Senate Bill Includes Cost Control, But Is It Enough?

In one of the best “glass-half-full” commentaries on the Senate’s healthcare reform bill, The Atlantic’s Ronald Brownstein interviews several health policy experts who concur that the cost controls in the measure could potentially be effective. Along with White House budget director Peter Orszag, Brownstein also cites a letter from leading health economists to the President as evidence that the legislation will be effective in bringing spending under control.

As noted in this space a week ago, the Nov. 17 letter from the 23 economists said the legislation would need four ingredients to meet their test:

• It could not increase the deficit;
• It would have to place an excise tax on high-cost insurance plans;
• It would have to include an independent Medicare commission;
• It would have to start to reform the healthcare delivery system.

The legislation would do all these things–and would even maintain budget neutrality, according to the Congressional Budget Office. But as usual, the devil’s in the details.

Take the proposed independent Medicare Advisory Board, which would recommend changes in Medicare reimbursement methods that the government could carry out with limited Congressional oversight. Any recommendations affecting hospitals or physicians, beyond what is in the legislation, are essentially taken off the table through 2019. That leaves the board to make proposals that would affect other providers, as well as Medicare Advantage plans and Part D drug plans. But Medicare Advantage spending will undoubtedly be slashed in the final reform bill, and the pharmaceutical companies have already made a deal with the Obama Administration-albeit one that the House bill challenges. Moreover, the Senate bill specifically prohibits the Medicare board from making any suggestions that would “ration care.” Considering how easy it is to allege rationing, that’s a big enough loophole for Congress to drive a tank through.

The big delivery-system reform in the bill, which follows the Senate Finance Committee blueprint, would place 1 to 2 percent of hospital Medicare payments at risk for meeting quality and efficiency targets. It remains to be seen whether that will be enough to counter the incentives to do more. Medicare would also have to study the utilization patterns of physicians in the program; at some point, it could increase payments for doctors who deliver high-quality, cost-effective care, and reduce them for those who don’t. But when, and by how much, have apparently been left up to the usual process. So Congress could still intervene on behalf of physicians, as it has in the past-and as the House recently did to prevent doctors from having their Medicare payments cut. The Senate bill would do the same, but only for one year, while the House permanently reverses the cuts in its $210 billion giveback.

The experts laud the Senate bill for including most of what they and their colleagues have been recommending. For example, it establishes programs to encourage accountable care organizations (ACOs) and reductions in hospital readmissions, as well as demonstration projects for payment bundling and enhanced home care for chronically ill seniors.

The ACO program would allow providers to share in the savings if improved coordination of care led to lower costs. But it’s important to remember two things about ACOs. The first, which gave Massachusetts legislators pause when a special state commission proposed something similar, is that it would be difficult to form such organizations because of the fragmentation of the delivery system and the lack of a business model for ACOs. Second, if ACOs did emerge in response to the government incentives, they would probably be led by hospital systems, some of which have adequate infrastructure and enough employed physicians to pull it off. If hospitals, rather than physicians, lead ACOs or bundling efforts, they will increase their domination of healthcare at the expense of private payers and consumers.

I agree with Brownstein and the experts he consulted that the Senate bill contains some important provisions that could lead to delivery-system reform. But many hurdles must be overcome-not the least of them, passage of the legislation-before we can break out the champagne.