More Problems Than Solutions in Medicare Report

By David S. Hilzenrath
Washington Post Staff Writer
Tuesday, June 16, 2009

Expanding access to Medicare will not solve the nation's health-care cost problem.

That's the message of a report yesterday by a commission that advises Congress on the federal medical program for older Americans.

To eliminate wasteful spending, policymakers must transform economic incentives for doctors, hospitals and other providers of medical services -- though it isn't clear how, according to the report.

As Congress and the Obama administration seek to restrain potentially crushing increases in health-care spending, the report by the Medicare Payment Advisory Commission (MedPAC) is emblematic of the larger debate: long on problems and short on solutions.

The commission has made specific recommendations in its past biannual reports, but identifying wasteful medical spending has proven a lot easier than rooting it out.

To illustrate what it might take to save Medicare, the commission describes how primary-care doctors, specialists and hospitals could be reorganized into "accountable care organizations" whose members would receive bonuses if the organizations met quality and cost targets. To ratchet up the incentives, health-care providers that fail to meet cost and quality targets could be penalized, the report says.

Even then, any projected savings would be highly uncertain, the report says. What is certain is that Medicare cannot maintain its current trajectory, it adds:

"If current spending and utilization trends continue, the Medicare program is fiscally unsustainable. . . . Part of the problem is that Medicare's fee-for-service payment systems reward more care -- and more complex care -- without regard to the quality or value of that care."

The report underscores the challenges facing President Obama and Congress as they seek to overhaul the health-care economy. The administration has put a spotlight on what it considers wasteful spending, but it has offered sparse details as to how it would change the incentives that produce the waste.

The report identifies some areas that are ripe for savings. MedPAC estimates that the government is paying private Medicare health plans -- which were supposed to save the government money -- much more than it should. In addition, the government could save money by adopting a more streamlined approval process for "follow-on biologics" -- products that imitate biotech treatments already on the market.

Getting doctors to join accountable care organizations may require pressure, MedPAC Executive Director Mark E. Miller told reporters: "If you want people to voluntarily organize, you may want to make sure that the current system isn't as pleasant a place to be."

The model for accountable care organizations resembles that of large, tightly managed physician groups, practices that have been the subject of demonstration projects, and Medicare's experience with those offers limited encouragement, according to the report. Measurable quality improved in the areas of care monitored, such as for diabetes and congestive heart failure. But "whether the demonstration has actually generated savings for the Medicare program is debatable," the report says.

Policymakers hope that money can be saved by better coordinating care. But, according to the MedPAC report, Medicare pilot programs intended to coordinate care for patients with chronic diseases -- programs that involved insurance companies and other private groups -- generally achieved modest quality improvements. Most of the programs cost Medicare more money than it would have spent without them, the report says.

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