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Stark Eyes Medicare Savings

By John Reichard, CQ HealthBeat Editor

March 17, 2009 -- Democrats who want universal health coverage will need all the savings they can get to pay for it, so it was no surprise on Tuesday when House Ways and Means Health Subcommittee Chairman Pete Stark, D-Calif., said he favored backing all of the recommendations issued by the Medicare Payment Advisory Commission (MedPAC) to reduce Medicare spending compared to current law.

"I hope that we follow all of the MedPAC recommendations and save some money," Stark told reporters after a hearing by his subcommittee on the advisory commission's March 1 payment recommendations to lawmakers. The hearing on MedPAC's payment advice is an annual event, but a Stark aide described it as part of a series of hearings this year on overhauling the health care system. Stark said those hearings will run until May and that after that his panel will mark up legislation overhauling health care.

While tax changes are on the table to raise some of the money to cover the uninsured, Medicare savings are part of the mix. President Obama, for example, has called for cuts in spending on Medicare Advantage plans, home health agencies, and some elements of hospital care to pay for covering the uninsured. Stark said Tuesday that "Medicare improvements" must be part of a health overhaul.

MedPAC Chairman Glenn Hackbarth testified that the commission favors increases for hospitals, doctors, ambulatory surgery centers and dialysis facilities in fiscal 2010, payment rate freezes for skilled nursing facilities and inpatient rehabilitation facilities, and payment reductions for home health agencies.

But MedPAC and those who favor its recommendations now face a barrage of complaints by providers and their allies on Capitol Hill that squeezing payments below levels in current law will harm access to care and water down its quality. Stark noted as much in his opening remarks, saying that "many in the provider community will balk at the recommendations," and that MedPAC's advice too often gets twisted up in complaints by providers that they can't sustain payment revisions that don't match increases in Medicare "market baskets" measuring changes in the cost of delivering care.

But Stark made a pitch for heeding MedPAC's advice, saying the panel "is as representative a board as I think we could find" of the various interests in the nation's health care system. Hackbarth too emphasized the commission's credentials. "The point I want to make is for the most part we are from the health care system," he said, noting that of some 350 commission votes cast on 22 payment recommendations only four were "no" votes and three were abstentions. MedPAC isn't beyond error but its mistakes do not result from a lack of experience in the health care system, he told lawmakers.

Republicans, however, were critical of MedPAC's advice that payments to private health plans should be the same as for fee-for-service providers in Medicare. And they criticized Medicare's payment rates as being too low, and as indicating the enormous financial pressure hospitals and doctors would face if a public program option were added to a system of universal coverage.

The subcommittee's top Republican, Rep. Wally Herger of California, described Medicare payment rates as being sharply lower than those in the private sector, claiming that they are some 40 percent lower in the case of physicians and 30 percent lower in the case of hospitals. Calling that a "huge disparity," Herger voiced disbelief at the idea that the difference didn't result in providers charging private payers more as a result.

Does MedPAC not see cost shifting as a result, with providers charging private insurers more to make up that difference, Herger asked Hackbarth.

Hackbarth's response was that MedPAC's recommended payment rates are sufficient if providers deliver care efficiently. Herger pressed Hackbarth further, asking whether the Medicare rates would be sufficient if there were no private insurers making higher payments. Hackbarth said they would.

The MedPAC chairman noted that recent analyses by the commission show that hospitals under cost pressure are able to tighten their belts to deliver efficient, quality care under Medicare payment rates. In general, hospitals aren't run efficiently because of overly generous private insurance rates, Hackbarth said. "Our concern is overly generous private payments drive up costs," he said. Medicare has to find ways to become more efficient if the program is to be sustained financially, he emphasized.

Higher Medicare payment rates wouldn't necessarily lead providers to charge other payers less, Hackbarth suggested. "It's not at all clear to me that higher Medicare rates would result in lower rates" to private insurers, he said. "For profit hospitals will seek to maximize their profits. Not-for-profit hospitals will seek to maximize their revenues, so they can do good things with it."

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