Wilensky

Even in this context, though, getting politicians and the public to engage seriously in discussing Medicare reform won’t be easy.

As important as entitlements may be to ultimately resolving the debt and deficit challenges, it’s critical to remember that the need to put Medicare on a fiscally sustainable path predates the current fiscal environment. The biggest problem in Medicare is the same as it is for all of health care — spending that has been growing two to two-and-a-half percentage points faster than the economy. The retirement of the baby boomers, which officially started last January, will increase the number of people on Medicare from the current 44 million to around 78 million and will produce added stress.

To be sure, figuring out a way to slow spending on Medicare has been a part of the Medicare program almost from its very beginning. The general strategy has been to place all of the pressure on providers, primarily by controlling their payments. But through the program’s history, this emphasis has not provided a sustained ability to control costs. Nonetheless, it appears that, as part of the debt deal, payments to providers will again likely be among the principal sources of savings.
To a lesser extent, Medicare has also tried to slow spending by changing the incentives embedded in its reimbursement structure.

The Affordable Care Act, for instance, seemed to follow this model. The health law makes some limited attempts to change provider incentives such as the provisions for value-based purchasing, accountable care organizations and other yet-to-be developed projects that will be funded by the Center for Medicare and Medicaid Innovation.

But the measure also introduced a “fail-safe” mechanism to enforce spending reductions — the Independent Payment Advisory Board. This panel will be responsible for making recommendations to the Congress for reductions needed to produce the spending rates established for Medicare. In keeping with the past exclusive focus on providers, the IPAB’s recommendations are limited to changes in provider reimbursement and cannot consider changes in benefits or eligibility.

The question of whether to involve Medicare beneficiaries more directly in strategies that slow spending is being discussed more explicitly than it has been in the past. This is the rationale underlying the premium support proposal included in the Dominici-Rivlin Debt Reduction Task Force recommendations, where a variety of private plans would be offered to seniors along with traditional Medicare, with a fixed subsidy from the government to purchase a plan. It was included in the more controversial proposal by House Budget Committee Chairman Paul Ryan, R-Wis., that would limit the choices to private plans. It is also the motivation that underlies proposals to limit or ban first dollar wrap-around insurance to traditional Medicare.

Congress has previously shied away from encouraging seniors to be concerned about the cost of Medicare-covered services — especially the vast majority with supplementary insurance. Whether the continuing need to slow spending or the failure to achieve desired spending rates by only focusing on providers will encourage the Congress to move in this direction is not yet clear.

Slowing spending is not the only issue that will need to be considered to ensure Medicare solvency. Increasing the eligibility age, as was being considered early in the debt reduction talks, reducing benefits for higher income beneficiaries or modifying Medicare’s funding sources are all likely to be up for discussion. All of these decisions will be challenging for the country and the Congress to consider.

Gail Wilensky, Ph.D., is a senior fellow at Project HOPE. She was the administrator of the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services) during the George H.W. Bush Administration and the chair of MedPAC.

This <a target="_blank" href="/medicaid/different-takes-080211-wilensky/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

Even in this context, though, getting politicians and the public to engage seriously in discussing Medicare reform won’t be easy.

As important as entitlements may be to ultimately resolving the debt and deficit challenges, it’s critical to remember that the need to put Medicare on a fiscally sustainable path predates the current fiscal environment. The biggest problem in Medicare is the same as it is for all of health care — spending that has been growing two to two-and-a-half percentage points faster than the economy. The retirement of the baby boomers, which officially started last January, will increase the number of people on Medicare from the current 44 million to around 78 million and will produce added stress.

To be sure, figuring out a way to slow spending on Medicare has been a part of the Medicare program almost from its very beginning. The general strategy has been to place all of the pressure on providers, primarily by controlling their payments. But through the program’s history, this emphasis has not provided a sustained ability to control costs. Nonetheless, it appears that, as part of the debt deal, payments to providers will again likely be among the principal sources of savings.
To a lesser extent, Medicare has also tried to slow spending by changing the incentives embedded in its reimbursement structure.

The Affordable Care Act, for instance, seemed to follow this model. The health law makes some limited attempts to change provider incentives such as the provisions for value-based purchasing, accountable care organizations and other yet-to-be developed projects that will be funded by the Center for Medicare and Medicaid Innovation.

