Medical Device Daily Washington Editor

WASHINGTON — Some of the presentations at this week’s Medicare conference, sponsored by America’s Health Insurance Plans (AHIP; Washington), suggest that all the work on healthcare policy may be finally yielding some return on investment.

Julie Goon, special assistant to President Bush for economic policy, gave attendees a look at how the administration would like to influence healthcare policy in its final 16 months. She said that healthcare information technology (HIT) is an important area where Michael Levitt, secretary of the Department ofHeath and Human Services, and the President want to make a difference.

The White House, she said, wants to boost incentives to providers who are uncertain as to whether the business case for investment in HIT is compelling, a question that has arisen frequently in the recent past as regional healthcare information organizations (RHIOs) have folded with alarming regularity in recent months (Medical Device Daily, Sept. 5, 2007).

Goon said, “Demand from consumers is” one of the forces that could compel providers to adopt HIT, and that “the secretary continues to work on HIT issues” with an eye toward making it a reality for use by Medicare providers.

However, she provided no specifics.

Regarding the Children’s Health Insurance Plan (CHIP), Goon said it has “worked successfully” to boost enrollment for children who otherwise would not have been covered.

But she said that the White House believes “it has grown away from its original purpose in many areas” and that the current CHIP bill “has too much money in it to cover the kids they say they want to cover,” which is children in families that earn as much as 200% of the federal poverty level.

The result, she said, is that CHIP enrollment is being used to enroll children from families that can afford private insurance. The Congressional Budget Office (GBO), Goon said, estimates that the percentage of current CHIP enrollees whose families can afford private insurance is in the range of 30% and that the administration wants to focus on “the kids it was originally intended for and not move up the income scale in a way [that] we can’t sustain long-term.”

Goon said that she has heard comments to the effect that there is more anti-managed care rhetoric than was the case in the past 10 years or so, with much of the antipathy aimed at Medicare Advantage (MA). As for the perception of the functionality of MA programs, “companies that focus on customer service” and that handle complaints speedily “are the programs that make it.”

“It’s hard to motivate someone who’s happy” to contact his or her elected officials, she said.

Goon said that Alan Greenspan, the recently departed chairman of the Federal Reserve “feels that the addition of Part D” was a mistake, but that the case for Part D was compelling.

Mark McClellan, former head of the Center for Medicare & Medicaid Services, was “a tireless advocate of bringing Medicare into the 21st century,” she said, and that Part D was part of that emphasis.

Goon cited statements by Leavitt, pointing out that the Medicare Trustees report included data indicating that hospital spending had dropped slightly, perhaps attributable to Part D, and the fact that the Bush administration ensured that the program was run through the private sector. And she said that Part D costs have run much lower than projected.

“When you do have private plans competing, and they don’t have to compete against the government,” costs stay low, Goon said, arguing that competition vs. Uncle Sam produces a fixed floor on prices and drives up costs.

Also presenting at the conference was Peter Orszag, director of the CBO since January

He said that “health is increasingly dominating the federal budget” but that most analyses “involve a misdiagnosis” of that trend. And he quipped that CBO “is turning into the Congressional Health Office, out of necessity.”

“The vast majority of analyses put primary emphasis on the aging of the population,” Orszag said. He acknowledged that this “is true,” but “it’s not true that it’s the biggest problem.” He pointed out that private insurers have a younger base of enrollment but they too are seeing a similar jump in costs.

However, Medicare has had some positive impact on overall spending. Orszag said that the diagnostic-related groups (DRGs) designed to trim hospital stays for Medicare patients had a similar effect on non-Medicare patients because the hospitals applied Medicare guidelines to their non-Medicare population.

Orszag said it requires more than tweaking the system to make healthcare affordable but that “it is possible to take costs out of the system without harming health” if advances in medical and pharmaceutical technology have the desired effect. And he showed a curve plotting health outcomes against cost that indicated that recent investments in healthcare are showing some returns.

“There is a wide variety of evidence that we’re on the flat part of the curve,” he said, and that this indicated that the healthcare inflation balloon finally may be holding still.

All in all, healthcare has not been an absolute drain on take-home income, Orszag said. Despite the attention regarding increases in the cost of healthcare by the media, consumers “are facing less cost-sharing than in previous decades” in proportional terms.

In the mid-1970s, Orszag said, consumers paid about one-third of the cost of their care, a figure that has fallen to about 15% today. This, he said, drives the public’s appetite for healthcare.

“It’s clear that on the patient side, reduction in cost- sharing has been another factor in why costs are high.”

Regarding the economic impact of medical devices, Orszag told Medical Device Daily that in order to make the case for increased use of medical technology, “some believe that the most effective way is to get expanded comparative effectiveness research underway involving registries, including for new devices” as well as for existing devices.

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