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House Democrats Back Medicare Disparity Fix in Overhaul

By Jane Norman, CQ HealthBeat Associate Editor

October 23, 2009 -- More than a dozen House Democrats who have long complained that their regions are shortchanged in Medicare reimbursements lined up Thursday behind a health care overhaul bill (HR 3200) after Democratic leaders agreed to a geographic fix.

"For too long Medicare has rewarded the quantity of medicine performed rather than the quality of medicine provided," said Betty McCollum of Minnesota. "This has penalized our states in particular because they deliver high-quality care at low cost."

The desire to include the fix in the overhaul grew for the members of the Quality Care Coalition as discussions intensified around a government-run insurance plan that would pay providers based on Medicare rates. Norm Dicks of Washington said he was among those Democrats who told leaders that they could not vote for the health care bill unless reimbursement disparity was ended.

"This is non-negotiable. We have to have this reform," Dicks said.

The two-step provision on which Democrats struck a deal could make a dramatic change in the formula for fee-for-service reimbursements, moving the huge Medicare system toward a more value- and outcome-based approach. The Democrats—most from the Midwest or Northwest—said leaders have guaranteed that the fix will be included in the version of the overhaul bill that comes to the floor, and they released legislative language.

The deal also comes at a time when House leaders are working to round up and solidify Democratic votes for the overhaul as they combine three versions approved by committees and iron out details in advance of a floor vote.

Ron Kind of Wisconsin said the lawmakers realize that the models for coordinated, efficient care in their home states might not work everywhere in the country. "What we are saying is that no longer is Medicare health care payment going to be based on just the utilization of the volume of care. It's going to be based on the outcome of care. You providers figure it out," Kind said.

"Basically, we are reinventing Medicare," said Jay Inslee of Washington. "We are doing it by not just changing what we pay physicians and hospitals but how we pay physicians and hospitals."

In the approach, part of which was announced earlier in concept, the Institute of Medicine would conduct a one-year study of the current system and make payment recommendations. Bruce Braley of Iowa said the institute, which is part of the National Academies, already has extensive research available on reimbursement disparity, including ideas on how to motivate better care.

A plan for action then would be developed by the institute over 16 months and submitted by the secretary of Health and Human Services to the administration and then to Congress, Kind said. It could be killed only through a joint resolution that gains the votes of two-thirds of each chamber. All action would be completed by the time the "public" insurance option is made available for consumers.

No scoring has been done by the Congressional Budget Office because the formula does not yet exist, but Kind said it's anticipated that major cost savings will be achieved. Changing Medicare and bending its cost curve will also have an impact on private health care costs, he said.

Separately, $8 billion over two years is included in the overhaul to provide a better floor for Medicare reimbursements in regions that receive less.

Dicks said House leaders have promised to fight for the Institute of Medicine provisions in a House–Senate conference committee on the overhaul. "I hope that the other body—you know who I'm speaking of—will not see that this reform requires them to protect certain areas of the country that have strong patrons, if you know what I mean," he said.

Omission of the fix in the overhaul would be "a deal breaker," said Rep. Earl Blumenauer, D-Ore. But he and others also praised House Speaker Nancy Pelosi, D-Calif., and other leaders for coming up with a solution.

House Appropriations Chairman David R. Obey, D-Wis., said he thinks it can work and the two-step process will be one of the most important changes in health care.

"There is nothing tougher to deal with in Congress than a formula fight," Obey said. "I think this has been structured in a way that will avoid that kind of a bloody fight, and in the end you will have Medicare that reimburses on the basis of substance rather than on the basis of how many votes each faction has on the House or Senate floor."

House members and senators historically have battled over reimbursement rates based on what's best for their own districts, often pitting certain cities and regions against predominantly rural and small-town areas with lower medical costs.

Some members whose districts benefit from higher rates contend that their patients are sicker and poorer. But the Dartmouth Institute for Health Policy and Clinical Practice reports that patients' economic status and health accounts for only a small portion of the reimbursement disparity.

The institute says patients in the highest-spending regions spend more time in the hospital, have more frequent physician visits and undergo more MRI procedures and CT scans. "These findings are supported by previous research showing that discretionary decisions by physicians seem to account for most of the regional variation in spending," institute researchers said in a study published in September in The New England Journal of Medicine.

McCollum said the House Democrats formed the Quality Care Coalition five months ago to work on the issue and held some 20 meetings. Peter A. DeFazio, D-Ore., said the movement gained speed when serious talks began about the public option.

DeFazio said the House is moving in a direction of a public option that pays providers 5 percent more than Medicare reimbursements. "No matter how good the rest of the plan was, if we based it on the faulty Medicare reimbursement rates of today, those of us who represent efficient, low-cost states would find many of our citizens now had a great new public plan option which no doctor would be willing to take," DeFazio said.

Dicks said that providers in places like McAllen, Texas, which was recently cited in a New Yorker magazine article for its high per-patient reimbursement rates, are paid thousands of dollars more than providers in his Washington district. "This is wrong and it was done on a political basis and it was sustained for 40 years," Dicks said. "It was very difficult because people are protecting their areas, their vested interests."

The Institute of Medicine would be directed to study geographic variation and growth in volume and intensity of services in per capita health care spending among the Medicare, Medicaid, privately insured and uninsured populations.

It would look, for example, at the extent to which variation can be tied to differences in input prices, health status, practice patterns, access to medical services and socio-economic factors including race, ethnicity, gender, age, income and educational status.

The institute, which would be appropriated $10 million for the study, would hold public hearings and provide an opportunity for public comment.

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