But the measure also introduced a “fail-safe” mechanism to enforce spending reductions — the Independent Payment Advisory Board. This panel will be responsible for making recommendations to the Congress for reductions needed to produce the spending rates established for Medicare. In keeping with the past exclusive focus on providers, the IPAB’s recommendations are limited to changes in provider reimbursement and cannot consider changes in benefits or eligibility.

The question of whether to involve Medicare beneficiaries more directly in strategies that slow spending is being discussed more explicitly than it has been in the past. This is the rationale underlying the premium support proposal included in the Dominici-Rivlin Debt Reduction Task Force recommendations, where a variety of private plans would be offered to seniors along with traditional Medicare, with a fixed subsidy from the government to purchase a plan. It was included in the more controversial proposal by House Budget Committee Chairman Paul Ryan, R-Wis., that would limit the choices to private plans. It is also the motivation that underlies proposals to limit or ban first dollar wrap-around insurance to traditional Medicare.

Congress has previously shied away from encouraging seniors to be concerned about the cost of Medicare-covered services — especially the vast majority with supplementary insurance. Whether the continuing need to slow spending or the failure to achieve desired spending rates by only focusing on providers will encourage the Congress to move in this direction is not yet clear.

Slowing spending is not the only issue that will need to be considered to ensure Medicare solvency. Increasing the eligibility age, as was being considered early in the debt reduction talks, reducing benefits for higher income beneficiaries or modifying Medicare’s funding sources are all likely to be up for discussion. All of these decisions will be challenging for the country and the Congress to consider.

Gail Wilensky, Ph.D, is a senior fellow at Project HOPE. She was the administrator of the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services) during the George H.W. Bush Administration and the chair of MedPAC.

This <a target="_blank" href="/medicaid/different-takes-080111-wilensky/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

The consequences for physicians and, therefore, their patients, is hard to imagine. And, while no one I know thinks these disastrous reductions will occur, it is not at all clear what will happen or where the funding will come from to put yet one more patch in place.

How did we get in this mess?

As is frequently the case, the current system reflects a combination of trying to fix some previous known problems and also trying to squeeze a little more money out of Medicare than most reasonable people thought made sense.

In the 1980s, Medicare paid physicians using a fee schedule that followed the “Usual Customary Reasonable” approach then used in the private sector. That schedule resulted in fees that many believed paid too much for procedures and too little for primary care services and paid urban physicians too much relative to their rural counterparts. It also had been observed that using a detailed fee schedule without an external constraint resulted in rates of increase for Medicare Part B that exceeded those of Part A, which by the middle of the decade had adopted a prospective pricing system.

To fix these problems, Congress passed legislation in late 1989 creating the Resource Based Relative Value System. This system was designed to pay physicians using a combined set of measures reflecting work effort, practice expense and a geographic adjuster. In addition, an external constraint called the Volume Performance Standard was put in place to allow fees to be increased (or decreased) by more than the law stipulated if spending for Part B grew at a slower (or faster) pace than had been anticipated.

The VPS had some technical glitches that needed to be fixed and in 1997 was replaced by the Sustainable Growth Rate, which tied the allowable increase in Part B spending to the growth rate in the economy — even though there was no historical basis for believing that this rate of increase was likely to be sustainable over any prolonged period. Some of us in the policy community tried to raise this issue with members of Congress and their staffs but the Congress was in dire need of additional savings — not only to get to a balanced budget, but also to pay for the State Children’s Health Insurance Program.

For the first few years, while the economy was continuing to grow at a robust rate, physicians and the AMA (which did not fight this provision when it became law) enjoyed the benefits of an allowable growth rate tied to the economy.

But in 2002, the first major problem occurred: the volume of services increased substantially and the growth in the economy slowed dramatically. As a result, and as proscribed by law, fees for physicians that year were reduced by 4½ percent.

In every year since, Medicare fees should have been reduced as a result of the SGR but haven’t been because of congressional concerns that the continued reductions would threaten access to care. Rather than face the scheduled reduction, lawmakers instead have annually provided enough funding to keep fees approximately flat but not to fix the problem — thereby digging deeper the hole that ultimately will need to be filled.

