Medical Device Daily Washington Editor

WASHINGTON – The routine trip to Capitol Hill for the members of the Medicare Payment Advisory Commission (MedPAC) rarely provokes Congress to make real reductions in the costs of Medicare. Hence, the revelation by the group this week that Medicare fee-for-service (FFS) plans cost even more than the much-maligned Medicare Advantage (MA) plan drew little more than a passing nod from a longtime foe of MA plans, Rep. Pete Stark (D-California).

At this week’s meeting of the House Ways and Means Committee health subcommittee, Stark, subcommittee chairman, said, “I have always felt that this subcommittee ... ought not get into the position of recommending procedures and prices” given the overwhelming push-back likely from the various providers. As a result, to examine the issues, “we have to doubly rely on MedPAC and CMS because they have professional staff,” he said.

Addressing the controversial issue of physician reimbursement under Part B, Stark said, “The 10% cut, as far as we’re concerned, is not acceptable,” and “we have to find a better way” to constrain physician spending under Part B than the current sustainable growth rate (SGR) mechanism.

Stark said the MedPAC report states that MA plans will be paid 13% more per patient in 2008 than straight fee-for-service providers but he failed to mention that Medicare FFS plans are paid an even greater premium for their services: 17% more per patient than straight FFS providers. According to the March MedPAC report, FFS plans are the fastest-growing segment of the Part B market.

Dave Camp (R-Michigan), ranking minority member, said that without “significant reforms” the Part A hospital fund will run dry in 2019 — “if we continue to simply tinker around the edges,” the problem won’t go away.

The White House budget plan would trim Medicare growth, he said, and “Congress must not let this opportunity [for reform] pass.”

MedPAC chairman Glenn Hackbarth said that the March report includes 21 recommendations, with “a high level of consensus about our recommendations.” The recommendations, he said, include “restraint in fee for service and ... changes in how we pay providers,” listing service bundling as one area ripe for reform.

Effective pricing constraints “must come from Congress, ultimately,” he said.

Concerning reimbursement of MA plans, Hackbarth said that current policy is “shaping the market” by providing financial incentives that do not constrain costs. “The benchmarks we use are a signal of what Medicare is willing to buy,” Hackbarth said, calling this “a luxury we can ill afford.”

Hackbarth said there is “not much difference at all” in the services offered by straight FFS and FFS plans. Such plans are “not supposed to limit beneficiary choice,” but payments “on average to private FFS plans are 117%” for each patient compared to straight Medicare FFS.

“We’re paying them 117% ... but only 9% is going back to beneficiaries and the other 8%” pays administrative and other costs, Hackbarth said.

MA plans justify their higher fees by offering additional services such as vision service.

Stark asked Hackbarth if “any additional benefits are actually used by beneficiaries?” Hackbarth replied that MA plans are not required to provide all encounter data, which “makes it difficult to assess the value” of additional services provided.

He said that if Congress’s “goal is to provide additional benefits, a more efficient way is to provide additional Medicare” payments to providers under traditional FFS.

Still, some MA providers are outperforming their native FFS counterparts.” Hackbarth said. “There are some private plans that provide services at less than Medicare costs. So long as we keep the current payment system, enrollment will continue to grow” which is “one of the reasons we think it’s important to act on this as soon as possible.”

Concerning the SGR cuts for physician reimbursement under Part B, Hackbarth said that a cut as large as 10% could possibly “affect access to care,” and thus “a modest increase in payments is appropriate.”

According to a Feb. 29 statement accompanying the MedPAC report to Congress, the commission recommends an update for hospital inpatient and outpatient services “equal to the hospital market basket . . implemented concurrently with a quality incentive program.” However, MedPAC also made reference to a “virtually unprecedented growth in hospital construction” as well as a finding that “some hospitals face little financial pressure to control their costs.”

The statement also suggested that part of any revenues used for a quality incentive program “should come from reducing indirect medical education (IME) payments” because “more than half of the IME add-on payment is unrelated to the additional cost of care” connected with teaching programs.

For outpatient dialysis, MedPAC recommended “an update equal to the projected change in input prices less the Commission’s adjustments for productivity growth,” a calculation that yields a net increase of 1%.

Hackbarth told Medical Device Daily that the surge in hospital construction has the effect of “adding a lot of beds and a lot of diagnostic equipment” that both generate capital, but he would not say whether this will create a glut.