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Fiscal Panel Co-Chairman: Proposal Takes Aim at 'Doc Fix', Medical Malpractice Laws

By Emily Ethridge, CQ Staff

November 10, 2010 — Making a pitch that physicians, lawyers and consumers must share the responsibility for reining in health care costs, the co-chairmen of President Obama's National Commission on Fiscal Responsibility and Reform on Wednesday called for reduced payment rates to physicians who participate in Medicare and increased cost sharing by the enrollees themselves.

In draft recommendations to reduce the nation's debt, Democrat Erskine Bowles and Republican Alan K. Simpson also urge the overhaul of medical malpractice laws, a longtime GOP goal, and paying lawyers less to reduce the cost of defensive medicine. The health care overhaul (PL 111-148, PL 111-152) passed this year mostly skimmed over the issue of "tort reform."

The report is the "chairmen's mark," meaning that it is a draft that has not been approved by the 18 members of the commission.

The co-chairmen set a long-term goal to contain the growth rate of federal health care spending after 2020 to no more than the gross domestic product plus 1 percent, with cost growth evaluated every two years. If health care costs grow more quickly, they recommend the president submit suggestions to Congress about how to lower spending, such as increasing premiums or adding a public option to the state-run insurance exchanges.

They recommend changing the widely criticized system used to calculate payment rates for physicians who see Medicare patients, known as the sustainable growth rate formula. They ask the Centers for Medicare and Medicaid Services to replace that formula by 2015, and make "modest reductions" in payment rates to physicians until then.

Since 2003, Congress has averted annual payment cuts to physicians called for under the formula, which is adjusted every year to reflect differences between actual spending and targets set to hold down Medicare spending on physician services. Doctor groups and lawmakers of both parties have called for repealing the formula, but the price tag for a long-term solution, estimated at $300 to $400 billion over 10 years, has been politically and fiscally prohibitive.

Other savings would come from increasing cost-sharing for Medicare enrollees and requiring plans to offer rebates for brand-name drugs as a condition of participating in Medicare Part D. The draft calls for replacing existing Medicare cost-sharing rules with a universal deductible and a cap on catastrophic coverage costs—which they estimate would save $85 billion between 2011 and 2020.

In total, they estimate that fixing the physician payment system would reduce the deficit by $282 billion from 2011 to 2020. Continuing to reimburse physicians at the rates they receive now would cost $276 billion over that time period, according to the draft.

The draft also relies on the new Independent Payment Advisory Board, created under the overhaul to make recommendations for limiting Medicare spending growth, to come up with cost savings. Republican lawmakers have targeted the board as one of their primary targets for repeal.

But the commission leaders said strengthening the board could lead to further cost savings, and suggested applying its proposals to all Medicare providers and to health plans in the state exchanges, and eliminating a provision in the law that allows Congress to discontinue the board.

In addition, the draft calls for expanding successful cost-containment demonstration programs by 2015 and identifying another $200 billion in federal health spending savings. It provides several areas to reduce spending, which are likely to be unpopular with lawmakers, state officials and consumers.

For example, the draft highlights savings from accelerating cuts to Medicare Advantage and home health programs under the health care law, increasing nominal copays for Medicaid recipients and reducing the taxes states can place on Medicaid providers. It also identifies reducing federal spending on Medicaid administrative costs and increasing cost sharing for military retirees under the Tricare program.

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