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Mission Medicare

Opinion Leaders mull Medicare changes like drug price leverage, advisory council

By Jessica Zigmond
Posted: November 2, 2009 - 12:01 am ET

In its 44-year history, Medicare has been effective at providing access to medical care and predictable coverage for its beneficiaries. Now it’s time for the federal program to use its purchasing leverage to improve quality and control costs, say healthcare experts who participated in the most recent Commonwealth Fund/Modern Healthcare Opinion Leaders survey.

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The survey—which focused solely on Medicare reform and was conducted by Harris Interactive between Sept. 9 and Oct. 13—is the 20th in a series designed to highlight leaders’ perspectives on the nation’s most pressing healthcare issues. In the survey, 83% of the 215 respondents say they believe Medicare has been either “extremely” or “very” successful at providing guaranteed access to basic medical care for the elderly and disabled, while 82% say the program has been extremely or very successful in providing beneficiaries with stable, predictable coverage.

Meanwhile, a mere 6% of healthcare opinion leaders say the program has been as strong in using its purchasing leverage to improve the quality of care, and only 4% say Medicare is extremely or very successful at using that leverage to control costs. Just 3% say they think the Medicare program is extremely or very successful at using its purchasing leverage to promote high health system performance.

Consider, too, how the participants responded when asked how effective they think it would be for Medicare to use its leverage to reward providers for performance on quality and efficiency: 59% answered that this would be an extremely effective or very effective measure, while 59% say it would be either extremely or very effective for Medicare to use its leverage to accelerate the adoption of electronic health records and other health information technology.

“We’re seeing in health reform that people want to use coverage to change the way care is delivered,” says Karen Davis, president of the Commonwealth Fund. Davis calls it a “major shift in philosophy” that moves away from wasteful practices.

One area in which Medicare could use its influence to help manage costs is prescription drugs. “If you look internationally,” Davis says, “the price we’re paying for brand-name drugs is higher, and that’s because they negotiate and we don’t. It would obviously lead to lower prices—those are dollars that could be used for benefits or to cover the uninsured.”

Using leverage

Some 81% of respondents say they either “strongly” or “somewhat” favor Medicare using its leverage to negotiate pharmaceutical drug prices, while only 14% say they either “strongly” or “somewhat” oppose that practice.

“I do agree that Medicare should use its leverage to direct prices,” says survey participant Jack Hoadley, a research professor at Georgetown University’s Health Policy Institute. “And, more specifically, to remove the restriction that’s in current law” that stipulates the federal government cannot play a role in negotiating with manufacturers. The harder task, Hoadley says, will be to implement a policy in which the benefit is delivered to private plans. “How do you set up a means by which the government could use its leverage when the plans are out there negotiating for pricing, and maybe they’re worried about not getting as good a price as the government?”

Another proposed Medicare-reform policy intended to improve care and lower costs is the concept of the “bundled” payment. It would be a single payment for all services provided to a beneficiary for a specific period of time, such as payment for acute-care episodes, including the beneficiary’s hospital stay and 30 days post-discharge, or comprehensive-care payment, including all services provided to the beneficiary during a year of coverage. In this area, 65% of respondents say a bundled payment policy would be extremely or very effective in improving care and reducing costs, while 7% say they think it would not be effective.

Gregory Walters is president of the Burlington, N.C.-based Piedmont Health Coalition, a not-for-profit that represents the interests of self-insured employers on medical benefit issues. He supports a bundled payment and says there is no motive or incentive to know healthcare’s true costs as the system exists today. “The reason I like the global packaging, what used to be called ‘global pricing’: it shifts the risk and instills greater financial management in the institution,” he says.

Independent council

Walters also supports the proposal for an independent Medicare advisory council, which would have the authority to make payment and benefit-design decisions within parameters established by Congress and subject to review by both Congress and the president. Most survey participants agree: an overwhelming majority of 75% say they either strongly or somewhat support the concept.

“If Congress failed to pass legislation each year that would achieve savings required by the commission’s mission—if spending growth overshot the targets—this commission would put out proposals” to rein in spending is how Anders Gilberg, vice president for public and private economic affairs for the Medical Group Management Association, explains the advisory council concept. “Congress would have to pass legislation each year either to match or achieve those savings, or, by default, the commission’s recommendations go into effect.”

The proposal for the Medicare advisory council—referred to in some circles as “MedPAC on steroids” (after the Medicare Payment Advisory Commission)—appears only in the Senate Finance Committee’s reform bill. And although the Congressional Budget Office reported this summer that the advisory council could ultimately save Medicare $2 billion over 10 years, that “score,” or cost estimate, accounted for savings from hospitals—even though Medicare Part A would be exempt from the purview of this commission, Gilberg explains. This is particularly worrisome for physicians, who still face a potential 21.5% cut in payments through the sustainable-growth-rate formula.

“It seems to offer some potential—it’s been scored as having some savings—but I think it’s a concept that has problems associated with it,” Georgetown’s Hoadley says. “On the one hand, you want to get some of the political influence out of decisions that need to be made. On the other hand, it takes the democratic consideration away from Congress to make these decisions.”

Davis of the Commonwealth Fund says she was surprised by how comfortable survey respondents were with the idea of an advisory council. Another area that Davis found surprising was a question that asked participants how strongly they favored or opposed expanding the HHS secretary’s authority to put Medicare payment pilots that meet appropriate requirements on a “fast track,” with the ability to extend their duration and scope if they appear successful. Nearly all respondents—95%—say they either strongly or somewhat favor this idea, while just 4% say they strongly or somewhat oppose it.

“I thought it expressed a lot of willingness for change,” Davis says of the respondents’ strong support for both the HHS secretary’s ability to test payment methods and for the advisory council. “Change is difficult, and most people are hesitant about it.”

Other parts of the survey that received strong support included: 83% of survey respondents say they strongly or somewhat favor eliminating the two-year waiting period currently required for the disabled before they become eligible for Medicare benefits, and 74% who say they are somewhat or strongly in favor of permitting adults ages 50 to 64 years of age to purchase Medicare coverage.

Both of these measures might suggest the popularity of the federal program that was established more than four decades ago for aging Americans who were about to lose their health benefits upon retirement.

“We’re having so much conversation on health reform for the broad population, it’s an important time to remember that Medicare has been mostly a successful program,” Georgetown’s Hoadley says. “It’s quite popular. People who are beneficiaries love the program,” he says. “If we can do as well filling the gap for the general population as we have for Medicare, we’d be doing well.

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