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Orszag Urges New Council to Restrain Medicare Spending

By John Reichard, CQ HealthBeat Editor

July 17, 2009 -- With growing cost concerns threatening to derail the Obama administration's health overhaul efforts, White House Office of Management Budget (OMB) Director Peter R. Orszag urged House Speaker Nancy Pelosi, D-Calif., Friday to consider rewriting a House Democratic overhaul plan to include language creating a new council to hold Medicare spending to levels projected under current law or to lower them.

"We agree that it is critical that health care reform is not only deficit neutral over the next decade, but that it does not add to our deficits thereafter," Orszag said in a letter Friday to Pelosi. The council "would have the authority to make recommendations to the President on annual Medicare payment rates as well as other reforms," Orszag said. "Both the annual payment updates and the broader reforms would be prohibited from increasing the aggregate level of net Medicare expenditures."

Senior OMB officials said the aim would be to maintain or lower the current Medicare spending "baseline," the level of spending actuaries project under current law that takes into account medical inflation, changes in enrollment, intensity of services, and other factors. Spending could go up in some parts of Medicare and fall in others, but the net effect would have to be no increase in the spending baseline, they said. One of the officials said the approach would hopefully lower the baseline but that even if it were maintained the council would help Medicare get better health care for the dollar.

The Medicare program is under constant pressure from companies and their lobbyists to boost payment levels.

Pelosi said in a mid-day press conference that she is receptive to the idea.

Under a draft bill forwarded along with the letter, the new "Independent Medicare Advisory Council" or "IMAC," would deliver its recommendations as a package that the president would have to either accept or reject. If the president accepted the recommendations, Congress would have 30 days to intervene by passing a joint resolution opposing them. But the president could veto that resolution, forcing Congress to come up with a two-thirds majority of each chamber to override him. Otherwise, the secretary of the Department of Health and Human Services would be authorized to carry them out.

That basic approach has been in place for two decades in the defense arena, where five rounds of military base closings and realignments have taken place since Congress in 1988 set up an independent commission to make recommendations to the president, who submits them to Congress. Lawmakers can pass a resolution of disapproval, but no such effort has ever succeeded.

The plan is similar to a proposal by Sen. John D. Rockefeller IV, D-W.Va., which Orszag also praised in his letter. Rockefeller would elevate the existing Medicare Payment Advisory Commission (MedPAC) to an executive branch agency with the authority to implement its recommendations. Rockefeller has said that change is needed because commission recommendations regularly get attacked by special interests and fail to gain passage in Congress. He says Congress has proven itself inefficient and inconsistent when it comes to making decisions about provider reimbursements.

Orszag said that either the Rockefeller MedPAC proposal or the IMAC approach "would represent a critical step forward in creating a health care system that rewards quality, restrains unnecessary costs, and provides better care to more Americans." The letter asks that Pelosi and the three House committees with jurisdiction over the Democratic proposal (HR 3200) consider the proposals.

The House Energy and Commerce Committee is the only one of the three panels still marking up the legislation. The Ways and Means and Education and Labor Committees approved the measure Friday.

Republicans and the conservative Blue Dog faction of the Democratic party in the House are protesting the cost of the Democratic plan, with criticism spreading across Capitol Hill Thursday following testimony by Congressional Budget Office Director Douglas Elmendorf that cost control elements in HR 3200 would not fully offset the increases it would make in the nation's overall health care spending.

Pelosi said at her press conference that even before receiving the Orszag letter she had instructed her staff to look at "how we can come together so that we can get the savings that MedPAC would put forth, but the responsibility of Congress would be reflected in the criteria that we would put forth and that the administration can have what they want." Pelosi didn't commit to the approach, however. "I'm not here to announce that is final. I am just saying that is something that under certain circumstances we would be receptive to."

Wisconsin Democrat Ron Kind, a House Blue Dog who voted against the version of HR 3200 marked up by the Ways and Means Committee, said the idea of empowering MedPAC is "worth exploring."

The proposals are controversial because they limit the ability of lawmakers to intervene on behalf of powerful constituents such as local hospital officials. Hospitals and other providers and manufacturers are sure to oppose the proposals because of their success in lobbying for higher reimbursement rates. "We oppose it," Richard Coorsh, spokesman for the Federation of American Hospitals, said of the IMAC approach.

Rockefeller issued a statement thanking the White House for endorsing his proposal. "The President is deeply committed to cutting costs, taking lobbyists and special interests out of the equation, and keeping Medicare solvent – and this is exactly what the MedPAC proposal will do," he said. A Rockefeller spokeswoman declined comment on how the IMAC proposal would compare with the MedPAC proposal.

In remarks delivered at the White House late Friday afternoon, President Obama sought to counter the upward spiral of concern about overhaul costs by pointing out progress made in the overhaul debate and pledging new cost control tactics.

"I want everybody to just step back for a moment and look at the unprecedented progress that we've already made on reform," he said. Referring to the Orszag letter, Obama said "I've proposed to Congress, and I am actually confident that they may adopt these proposals, that . . . an independent group of doctors and medical experts will oversee long-term cost-savings measures."

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