What’s the answer?

We need to redesign how we pay physicians. The current fee-for-service system rewards volume rather than value and makes it difficult to encourage or reward physicians who provide low cost, high quality care. In fact, the current link between overall fees and overall spending growth has meant that physicians who practice conservatively have seen their fees and income stay relatively flat since 2002, while those who practice in a more aggressive style have seen their fees stay flat but their income grow substantially. Meanwhile, spending on Part B has been growing at rates of 10 to 12 percent per year through much of the decade — clearly an unsustainable growth rate.

Physician payments need to move away from the current practice of billing for more than 8,000 CPT — Current Procedural Terminology — codes to a more bundled system in which payments are made for taking care of chronic diseases and for high cost, high volume interventions; or to a system that is closer to salary-based reimbursement. Hopefully the bundling pilots that are part of the health overhaul, along with the fledgling interest in accountable care organizations, will provide information on some of the alternatives we so desperately need.

The Center for Medicare & Medicaid Services urgently needs to jump-start these pilots. In the meantime, physicians should expect no more than short term fixes to this perennial (and frustrating) problem. It’s in everyone’s interest to get workable alternatives tried and in practice as soon as possible.

This <a target="_blank" href="/medicare/111810wilensky/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

Despite the all-out push by the Democrats for some version of their health care reform legislation, it is hard not to conclude that Americans seem to prefer incremental reform and that the current bills exceed the level of comfort for many Americans. This should not come as a surprise since almost 75 percent of Americans are satisfied or very satisfied with their health care.

Polls can be tricky – it depends on how the questions are asked and when they are asked – but there have been consistent signals from the American public that the Democrats seem determined to ignore. The majority, or at least a plurality, has been disapproving of the “Obama plan” since last summer. Many Americans believe that their own health care costs will increase and the quality will decline if reform legislation is passed.

This was also the case with the failed effort in 1994. And, as the administration has itself noted repeatedly, many Americans would rather that the president focus on the economy instead of health care, in spite of repeated statements by the administration that health care reform is economic reform.

In the event that the current efforts fail, I believe there are discrete blocks of change that should be considered as important next steps. Incremental proposals make reform more complicated – many of the pieces of the current reform bills are interrelated  – but they can provide significant and sustainable changes in the right direction.

First, coverage could be expanded to all uninsured people below the poverty line, either through Medicaid or by allowing these individuals to purchase insurance through an exchange or other negotiated purchasing process. Since about one-third of the uninsured are below the poverty line, this will have a significant effect on the number of remaining uninsured. It will also require signficant funding, but a far smaller amount than is currently being contemplated.

Second, many of the interesting pilot studies that are part of the current legislation should be a part of any future legislation. As has become all too clear, we don’t really know how to make the transformation from the delivery system we have now, which rewards institutions and clinicians for doing more and more complex procedures, to one where the incentives reward those who produce high quality, low cost care. Unlike current pilots and demonstrations, those that produce desirable outcomes – lower costs at same or improved quality or improved quality at same or lower costs, should be allowed to become part of Medicare without additional authorization from the Congress.

Third, unlike current legislation, medical liability reform needs to be a part of any serious effort that encourages the more conservative practice of medicine and should be regarded as an important enabler of cost containment. An evidenced-based strategy of liability reform might help cross the chasm between Republicans and Democrats on this issue. For example, physicians and institutions that agree to follow a set of patient safety measures developed by the Institute of Medicine and standards developed by medical societies or special groups should be provided immunity from liability unless there have been provable charges of criminal negligence.

Finally, physician payment reform needs to be considered a direct part of health care reform rather than continuing the current myth that somehow it can be considered separately. Yes, it will take real money to fix. The Congressional Budget Office estimates the cost to be approx $220 billion over 10 years, far more than the current estimated savings from health care reform legislation. Further, it is impossible to imagine reforming the delivery system without reforming how physicians are reimbursed. Pilot programs that test new reimbursement systems need to start as soon as possible, and Congress should only provide short-term relief from Medicare’s sustainable growth rate pressure until a new system is ready to be legislated. Otherwise change will never occur.

