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Obama Eyes The Purse Strings for Medicare
Lawmakers Now Win Friends at Home by Setting Payout Rates

By Shailagh Murray
Washington Post Staff Writer
Thursday, July 16, 2009

At the same time President Obama is asking members of Congress to take one of the most politically difficult votes of their careers, he is also pressing lawmakers to give up one of their most valued perks of office: boosting Medicare payments to benefit hometown providers.

Setting reimbursement rates for local hospitals, doctors, home health-care centers and other providers is a legislative ritual that amounts to one of the most effective and lucrative forms of constituent service. Delivering federal money through Medicare, the country's largest insurance program, can be a powerful tool on the campaign trail, allowing lawmakers to argue that they are creating jobs and improving the quality of health care for voters.

Longtime members of Congress have become masters at dominating the tug of war between keeping providers flush and trying to rein in the entitlement program's dramatic growth. House Ways and Means Chairman Charles B. Rangel (D-N.Y.) champions New York City's teaching hospitals. Charles E. Grassley (Iowa), the Senate Finance Committee's ranking Republican, makes sure rural health-care services are amply funded. Months before Sen. Ted Stevens (R-Alaska) left office, he secured a permanent 35 percent increase in Medicare payments for Alaska physicians.

Obama administration officials say they are determined to stem soaring Medicare spending, arguing that it is a root cause of the broader health-care crisis that they are trying to address with Congress. Behind the scenes, Obama is pushing for a mechanism that would take Medicare payment authority out of the hands of politicians and invest it in a separate entity, possibly under the executive branch.

"Structures that fundamentally alter the long-term costs are a must for real health-care reform," said White House Chief of Staff Rahm Emanuel. He called the Medicare payment debate "the least talked-about, most important issue on the table."

House Democrats' health-care proposal, released Tuesday, includes no measures aimed at reversing the long-term cost trajectory of Medicare, a fact that spurred a rebellion among conservative Blue Dog Democrats on the Energy and Commerce Committee, which will begin debate on the House bill today. Rep. Mike Ross (Ark.), a Blue Dog leader and panel member, told reporters yesterday that he has the votes to defeat the package unless it is "substantially amended" to address long-term cost concerns.

The Senate health committee approved its own bill yesterday on a party-line vote; that package also was silent on the issue of Medicare's growth.

"We need to make it happen," Senate Finance Committee Chairman Max Baucus (D-Mont.), whose panel has jurisdiction over Medicare, said of payment reform. Baucus is crafting a separate proposal to pay for expanded health-care coverage, but that task is complicated by the fact that he is also attempting to win the backing of lawmakers such as Sen. Olympia Snowe (R-Maine), a crucial swing voter who opposes White House efforts to shift control of the Medicare payment equation.

Snowe said Finance Committee members have debated payment reform at length in recent closed-door meetings, but did not reach a consensus. She said her chief worry is that providers would continue to look to lawmakers to protect their interests but that under a new system, she and others would be unable to respond to their concerns. Congress must retain the ability to "shape and influence" Medicare rates, Snowe said. "We're still going to be held accountable."

Obama urged House and Senate leaders to action during a White House meeting this week, and at the request of committee chairmen, administration officials yesterday sent two proposals to Capitol Hill aimed at addressing the problem. One would empower the Medicare Payment Advisory Commission (MedPAC), a nonpartisan body of health-care experts that serves Congress in an advisory role, to determine cuts and changes to Medicare, akin to the Federal Reserve Board. "It's not perfect, but it does a lot better job than what Congress is doing," Rep. Jim Cooper (Tenn.) said of the commission. Cooper, a Blue Dog, co-sponsored the proposal with Sen. John D. Rockefeller IV (D-W.Va.), a senior Finance Committee member.

The second proposal would create a similar entity, called the Independent Medicare Advisory Council, to make Medicare recommendations to the president. Lawmakers could vote to overturn decisions with which they disagreed but could no longer tailor Medicare spending to address local concerns.

Medicare and Medicaid spending now accounts for 5 percent of gross domestic product, and if both programs grow at the same rate over the next 40 years as they have for the past four decades, they will eventually hit 20 percent of GDP, according to estimates.

Congress is attempting to extract as much as $500 billion in Medicare cost savings to pay for health-care reform, but Obama administration officials are concerned that those savings would not result in the transformative fixes the system needs to be stabilized for the long term. White House officials say their own proposals for payment reform would make the system more flexible, allowing it to respond to developments such as breakthroughs in treatment.

"We're trying to create a structure where that would be easier to reorient the system towards higher value and lower cost in the future," said White House budget director Peter Orszag.

The long-term cost challenge has emerged as a major point of contention as new health-care legislation creeps closer to becoming a reality. White House officials and Democratic fiscal hawks worry that Congress could provide coverage to millions of uninsured people, expand the government's role in health care, and yet fail to "bend the cost curve," creating a fiscal disaster for the nation and a political disaster for their party. Republicans are warning that Democrats are charting a ruinous path, and those criticisms are beginning to resonate.

Senate Finance Committee member Ron Wyden (D-Ore.) said such concerns have elevated the Rockefeller-Cooper proposal from a nonstarter to an idea that is gaining traction. "That's getting a very serious look right now," Wyden said.

MedPAC was created in 1997 to address Medicare's grim prospects as health-care costs outpaced inflation and retiring baby boomers caused the program's ranks to swell. As the country's largest health-insurance program, covering nearly 40 million of the most expensive patients, the entitlement program also holds extraordinary influence over the health-care marketplace.

A flood of carefully researched MedPAC reports set forth specific ideas for addressing Medicare's many deficiencies. In testimony before the House in late June, MedPAC Chairman Glenn M. Hackbarth summed up his view of the problems. "The health-care delivery system we see today is not a true system: Care coordination is rare, specialist care is favored over primary care, quality of care is often poor, and costs are high and increasing at an unsustainable rate," Hackbarth told Energy and Commerce Committee members.

But for most lawmakers, resisting the armies of health-care lobbyists who are deployed to protect industry interests has proved difficult. "Basically, the cards are stacked against the member who has to confront these groups," said George F. Grob, who conducted numerous Medicare reviews through the Department of Health and Human Services' inspector general's office. "Look at who they're confronting -- the cancer doctors. Drug companies saying, 'We're the ones saving lives out there.' Hospitals saying, 'We're going to have to shut down.' "

Such concerns are often conveyed to politicians by former colleagues or aides who have joined industry ranks. "They're talking to their friends," Grob said. But also, he said, the lobbyists "make really good arguments. They really know their stuff, and they understand the process. They know what the life cycle of a bill is, they know who to talk to, they know what they're talking about -- and they reach everybody."

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