Medical Device Daily Washington Editor

WASHINGTON — As Congress fights its way through the annual budget exercise, it obtains plenty of feedback from various parties, each with a slightly different take on such matters. Earlier this month, the Congressional Budget Office gave the Senate budget committee an overview of some features of the current and impending fiscal situation, and the message by CBO chief David Walker, the U.S. comptroller general, could not have been clearer.

Congress has to fix Social Security and Medicare or they will wreck the economy.

In his Jan. 11 testimony, Walker said that his “bottom line message today is no surprise to members of this committee.” He said that the nation’s “current financial condition is worse than advertised” and that the impact of current spending on the “long-term fiscal outlook is both imprudent and unsustainable.”

Walker told the senators that while “the $248 billion fiscal year 2006 unified budget deficit was lower than originally forecast, and lower than last year’s deficit of $318 billion,” the improvement over earlier forecasts “did not fundamentally change our long-term fiscal outlook.”

The nation’s chief accountant said that “the single largest contributor to the deterioration of our long-term outlook was the passage of the Medicare Prescription Drug Bill in 2003,” which he said will add $8 trillion to federal outlays as the Baby Boomer group wends its way through the Medicare system.

Walker also said that “taken together, Social Security, Medicare, and Medicaid under current law represent an unsustainable burden on future generations.”

According to CBO’s numbers, federal spending for those three programs will account for 15.5% of gross domestic product (GDP) in 2030, up substantially from today’s 9%. Medicare is projected to represent almost half that amount in 2030, although Walker offered no specific figures for Medicare’s projected total outlays in 2030 in his testimony.

The other side of the pincher comes from projections of economic growth, a notoriously dicey exercise that meteorologists surely understand. CBO estimates call for “the average annual growth rate of real GDP [to] decline from 3.1% in 2008 to 2.6% in the period 2012-2016,” a shift that “will come just as spending on Social Security, Medicare and Medicaid will begin to accelerate — accounting for 56% of all federal spending by 2016 compared to 43% in 2006.”

Walker suggested that White House budget projections for specific programs and initiatives “should cover 10 years,” an idea he called “especially important, given that some policies – both spending and tax — cost significantly more, or lose significantly more revenue, in the second five years than in the first.” He also made the case that Congress should reinstate the pay-as-you-go approach to budgeting that expired in 2002. “Mandatory spending cannot remain on autopilot,” he argued, adding that Congress should consider some sort of trigger to keep a lid on discretionary spending. However, Walker also told the committee that “as everyone in this committee knows, these steps alone will not solve the problem.”

Gary Burtless, an economist with the Brookings Institution (Washington), told Medical Device Daily that the solution to the problem of Medicare financing is the same as that which should be applied to the overall health insurance dilemma. He described health insurance in the U.S. as “the most dysfunctional in the world” and argued that “the only solution [for Medicare] is to deal with the overall insurance problem.” That, he said, means providing Medicare coverage to “everyone in the country.”

“I do not think that raising the age of eligibility helps” to put Medicare on a solvency track, he said. And he insisted that “the essential problem that Medicare was formed to address was affordability” of healthcare and that raising the age of eligibility counter-acts that intent.

Karen Davenport, a director of health policy for the Center for American Progress (Washington) another think tank, told MDD: “[I]t is important to remember that Medicare spending is growing along with overall healthcare spending,” but that the SGR mechanism has not exactly been a success in restraining increased Medicare costs.

“Limitations on doctors’ fees have been overridden more often than they’ve been observed in the last few years,” Davenport said.

As for raising the age of eligibility, she called this “one of the options that needs to be on the table, but so do lots of other options.”

Boosting eligibility would create problems for the uninsured prior to eligibility, so Uncle Sam might want to think about “a buy-in option for those aged 55 and up” that would work in a fashion that is fairly similar to those who have to buy into Medicare Part A because they don’t have forty quarters of FICA taxes.

On whether pay-for-performance will make a meaningful difference in healthcare expenditures, Davenport said she is optimistic “in the long run,” but that much work remains on “expanding our knowledge base of best practices and best outcomes.”

Questioned about the lack of motivation for subpar providers to post their quality scores, she said that “payers are in the best position to force providers to report quality measures.”

“There are some common sense things” that Congress can do about Medicare spending, such as end overpayments to private health plans, Davenport said. “A prudent first step would be to undo some earlier decisions,” she said, including revisiting Medicare Part C, the managed care program now more commonly referred to a Medicare Advantage, which she said is overpaid.

Davenport said she was not familiar with the relative problems of obtaining approval and reimbursement for medical devices in the U.S. vs. other Western nations, but that reining in spending on devices and drugs that are perceived as being over-prescribed are within Congress’s purview.

“I think a lot of these [reimbursement] issues will be looked at” in the 110th Congress,” Davenport said.