These are not small changes. They will clearly require additional funding compared to the status quo. But they represent a far more limited and circumscribed set of changes than what is currently being contemplated, and they contain measures to appeal to both Republicans and Democrats. It seems to be political folly at best to ignore consistent and strong messages from the public about what they do and do not want, or to assume the polls reflect that Americans don’t understand what is being proposed. November will “tell the tale” if such incremental pieces of reform would have been the better road.

This <a target="_blank" href="/news/031510wilensky/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

The focus on health insurance reform, at least in part, reflects polling data that shows the public is much more responsive to issues like guaranteeing coverage to people without regard to pre-existing conditions or health status and providing subsidized insurance or access to Medicaid to people who need help. There is far less interest in slowing spending or controlling costs, especially in ways that could be viewed as making access to whatever health care patients or their physicians want more difficult. Not surprisingly, this lesser interest is reflected in the legislation just passed.

To be fair, the House bill, as well as the bill voted out by the Senate Finance Committee, contains a variety of changes that focus on quality and health system performance improvements. These include proposals that encourage the development of more primary care providers as well as requirements to improve the coordination of care for people who are jointly on Medicare and Medicaid and other high users of services.

There are also promising pilots that would bundle payments for post-acute care and that test incentive models that encourage accountable care organizations-groups of providers that are responsible for managing the cost and quality of care for a group of patients–and other payment and service delivery models. Based on past experience, however, the Secretary of Health and Human Services needs to be able to fully implement successful pilots without new authorizing legislation from the Congress. Otherwise the likelihood of even promising pilots becoming a part of Medicare is small.

As we move to the endgame of what will at best be health care reform 1.0, it is also important to remember that if we want to improve health-presumably health care reform is a means to improving health-we need to focus on more than just health care and reform of the health care system.

We probably all know that health care is only one means of improving health. It became especially clear to me after spending three years as a commissioner on the World Health Organization Commission on the Social Determinants of Health, which focused on the relationship of poverty, education, early childhood education, the treatment of women and individual empowerment to health and life expectancy. While the importance of clean water and sanitation to health is obvious for developing countries, focusing on the environment where people live and work is also important for developed countries-especially if we want to make progress reducing the disparities in health outcomes observed in minorities and disadvantaged populations.

The rationale for considering the role of these social determinants of health is relevant for all age groups, but it is especially important for children. Improving the conditions surrounding a child’s early development will improve opportunities for better health throughout the child’s life span. Many of the biggest challenges the country now faces begin in childhood. Obesity, cardiovascular disease, cancer and mental health problems-conditions that account for more than 75% of health care spending today-all can have roots in the early years of life.

Improving nutrition during gestation and delivery is critical to the health development of a child. It also plays a role in the likelihood of a child’s developing obesity, type 2 diabetes, high blood pressure and heart disease later in life. This means that making sure pregnant women with low incomes have stable access to nutritional food is thought of as an important strategy for improving future health.

Making sure that pregnant women have access to substance abuse programs is another strategy that would markedly improve children’s health. As it is, too many children are born with serious medical challenges because their mothers had substance abuse problems. Not aggressively intervening to make sure such care is available and easily accessible imposes large financial burdens on the system and incalculable human costs on the children born to substance-abusing women.

Similarly, investments in early childhood education, especially for the poor, should be regarded as an important tool for preventing disease, improving quality of life and increasing later productivity. Recognizing the social determinants of health means that programs like Head Start, Title I of the Education Act of 1965 that funded schools with high concentrations of poor children and is now part of No Child Left Behind, and ensuring that school lunches provide basic nutrition, including fresh fruits and vegetables, may be as important to improving health as any of the changes now under consideration even if they are not regarded as a traditional part of health care reform.

The Congress and the country are finding reforming the health care system a major challenge-one that is likely to take many rounds of legislation. As we struggle through this first round of health care reform, it is important that we remember that the ultimate goal is to provide for a healthier America. Improving the conditions in which people are born and live, age and die may be at least as important as reforming health care in achieving this goal.

Gail Wilensky is a Senior Fellow at Project HOPE, an international education foundation. She was the Administrator of the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services) from 1990-1992 and the chair of the Medicare Payment Advisory Commission from 1997-2001.

