Lawmakers are looking to change the way Medicare pays doctors and hospitals before basing Medicare rates on an entirely new government-run program.
About those Medicare rates ...
House bill has new provisions to revamp payment
Congressional Democrats last week announced that the House health reform bill—the America’s Affordable Health Choices Act—would contain new provisions to study, then revise, the Medicare reimbursement system.
Specifically, the new language calls on the Institute of Medicine to conduct two studies, one of which would take place for one year after enactment of the bill with a goal to update Medicare’s reimbursement formula to eliminate geographic disparities. The second study, which would take place over two years and be subject to congressional review, would take measures to re-base Medicare payment on quality of care rather than volume.
Political motivations are a major driver of these studies, some provider sources claim. A number of the fiscally conservative Democrats who represent rural interests in the House Blue Dog coalition “have been raising the issue that there’s disparity in payments in Medicare,” and that a public option based on Medicare rates would disadvantage rural communities, said Blair Childs, senior vice president of public affairs at group purchasing and quality organization Premier. “That’s what’s driving all this.”
Among those in Congress who support a public option, the thinking is these changes would make such an option based on Medicare rates more attractive to providers, particularly those located in rural areas and aren’t paid well by Medicare. Negotiations on the exact form of public option supported in the House continued late last week.
An option based on Medicare rates plus 5% has been espoused by House leadership and other liberal Democrats as the best alternative for bringing costs down and enhancing healthy competition with the private insurers. At deadline, however, various formats for the public option, including the robust alternative, were still being debated.
In establishing a new government-run program based on Medicare, however, you have to fix what’s wrong with Medicare first, said Rep. Peter DeFazio (D-Ore.) during the news conference. Otherwise, the public will just end up with yet another government-run program that no doctor will want to participate in, he warned. The other result is that hospitals will end up cost-shifting to other plans to make up for the losses they would face under a public plan based on Medicare rates, DeFazio said.
Ideally, lawmakers would like to see this revamp of Medicare’s reimbursement system take place prior to establishing the public option and other health insurance exchange measures in the bill.
In changing the rules on how providers get paid, however, not all hospitals may benefit, depending on where they’re located. An $8 billion fund has been set aside in the bill to help some hospitals ease into the transition of a new Medicare compensation system, said Rep. Bruce Braley (D-Iowa).
The provider community needs to be aware that when the rules of compensation change, “they need to be prepared,” Braley said.
Already, these studies have provoked concerns among the hospital community. While appreciative of the fact the bill would provide this $8 billion safety net, “we are disturbed that there would be significant redistribution among hospitals when that funding elapses,” said Alicia Mitchell, spokeswoman for the American Hospital Association in an e-mail.
Ron Anderson, CEO of Parkland Health and Hospital System in Dallas, acknowledged that “we have to get to a point where we have to pay for quality and we have to pay for outcomes,” and these studies would help accomplish that goal. In addressing the regional disparities of Medicare payments, however, there are bound to be winners and losers, no matter what you do, he cautioned. “Some hospitals are going to experience some destabilization.”
For that reason, “you can’t just recalibrate and average everything out. These studies have to be done in an evidence-based manner,” Anderson said.
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