Both Republicans and Democrats agree that rising Medicare costs
are the principal long-term driver of the federal deficit. They just don't
agree on how to rein in the spending. The lesson from New York's
special House election is that the Republicans' plan -- vouchers to
purchase a private insurance plan -- may be political kryptonite, and
some are starting to back away.
So what will the Democrats do to curb costs? The new health-care
law gives an independent board the power to make sweeping cuts
in Medicare spending. President Obama's new deficit reduction plan
proposes to beef up that power.
Republicans and some Democrats want none of it. They claim
the Independent Payment Advisory Board usurps Congress'
spending power over a huge and important social program. "It's our
constitutional duty, as members of Congress, to take responsibility for
Medicare and not turn decisions over to a board," said Rep. Allyson
Schwartz (D-Pa.), a co-sponsor of a bill to repeal the board.
True, Congress is responsible for establishing policies affecting all
aspects of Medicare, including payments to health-care providers,
hospitals and insurance plans. The problem is that Congress also
has a long record of walking away from the most promising attempts
to save money in the Medicare program. Congress should not be
allowed another opportunity to repeat history.
Take bundled payments. In this cost-saving approach, health-
care providers receive a fixed sum of money for a package of
services, which reduces incentives to overuse services. Many health
economists - and even Congress' own Medicare Payment Advisory
Commission - agree that bundled payments show the greatest
promise to reduce Medicare spending.
In 1991, Congress seemed to agree. It authorized a demonstration
project to test the effectiveness of bundled payments for cardiac-
bypass surgeries, one of the most common and costly services in
Medicare. Four hospitals were chosen for the demonstration, and
each was paid a single fee for all inpatient and physician services for
heart-bypass patients.
The result? Medicare saved more than $50 million over five
years -- and quality of care improved. Yet the American Hospital
Association and organizations like the Mayo Clinic didn't like the idea.
Congress caved in to the pressure, killing any chance of broader
implementation.
Another promising solution to Medicare's cost problems involves
competitive bidding. Because certain health-care services can be
considered as commodities, Medicare could save money by buying
them from the lowest-cost supplier.
In 2002, Medicare began a demonstration project using competitive
bidding when buying such medical equipment as oxygen tanks,
diabetes supplies and wheelchairs. The approach produced a 20%
savings over a six-year period, according to Medicare.
Initially a strong supporter of competitive bidding, Congress again
wilted in the face of vigorous opposition from large medical supply
companies. The effort remains on hold.
There are other areas where money can be saved if Congress would
join the cause. The use of diagnostic and imaging services has
exploded in recent years. In 1980, 3 million CT scans were done in
this country. By 2008, the figure had climbed to 68 million. The rise
came despite evidence that CT imaging could be responsible for 1 in
50 future cases of cancer, according to an article in the New England
Journal of Medicine.
In 2007, Medicare moved to disallow CT imaging for cardiovascular
disease in cases where the scan was not clinically warranted. With
the backing of Congress, Medicare officials took the risky step
of demanding evidence of a scan's benefit before paying for it.
Lobbyists for cardiologists soon arrived on Capitol Hill, and Congress
again lost its nerve. The result is that Medicare is helping to subsidize
a technology that may be doing extensive harm.
Congress can't even agree to pay more money for better
performance. In yet another demonstration project started in
2005, Medicare created a pay-for-performance reimbursement
system that rewarded health-care providers who were better at
managing their patients. In three years, physician groups and
hospitals showed better outcomes on 28 of 32 clinical measures -- such as blood pressure, weight and LDL cholesterol levels -- for
patients with diabetes, congestive heart failure and coronary artery
disease. Participating hospitals saw their Medicare quality scores -
such as readmission rates -- increase by 17% in four years.
But not a peep from Congress.
The beauty of the Independent Payment Advisory Board is that
it keeps Congress on the sidelines. If Medicare spending growth
exceeds a set target, the board is required to recommend cuts
to reduce spending by specified amounts, starting in 2015. The
reductions automatically go into effect unless Congress comes up
with alternative cuts that result in equivalent savings.
Congress, of course, flinched when it could have enhanced the
board's powers when drawing up the Affordable Care Act. By not
giving the board the authority to recommend changes in Medicare
benefits, impose cost-sharing on patients or reduce payments to
providers and suppliers already scheduled for cutbacks, Congress
bypassed yet another opportunity to save money.
Medicare is one of the few areas in government where we know what
to do to start saving money. Congress' long history of support for
wasteful Medicare spending shows that we can't trust it to help.
Dana P. Goldman is director of the Leonard D. Schaeffer Center for
Health Policy and Economics at the University of Southern California. Veeral Shah is a graduate student in the school of public policy.