This <a target="_blank" href="/news/111209wilensky/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

Wilensky

Even in this context, though, getting politicians and the public to engage seriously in discussing Medicare reform won’t be easy.

As important as entitlements may be to ultimately resolving the debt and deficit challenges, it’s critical to remember that the need to put Medicare on a fiscally sustainable path predates the current fiscal environment. The biggest problem in Medicare is the same as it is for all of health care — spending that has been growing two to two-and-a-half percentage points faster than the economy. The retirement of the baby boomers, which officially started last January, will increase the number of people on Medicare from the current 44 million to around 78 million and will produce added stress.

To be sure, figuring out a way to slow spending on Medicare has been a part of the Medicare program almost from its very beginning. The general strategy has been to place all of the pressure on providers, primarily by controlling their payments. But through the program’s history, this emphasis has not provided a sustained ability to control costs. Nonetheless, it appears that, as part of the debt deal, payments to providers will again likely be among the principal sources of savings.
To a lesser extent, Medicare has also tried to slow spending by changing the incentives embedded in its reimbursement structure.

The Affordable Care Act, for instance, seemed to follow this model. The health law makes some limited attempts to change provider incentives such as the provisions for value-based purchasing, accountable care organizations and other yet-to-be developed projects that will be funded by the Center for Medicare and Medicaid Innovation.

But the measure also introduced a “fail-safe” mechanism to enforce spending reductions — the Independent Payment Advisory Board. This panel will be responsible for making recommendations to the Congress for reductions needed to produce the spending rates established for Medicare. In keeping with the past exclusive focus on providers, the IPAB’s recommendations are limited to changes in provider reimbursement and cannot consider changes in benefits or eligibility.

The question of whether to involve Medicare beneficiaries more directly in strategies that slow spending is being discussed more explicitly than it has been in the past. This is the rationale underlying the premium support proposal included in the Dominici-Rivlin Debt Reduction Task Force recommendations, where a variety of private plans would be offered to seniors along with traditional Medicare, with a fixed subsidy from the government to purchase a plan. It was included in the more controversial proposal by House Budget Committee Chairman Paul Ryan, R-Wis., that would limit the choices to private plans. It is also the motivation that underlies proposals to limit or ban first dollar wrap-around insurance to traditional Medicare.

Congress has previously shied away from encouraging seniors to be concerned about the cost of Medicare-covered services — especially the vast majority with supplementary insurance. Whether the continuing need to slow spending or the failure to achieve desired spending rates by only focusing on providers will encourage the Congress to move in this direction is not yet clear.

Slowing spending is not the only issue that will need to be considered to ensure Medicare solvency. Increasing the eligibility age, as was being considered early in the debt reduction talks, reducing benefits for higher income beneficiaries or modifying Medicare’s funding sources are all likely to be up for discussion. All of these decisions will be challenging for the country and the Congress to consider.

Gail Wilensky, Ph.D., is a senior fellow at Project HOPE. She was the administrator of the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services) during the George H.W. Bush Administration and the chair of MedPAC.

This <a target="_blank" href="/medicaid/different-takes-080211-wilensky/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

Even in this context, though, getting politicians and the public to engage seriously in discussing Medicare reform won’t be easy.

As important as entitlements may be to ultimately resolving the debt and deficit challenges, it’s critical to remember that the need to put Medicare on a fiscally sustainable path predates the current fiscal environment. The biggest problem in Medicare is the same as it is for all of health care — spending that has been growing two to two-and-a-half percentage points faster than the economy. The retirement of the baby boomers, which officially started last January, will increase the number of people on Medicare from the current 44 million to around 78 million and will produce added stress.

To be sure, figuring out a way to slow spending on Medicare has been a part of the Medicare program almost from its very beginning. The general strategy has been to place all of the pressure on providers, primarily by controlling their payments. But through the program’s history, this emphasis has not provided a sustained ability to control costs. Nonetheless, it appears that, as part of the debt deal, payments to providers will again likely be among the principal sources of savings.
To a lesser extent, Medicare has also tried to slow spending by changing the incentives embedded in its reimbursement structure.

The Affordable Care Act, for instance, seemed to follow this model. The health law makes some limited attempts to change provider incentives such as the provisions for value-based purchasing, accountable care organizations and other yet-to-be developed projects that will be funded by the Center for Medicare and Medicaid Innovation.

