Should MedPAC Be Given Authority Over Medicare Payments?

Most of the attention paid to President Obama’s letter to Senators Max Baucus and Ted Kennedy has focused on Obama’s willingness to accept a health reform plan that includes an individual mandate to buy health insurance. But that’s not surprising, considering the strong support in Congress for that requirement. And nobody was really surprised that the President called for a public insurance option, since he had promoted that idea during his election campaign. What was unexpected, though, was Obama’s endorsement of a proposal to give the Medicare Advisory Payment Commission (MedPAC) vast new powers to determine Medicare reimbursement of providers. Under this proposal, MedPAC’s recommendations for cost reductions by Medicare would be adopted unless Congress voted in a joint resolution to overturn them.

“This is similar to a process that has been used effectively by a commission charged with closing military bases, and could be a valuable tool to help achieve health care reform in a fiscally responsible way,” stated Obama in his letter.

A similar proposal is included in a bill introduced by Sen. Jay Rockefeller, which the President reportedly cited in a meeting with Democratic Senators. That bill would turn MedPAC into an agency in the executive branch. Currently, MedPAC is merely a Congressional advisory commission that has no decision-making authority. Rockefeller would give MedPAC the authority to set Medicare and Medicaid reimbursements for physicians and hospitals. The 17 MedPAC commissioners—all healthcare experts–would make those decisions, instead of Congress.

Congress has had a very difficult time addressing these issues, partly because of the strong hospital and physician lobbies and also because healthcare organizations, as well as manufacturers of devices, drugs, imaging equipment, durable medical equipment and other medical supplies, are located all over the country. Add it up, and you have a pressure group in every Congressional district.

One area that has consistently stymied Congress is physician reimbursement. In the 1990s, the government tried to limit the volume of services by creating a “sustainable growth rate” (SGR) formula that is supposed to cut per-unit reimbursement if physicians raise the amount of services they provide more than a certain amount each year. For the past few years, Congress has reversed the pay reductions called for in that formula every year because of pressure from physicians and their societies. At this point, the law calls for a 26.5 percent cut in physician reimbursement, which clearly isn’t going to happen.

How MedPAC would tackle that problem is unknown. But MedPAC’s commissioners have recommended redistributing some Medicare payments from specialists, whom they regard as overpaid, to primary-care physicians. They have also advised that a portion of Medicare payments should be made for the quality, rather than the quantity, of services provided. They have made recommendations to reduce Medicare’s excessive costs for imaging tests, and they have called for unbiased comparative effectiveness research.

Initial health wonk reaction to the idea of making MedPAC the arbiter of Medicare payments has been positive. Ezra Klein, writing in The Washington Post, opined that the proposal, if adopted, would make Congress more honest by eliminating pressure from local constituents on Medicare reimbursement. And Maggie Mahar, writing in her Health Beat blog, says, “MedPAC’s recommendations could serve as a brilliant blue print for overhauling Medicare,” which could jumpstart real reform of the whole system.

Some health policy experts are also pleased. “I would be delighted if that happened,” Lawrence Casalino, MD, chief of the Division of Outcomes and Effectiveness Research at Weill-Cornell Medical College, tells BNET. “I think the MedPAC commissioners are very good, and they can make decisions that would be hard for the politicians to make.”

So what’s the catch? I agree that these are very smart people who really know the issues. But I wonder what steps would be taken to safeguard them from the enormous pressures of interest groups. And there is also a big leap from making recommendations to making policies that will affect millions of people in big and small ways. Perhaps we should have some kind of citizens’ advisory panel that could help keep the commissioners in touch with the concerns of patients.