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At Health Overhaul Hearing, the Talk Turns to Medicare

By John Reichard, CQ HealthBeat Editor

May 6, 2008 -- The Senate Finance Committee launched on Tuesday the first of a series of at least eight hearings this year on overhauling the entire U.S. health care system, but former Health and Human Services Secretary Tommy Thompson testified that the panel should first focus more narrowly on revamping Medicare.

"Medicare is going broke," said Thompson, who together with former HHS Secretary Donna Shalala provided the sole testimony at the hearing. Although Shalala didn't endorse the Medicare-first strategy, she backed up Thompson in emphasizing the importance of the program. "It's very important to use Medicare as part of the wedge to transform the entire health care system," she said.

Thompson reminded the panel that Medicare's hospital trust fund will begin taking in less money than it pays out by 2013 and is headed for insolvency by 2019. That development "is going to be a huge, kind of dampening impact on health care," he said.

Reducing benefits, increasing the age of eligibility, and increasing revenue will all likely have to be part of the approach to transforming Medicare, he said. "How should we make these difficult decisions? I am calling for the creation of a bipartisan commission, similar to the base-closing commission. This commission should be charged by Congress and the next president to recommend solutions," Thompson urged, noting that "2017 is not that far away."

Shalala differed on the utility of a commission and objected strenuously to raising Medicare's age of eligibility, now 65 years of age for most beneficiaries. She said the commission approach is suited to dealing with more narrow issues and asserted that the "political system," specifically Congress, is going to have fix Medicare. "I think extending the age for Medicare is a very dangerous issue. As people get older they get sicker and that's the last thing we want to do in our society."

But when committee Chairman Max Baucus, D-Mont., seemed to suggest—as did other senators—that the focus ought to be on tackling health care costs both inside and outside of Medicare, Shalala made a vigorous argument that changes to streamline Medicare, notably through requiring the use of electronic health records, should "absolutely" be part of the strategy for implementing universal health coverage in the United States.

"You'd be surprised how much the private sector follows Medicare," she told Baucus. "It's very important as part of the strategy to use what you can control, and that is the Medicare system," she said. If use of electronic health records is driven through Medicare, "you will get a bump in the private sector."

Struggling with Medicare Writ Small . . .
Senate Finance Committee members meanwhile continue to struggle with putting together a much smaller package of Medicare changes that would put off, for 18 months, deep scheduled cuts in physician payments due to start July 1. Grassley said on his way out of the hearing that he and Baucus do not yet have a package to talk about, but the pair were planning to meet later on Tuesday. Baucus said after the hearing that he's still planning to bring to the Senate floor a Medicare package in "mid-May, end of May."

Grassley said "extras" in the bill beyond blocking doctor payment cuts could include rural provider payment provisions. Asked if a mandate for electronic prescribing in Medicare could be in the package, Grassley said it "might."

But even as relatively small issues set off intense lobbying that slows agreement on Medicare legislation, lawmakers are expressing confidence that the days of overhauling health care broadly will soon begin.

. . . But Boasting of Big Ambitions
"This committee must prepare for the challenge of building consensus" on a health overhaul, Baucus said in his opening statement. "I am confident that this time we will succeed."

"I see many shared principles," he said, including agreement to strive for universal coverage and slow the growth in health care costs. Payment incentives rewarding quality and efficiency, greater use of health information technology including electronic medical records, and wider research comparing the effectiveness of medical treatments "are just a few proposals that can transform our delivery system."

Grassley said it's important not to upend the system and observed that "people are used to their employers providing health benefits."

"I think we need to look into whether we can expand health care coverage by making the current unlimited income tax exclusion for employer-provided health insurance more equitable, while increasing the tax benefits for taxpayers purchasing non-group coverage," he said.

Shalala, who served as HHS secretary in the Clinton administration, seemed to determined to apply lessons learned from the spectacularly ambitious and spectacularly unsuccessful attempt to overhaul health in 1993–1994. It's important to have widespread agreement not just that there is a problem but also on the solution, she said, and that the elements be kept simple. "There ought to be limited elements—you ought to pick the ones that matter to do universal coverage.

"One of the things we learned in '93 is that complexity killed us," she said.

She also noted that a Congressional Budget Office estimate of the cost of the Clintons' proposed Health Security Act was "devastating. It changed the momentum of the discussion." Alluding to CBO's recent estimate that Democratic Oregon Sen. Ron Wyden's Healthy Americans Act would be budget neutral, Shalala said that if one starts the debate with a score of budget neutrality, "you take a giant step."

The Finance Committee plans to have two more health overhaul hearings before hosting a June 16 "summit" on health care to which it has invited the entire U.S. Congress.

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