But the measure also introduced a “fail-safe” mechanism to enforce spending reductions — the Independent Payment Advisory Board. This panel will be responsible for making recommendations to the Congress for reductions needed to produce the spending rates established for Medicare. In keeping with the past exclusive focus on providers, the IPAB’s recommendations are limited to changes in provider reimbursement and cannot consider changes in benefits or eligibility.

The question of whether to involve Medicare beneficiaries more directly in strategies that slow spending is being discussed more explicitly than it has been in the past. This is the rationale underlying the premium support proposal included in the Dominici-Rivlin Debt Reduction Task Force recommendations, where a variety of private plans would be offered to seniors along with traditional Medicare, with a fixed subsidy from the government to purchase a plan. It was included in the more controversial proposal by House Budget Committee Chairman Paul Ryan, R-Wis., that would limit the choices to private plans. It is also the motivation that underlies proposals to limit or ban first dollar wrap-around insurance to traditional Medicare.

Congress has previously shied away from encouraging seniors to be concerned about the cost of Medicare-covered services — especially the vast majority with supplementary insurance. Whether the continuing need to slow spending or the failure to achieve desired spending rates by only focusing on providers will encourage the Congress to move in this direction is not yet clear.

Slowing spending is not the only issue that will need to be considered to ensure Medicare solvency. Increasing the eligibility age, as was being considered early in the debt reduction talks, reducing benefits for higher income beneficiaries or modifying Medicare’s funding sources are all likely to be up for discussion. All of these decisions will be challenging for the country and the Congress to consider.

Gail Wilensky, Ph.D, is a senior fellow at Project HOPE. She was the administrator of the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services) during the George H.W. Bush Administration and the chair of MedPAC.

This <a target="_blank" href="/medicaid/different-takes-080111-wilensky/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

The consequences for physicians and, therefore, their patients, is hard to imagine. And, while no one I know thinks these disastrous reductions will occur, it is not at all clear what will happen or where the funding will come from to put yet one more patch in place.

How did we get in this mess?

As is frequently the case, the current system reflects a combination of trying to fix some previous known problems and also trying to squeeze a little more money out of Medicare than most reasonable people thought made sense.

In the 1980s, Medicare paid physicians using a fee schedule that followed the “Usual Customary Reasonable” approach then used in the private sector. That schedule resulted in fees that many believed paid too much for procedures and too little for primary care services and paid urban physicians too much relative to their rural counterparts. It also had been observed that using a detailed fee schedule without an external constraint resulted in rates of increase for Medicare Part B that exceeded those of Part A, which by the middle of the decade had adopted a prospective pricing system.

To fix these problems, Congress passed legislation in late 1989 creating the Resource Based Relative Value System. This system was designed to pay physicians using a combined set of measures reflecting work effort, practice expense and a geographic adjuster. In addition, an external constraint called the Volume Performance Standard was put in place to allow fees to be increased (or decreased) by more than the law stipulated if spending for Part B grew at a slower (or faster) pace than had been anticipated.

The VPS had some technical glitches that needed to be fixed and in 1997 was replaced by the Sustainable Growth Rate, which tied the allowable increase in Part B spending to the growth rate in the economy — even though there was no historical basis for believing that this rate of increase was likely to be sustainable over any prolonged period. Some of us in the policy community tried to raise this issue with members of Congress and their staffs but the Congress was in dire need of additional savings — not only to get to a balanced budget, but also to pay for the State Children’s Health Insurance Program.

For the first few years, while the economy was continuing to grow at a robust rate, physicians and the AMA (which did not fight this provision when it became law) enjoyed the benefits of an allowable growth rate tied to the economy.

But in 2002, the first major problem occurred: the volume of services increased substantially and the growth in the economy slowed dramatically. As a result, and as proscribed by law, fees for physicians that year were reduced by 4½ percent.

In every year since, Medicare fees should have been reduced as a result of the SGR but haven’t been because of congressional concerns that the continued reductions would threaten access to care. Rather than face the scheduled reduction, lawmakers instead have annually provided enough funding to keep fees approximately flat but not to fix the problem — thereby digging deeper the hole that ultimately will need to be filled.

