Medical Device Daily Washington Editor

WASHINGTON – The discussions held during meetings of the Medicare Payment Advisory Commission (MedPAC) suggest a near reverence for the notion of incremental creep, but given the behemoth the commission must move – Medicare financing – hopes for faster action are probably unrealistic.

Still, the commission is not utterly idle. It met last Friday and offered a preview of what might appear on the commission’s report to Congress in June regarding fee-for-service medical care. Another theme of the meeting was that public and private payers have similar problems and should adopt similar approaches.

In a report to the commission, MedPAC staffer David Glass said that “sustainability might still be an issue” even if quality of care improves. He referred to the recent CBO report (Medical Device Daily, Jan. 4, 2007) that took the position that the higher cost per beneficiary, not the greater number of beneficiaries, “is the prime driver of cost growth.”

“We would want any policy to promote accountability and care coordination,” Glass said. Policy should also emphasize incentives to “higher efficiency – both lower-cost production and higher quality – rather than increases in volume.”

And in a statement that seemed to hint at potential further privatization of Medicare, Glass said that “promoting alignment with the private sector would provide greater leverage and decrease administrative burden.”

He said: “The basic problem with the fee-for-service system is ... reward for services” rather than outcomes, and that “marginal rewards may be insufficient to change [provider] behavior.”

Among the potential changes to Medicare proposed in the past is the concept of the medical home, but Glass said that bundled payments might also have an ameliorative impact on Medicare inflation.

However, a relative newcomer to the table drew attention. Glass said that the accountable care organization (ACO) “is a broader concept” that would put the patient in a system that “would be held accountable for costs and outcomes.”

An ACO would consist of doctors, hospitals and other providers that would offer seamless care throughout the stages of treatment. This kind of coordination would seemingly require integrated healthcare information technology and also that doctors would be willing to give up at least some autonomy.

Needless to say, other tripwires abound. Given that such a system would involve more than one provider and more than one type of provider, Glass asked rhetorically: “Should incentives be based on individual or group performance?”

He said that the answer would indicate willingness to participate.

Glass also threw out the question of how much patience policymakers should exhibit before moving policy to implementation in the real world.

“Should we wait for policy proposals to prove out [in demonstration projects] before adopting them?”

Glenn Hackbarth, commission chair, said of the current areas of MedPAC’s study: “I see this chapter as a directional statement” that describes “the general direction that policy needs to move over a fairly long period of time.” Giving Congress something that is actionable is important, he said. “The shorter and tighter the statement” to Congress, the more useful it might be.

Hackbarth said that “a theme worth underlining more prominently is the synchronization idea.” He used this term to denote “getting the signals sent by public and private payers more closely aligned.”

“We should be using common measures and common data sets ... maybe even setting common clinical goals,” Hackbarth said.

David Durenberger, the chairman of the National Institute of Health Policy at the University of St. Thomas (Minneapolis), said that due to reforms instituted in Minnesota in the early 1980s, the state’s average spending on Medicare beneficiaries dropped from the top quartile to the bottom quartile without any apparent drop in efficacy or efficiency.

“It just seems to make sense to set up ... with a particular accent on accountability,” which he indicated was one of the primary features of the Minnesota reforms.

Mitra Behroozi, executive director of the oddly-named 1199 SEIU Benefit and Pension Funds (New York), cautioned against na ve ideas regarding the finances of beneficiaries. She said that affordability is more accurately depicted as “various strata” as opposed “to the poor — and then there’s everybody else.”

Behroozi said that some beneficiaries gravitate toward Medicare Advantage (MA) plans because “they want to save the money, so they’re willing to forgo a certain amount of choice in order to conserve [their own financial] resources.”

However, given that Uncle Sam forks over $1.12 for each MA beneficiary for each $1 it spends on beneficiaries under fee-for-service, she said that MA plans do not “bring any value to Medicare.”

A reduction of the Part B premium, Behroozi said, might be used to encourage beneficiaries to go along with enrollment in a system that would give them a medical home. “Its not so much the stick [of uncoordinated care], but the carrot of lowering costs” that will drive the behavior of beneficiaries in this direction, she said.

Arnold Milstein, MD, medical director of the Pacific Business Group on Health (San Francisco), said, “reform in spending is based on the idea of taking back that part of spending that’s doing you no good” and that some estimates of this portion, which could be described as bloat, amount to as much as 30% to 40%. And he asked: “What is our theory by which we remove that 35%?”

Milstein said that when he talks to hospital administrators “they get the idea right away ... but they want to know what the nature of the deal is.

“It’s unrealistic to expect hospital administrators” to just give up the funds, he said.

Milstein mentioned a theory of complex adaptive systems, but finished his remarks with an expression of frustration. “You want to aim for the smallest number of changes that will produce the biggest forward movement, but it seems to me we never get to that.”