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MedPAC Assesses Methods of Wringing Greater Value from Medicare Spending

June 16, 2006 -- With Medicare spending on a seemingly unsustainable trajectory, analysts at the Medicare Payment Advisory Commission (MedPAC) are trying to deal with the problem by figuring out how to get better value for the Medicare dollar. Tighter management of care in the traditional fee-for-service part of Medicare, measuring the levels of care prescribed by physicians, and improving the accuracy of payments to providers all hold promise toward that end, the commission said in a report to Congress on Thursday.

The MedPAC report also details how seniors decided to enroll in the new Medicare drug benefit, noting that while the enrollment process confused them, most beneficiaries felt they had enough information on which to base a decision.

The report emphasizes the larger challenge that policymakers face in Medicare. "Controlling spending is essential to assure the sustainability of the program," the report notes. "The longer action is delayed, the more draconian the remedies will be required." The tack MedPAC is now taking emphasizes avoiding wasteful expenditures; "Medicare must increase the quality and the value of the care it purchases," the report says.

Two of the main approaches MedPAC is exploring to increase value are "care coordination" in traditional Medicare and measuring "resource use" by physicians, the commission's executive director, Mark Miller, noted in a press briefing Thursday on the report.

Care coordination refers to ensuring a patient gets appropriate care in the least-costly setting—such as a doctor's office rather than an emergency room—and helping patients better manage their own conditions. While managed care plans are the vehicle in the Medicare Advantage side of Medicare that oversees care coordination, beneficiaries are overwhelmingly in the unmanaged fee-for-service side of Medicare.

Two methods can be used to coordinate care in traditional Medicare, the report says. In one, Medicare would contract with a large group practice to ensure patients go to the right settings for care or if they have complex conditions such as congestive heart failure or diabetes, that they take medications properly, and get needed checkups to keep them from developing complications that require costly hospital care.

Typically, large group practices would rely on nurse managers and information technology systems to track patients and help them better manage their own care.

The second approach targets the many beneficiaries who do not go to large group practices but rather to small or solo physician practices. Medicare could contract with separate care management organizations that have their own information technology and care management systems and can coordinate with the beneficiary's doctor. Under this model, the beneficiary would have to agree to primarily go to a particular doctor as his or her "medical home."

MedPAC's staff work indicates that care coordination in the fee-for-service sector could improve the quality of care, but whether it would reduce costs is less clear at this point, said the report.

Miller also noted that the commission seeks to improve value by making physicians more accountable for the care that they deliver. Paying them more for higher-quality care is one part of holding them accountable; another part is measuring the health care resources they consume in delivering care.

The idea is to compare doctors on the tests and procedures and other forms of care they prescribe in treating patients for a particular condition. Doctors who order more services without getting better results can be identified and prodded to practice more efficiently.

The report says that two methods of organizing data show potential for incorporating measures of resource use in Medicare, but further work needs to be done to see if they can be used to compare individual doctors on resource use as distinct as from geographic areas.

Miller noted that MedPAC is assessing whether existing medical literature can be used to compare the cost-effectiveness of various approaches for treating the same medical condition. The report finds that existing studies do not necessarily give clear answers, Miller suggested. That in turn raises new questions about using cost-effectiveness as a tool to improve value, such as how to create a system for consistently generating useful cost-effectiveness findings, how to finance it, and the roles of the public and private sector in the process.

The move toward payment accuracy reflects an attempt to ensure that Medicare's payment systems aren't skewed toward developing incentives for providers to deliver certain types of care for financial rather than clinical reasons, Miller suggested.

The report also identifies best practices in home care that could be used to develop performance measures to improve the quality of that type of care.

Using surveys and focus groups, MedPAC analysts also examined how beneficiaries learned about the Medicare drug benefit and made their choices. According to the analysts, beneficiaries relied on friends and family most often for information, but also relied on insurance agents and the drug plans. In many cases, they would identify a plan they wanted and get the literature and then make a decision on enrolling, Miller said.

Not many beneficiaries used Medicare's Web site or its 800 number, but those that did found those tools useful, Miller said. Beneficiaries found the enrollment process confusing, "but they also said they did have enough information to make a decision," Miller added. Despite predictions that beneficiaries in many cases would rely on doctors and pharmacists in making decisions, few did so, Miller noted.

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