What’s the answer?

We need to redesign how we pay physicians. The current fee-for-service system rewards volume rather than value and makes it difficult to encourage or reward physicians who provide low cost, high quality care. In fact, the current link between overall fees and overall spending growth has meant that physicians who practice conservatively have seen their fees and income stay relatively flat since 2002, while those who practice in a more aggressive style have seen their fees stay flat but their income grow substantially. Meanwhile, spending on Part B has been growing at rates of 10 to 12 percent per year through much of the decade — clearly an unsustainable growth rate.

Physician payments need to move away from the current practice of billing for more than 8,000 CPT — Current Procedural Terminology — codes to a more bundled system in which payments are made for taking care of chronic diseases and for high cost, high volume interventions; or to a system that is closer to salary-based reimbursement. Hopefully the bundling pilots that are part of the health overhaul, along with the fledgling interest in accountable care organizations, will provide information on some of the alternatives we so desperately need.

The Center for Medicare & Medicaid Services urgently needs to jump-start these pilots. In the meantime, physicians should expect no more than short term fixes to this perennial (and frustrating) problem. It’s in everyone’s interest to get workable alternatives tried and in practice as soon as possible.

This <a target="_blank" href="/medicare/111810wilensky/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

Despite the all-out push by the Democrats for some version of their health care reform legislation, it is hard not to conclude that Americans seem to prefer incremental reform and that the current bills exceed the level of comfort for many Americans. This should not come as a surprise since almost 75 percent of Americans are satisfied or very satisfied with their health care.

Polls can be tricky – it depends on how the questions are asked and when they are asked – but there have been consistent signals from the American public that the Democrats seem determined to ignore. The majority, or at least a plurality, has been disapproving of the “Obama plan” since last summer. Many Americans believe that their own health care costs will increase and the quality will decline if reform legislation is passed.

This was also the case with the failed effort in 1994. And, as the administration has itself noted repeatedly, many Americans would rather that the president focus on the economy instead of health care, in spite of repeated statements by the administration that health care reform is economic reform.

In the event that the current efforts fail, I believe there are discrete blocks of change that should be considered as important next steps. Incremental proposals make reform more complicated – many of the pieces of the current reform bills are interrelated  – but they can provide significant and sustainable changes in the right direction.

First, coverage could be expanded to all uninsured people below the poverty line, either through Medicaid or by allowing these individuals to purchase insurance through an exchange or other negotiated purchasing process. Since about one-third of the uninsured are below the poverty line, this will have a significant effect on the number of remaining uninsured. It will also require signficant funding, but a far smaller amount than is currently being contemplated.

Second, many of the interesting pilot studies that are part of the current legislation should be a part of any future legislation. As has become all too clear, we don’t really know how to make the transformation from the delivery system we have now, which rewards institutions and clinicians for doing more and more complex procedures, to one where the incentives reward those who produce high quality, low cost care. Unlike current pilots and demonstrations, those that produce desirable outcomes – lower costs at same or improved quality or improved quality at same or lower costs, should be allowed to become part of Medicare without additional authorization from the Congress.

Third, unlike current legislation, medical liability reform needs to be a part of any serious effort that encourages the more conservative practice of medicine and should be regarded as an important enabler of cost containment. An evidenced-based strategy of liability reform might help cross the chasm between Republicans and Democrats on this issue. For example, physicians and institutions that agree to follow a set of patient safety measures developed by the Institute of Medicine and standards developed by medical societies or special groups should be provided immunity from liability unless there have been provable charges of criminal negligence.

Finally, physician payment reform needs to be considered a direct part of health care reform rather than continuing the current myth that somehow it can be considered separately. Yes, it will take real money to fix. The Congressional Budget Office estimates the cost to be approx $220 billion over 10 years, far more than the current estimated savings from health care reform legislation. Further, it is impossible to imagine reforming the delivery system without reforming how physicians are reimbursed. Pilot programs that test new reimbursement systems need to start as soon as possible, and Congress should only provide short-term relief from Medicare’s sustainable growth rate pressure until a new system is ready to be legislated. Otherwise change will never occur.

