congress from 'neatening' up around the edges of what the board does by passing subsequent bills?" said Joseph Antos, a health researcher at the conservative-leaning American Enterprise Institute.

With 15 members, moreover, the board will probably be large enough to represent many industries that would be targets of cuts, Antos said.

Diane Lim Rogers, chief economist at the deficit-fighting nonpartisan Concord Coalition, said the group's success hinges on "future administrations and Congresses following through on a level of discipline and a set of policies that they themselves did not set," she said.

"Everything we already know to do to reduce health costs is exactly what the politicians want to put off until someone else is in charge," Rogers said.

GOP Rep. Paul D. Ryan of Wisconsin has also expressed skepticism that the board's recommendations will ever take effect. In March, he asked the Congressional Budget Office to assess the law's financial impact if several provisions were altered, including the one creating the advisory board.

But the critics will find it difficult to dismantle the board.

The health care law lays out a complicated path for dissolving it, requiring the introduction of a joint resolution by early 2017 that must have the support of 60 percent of each chamber.

It also includes procedures to speed the board's recommendations through both chambers, including time limits on debate. To make significant changes would require support of three-fifths of the Senate.

That approach pleases researchers who have long fought to change most payment incentives so that Medicare pays for quality of service, rather than just quantity.

"You structure a choice that it's harder to walk away from," said Elliott S. Fisher, director of the Center for Health Policy Research at Dartmouth Medical School.

Dartmouth research has established that spending more Medicare dollars on a patient doesn't necessarily lead to better health outcomes and, in some cases, may have the opposite effect.

"In the long run, if we move toward a payment system that rewards better value on a level playing field, innovators who come up with high-value treatments or better ways of delivering the same care at lower costs will be rewarded," said Fisher.

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