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MedPAC Urges Center to Compare Value of Treatments

By John Reichard, CQ HealthBeat Editor

April 13, 2007 -- The Medicare Payment Advisory Commission (MedPAC) lent its backing this week to the growing number of health policy leaders who seek to tackle rising health costs by researching health care services to identify which provide the best value.

The panel voted Thursday to include a recommendation in its June report to Congress that legislators "should charge an independent entity to sponsor credible research on comparative effectiveness of health care services and disseminate this information to patients, providers and public and private payers."

MedPAC files two major reports to Congress each year making recommendations on Medicare payment policy, one in March and the other in June. At its April 12–13 meeting, the panel also agreed to include recommendations in its upcoming June report regarding a new method for calculating hospital wages in setting Medicare payment levels and to lessen the hassles Medicare beneficiaries encounter filling prescriptions for certain drugs.

Leading health policy analysts recently called for funding for comparative research overseen by some authoritative entity.

One of those analysts, Gail Wilensky, administrator of Medicare and Medicaid in the 1990s under President George Bush, warned at a meeting in February that health care spending is growing around 2 percent faster than inflation and must be brought down to a more sustainable level, such as half a percent or 1 percent.

Senate Finance Chairman Max Baucus, D-Mont., also is urging more comparative effectiveness research. The bill (S 3) the Finance Committee marked up Thursday on Medicare drug price negotiating authority authorizes new studies comparing pharmaceuticals' effectiveness to guide Medicare prescription drug plans in decisions on what drugs to cover. The Senate is expected to vote on the bill the week of April 16.

It's uncertain how far Congress is willing to go. Wilensky said in February that bringing down the cost growth curve will require an investment of billions, not millions, of dollars in comparative studies.

During a press briefing Thursday, Centers for Medicare and Medicaid Services acting Administrator Leslie V. Norwalk said private plans offering Medicare drug coverage already can do their own analysis of how effective drugs are and take those findings into account as they develop lists of drugs that will be covered by the plan.

In other action, MedPAC voted to recommend to Congress a new method for compensating hospitals for their labor costs. The new method would reduce geographic variations in the wage index now used by Medicare, which leads to constant lobbying pressure by hospitals to be "reclassified" into neighboring areas with different wage index values that result in higher Medicare payments.

The new method is designed to reduce year-to-year volatility in wage index values as well as to reduce the large differences that now occur between neighboring counties.

Instead of relying on data submitted by hospitals as is now the case, the index would be calculated "from all employers and industry-specific occupational weights," according to the language of the recommendation. In effect, the index would be calculated using data from the Bureau of Labor Statistics and the U.S. Census Bureau.

Wage index values would be calculated county by county. The new method would be implemented so that "large changes in wage index values are phased in over a transition period," according to the language of the recommendation.

In calling for the repeal of the existing statute governing the hospital wage index, the recommendation also would end the practice of allowing reclassifications into neighboring areas and of permitting exceptions to complying with the index.

MedPAC also is calling for use of the new wage index method in calculating payments for skilled nursing facilities and home health agencies and for an evaluation by the Health and Human Services secretary of its use for certain other Medicare payment systems.

The commission also sought to lessen confusion that occurs over whether certain drugs are covered by Part D or Part B of Medicare. Part D governs the prescription drug benefit and Part B various forms of care outside the hospital.

In some cases, Part D prescription drug plans aren't able to determine whether B or D pays for a drug without requesting additional information, creating administrative hassles, and potentially delaying access to treatment.

Recommendations agreed to by the panel urge Congress to direct the Medicare program to "identify certain overlap drugs and direct plans to always cover them under Part D." Those drugs should be "low cost" and now "covered under Part D most of the time."

MedPAC also is advising Congress to allow Medicare prescription drug plans to cover a "transitional supply" of overlap drugs under certain conditions until a final decision is made whether they are covered under Part B or Part D.

Congress also "should permit coverage for appropriate preventive vaccines under Part B instead of Part D," MedPAC advises.

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