These are not small changes. They will clearly require additional funding compared to the status quo. But they represent a far more limited and circumscribed set of changes than what is currently being contemplated, and they contain measures to appeal to both Republicans and Democrats. It seems to be political folly at best to ignore consistent and strong messages from the public about what they do and do not want, or to assume the polls reflect that Americans don’t understand what is being proposed. November will “tell the tale” if such incremental pieces of reform would have been the better road.

This <a target="_blank" href="/news/031510wilensky/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

The focus on health insurance reform, at least in part, reflects polling data that shows the public is much more responsive to issues like guaranteeing coverage to people without regard to pre-existing conditions or health status and providing subsidized insurance or access to Medicaid to people who need help. There is far less interest in slowing spending or controlling costs, especially in ways that could be viewed as making access to whatever health care patients or their physicians want more difficult. Not surprisingly, this lesser interest is reflected in the legislation just passed.

To be fair, the House bill, as well as the bill voted out by the Senate Finance Committee, contains a variety of changes that focus on quality and health system performance improvements. These include proposals that encourage the development of more primary care providers as well as requirements to improve the coordination of care for people who are jointly on Medicare and Medicaid and other high users of services.

There are also promising pilots that would bundle payments for post-acute care and that test incentive models that encourage accountable care organizations-groups of providers that are responsible for managing the cost and quality of care for a group of patients–and other payment and service delivery models. Based on past experience, however, the Secretary of Health and Human Services needs to be able to fully implement successful pilots without new authorizing legislation from the Congress. Otherwise the likelihood of even promising pilots becoming a part of Medicare is small.

As we move to the endgame of what will at best be health care reform 1.0, it is also important to remember that if we want to improve health-presumably health care reform is a means to improving health-we need to focus on more than just health care and reform of the health care system.

We probably all know that health care is only one means of improving health. It became especially clear to me after spending three years as a commissioner on the World Health Organization Commission on the Social Determinants of Health, which focused on the relationship of poverty, education, early childhood education, the treatment of women and individual empowerment to health and life expectancy. While the importance of clean water and sanitation to health is obvious for developing countries, focusing on the environment where people live and work is also important for developed countries-especially if we want to make progress reducing the disparities in health outcomes observed in minorities and disadvantaged populations.

The rationale for considering the role of these social determinants of health is relevant for all age groups, but it is especially important for children. Improving the conditions surrounding a child’s early development will improve opportunities for better health throughout the child’s life span. Many of the biggest challenges the country now faces begin in childhood. Obesity, cardiovascular disease, cancer and mental health problems-conditions that account for more than 75% of health care spending today-all can have roots in the early years of life.

Improving nutrition during gestation and delivery is critical to the health development of a child. It also plays a role in the likelihood of a child’s developing obesity, type 2 diabetes, high blood pressure and heart disease later in life. This means that making sure pregnant women with low incomes have stable access to nutritional food is thought of as an important strategy for improving future health.

Making sure that pregnant women have access to substance abuse programs is another strategy that would markedly improve children’s health. As it is, too many children are born with serious medical challenges because their mothers had substance abuse problems. Not aggressively intervening to make sure such care is available and easily accessible imposes large financial burdens on the system and incalculable human costs on the children born to substance-abusing women.

Similarly, investments in early childhood education, especially for the poor, should be regarded as an important tool for preventing disease, improving quality of life and increasing later productivity. Recognizing the social determinants of health means that programs like Head Start, Title I of the Education Act of 1965 that funded schools with high concentrations of poor children and is now part of No Child Left Behind, and ensuring that school lunches provide basic nutrition, including fresh fruits and vegetables, may be as important to improving health as any of the changes now under consideration even if they are not regarded as a traditional part of health care reform.

The Congress and the country are finding reforming the health care system a major challenge-one that is likely to take many rounds of legislation. As we struggle through this first round of health care reform, it is important that we remember that the ultimate goal is to provide for a healthier America. Improving the conditions in which people are born and live, age and die may be at least as important as reforming health care in achieving this goal.

Gail Wilensky is a Senior Fellow at Project HOPE, an international education foundation. She was the Administrator of the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services) from 1990-1992 and the chair of the Medicare Payment Advisory Commission from 1997-2001.

This <a target="_blank" href="/news/111209wilensky/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">