Medical Device Daily Washington Editor

WASHINGTON – Thursday's meeting of the Medicare Payment Advisory Commission (MedPAC) included a session titled "Medicare's statutory authority to support delivery system reform." While there were voices that favored beefing up the agency's statutory authority to push reform along, there were also those that expressed misgivings on how such authority might work in practice.

Whether the commission will come to a consensus on this question remains to be seen, but recent activity on Capitol Hill – including the scrapping of the DME competitive bidding program – suggests that such a recommendation might fall on deaf ears.

Still, as the commission's chairman, Glenn Hackbarth said, the current model suggests big problems in the offing where the sustainability of Medicare is concerned.

MedPAC staffer Nancy Ray said in her presentation that the impetus behind this discussion was that "the pace of delivery system reform and improved efficiency is slow at best," and noted that CMS often does not have statutory authority to implement some of the commission's past recommendations for reform.

Some have argued for more flexibility for CMS, Ray said, adding that among the pilot programs CMS would need statutory changes in order to scale up are pay for performance (P4P), prior authorization of a number of procedures – which was discussed in the previous MedPAC session with regard to imaging under Part B – and competitive bidding.

Ray referred to the recent court decision involving the dual-drug nebulizer treatment DuoNeb (Medical Device Daily, Nov. 7, 2008) in which the U.S. District Court for the District of Columbia overruled an attempt by CMS to use a lower-cost treatment. The author of the district court decision, Judge Henry Kennedy, also ruled late last year that CMS could not collect Part D overpayments to beneficiaries totaling roughly $50 million (MDD, Oct. 2, 2007). "The take-away message is that Medicare's statutory authority ... is not clear and that this court ruling may affect Medicare's authority to carry out such policies in the future," Ray said.

DME competitive bidding, Ray said, "has not been shown to cause access problems," and the latest demonstration project – which is at least the second such project that showed that bidding would reduce costs without imposing undue burdens on beneficiaries – "resulted in 26% savings" for both taxpayer and beneficiary. Among the lessons learned from the latest DME bidding episode is that "CMS needs explicit authority" to put such programs into place, but "the influence of suppliers impacted Medicare's ability" to deploy the program by means of lobbying on Capitol Hill.

Bill Scanlon, MD, an independent consultant and MedPAC member, said, "The core issue is the awesome power of government and the need to have some protection from that power." He cited courts and congressional recourse as examples of that power. "All of them are important," he said, but suggested that panelists put themselves in the position of members of an industry that "could be devastated" by government actions.

Scanlon also said that some of the tasks put before CMS are "an impossible job, given the statutory constraints," but cited CMS's use of contracts to perform some of its cost constraint work as part of the problem. He also said CMS's resources must be bolstered if only to build confidence in the affected industries that the agency's actions will be well thought out.

Commission member John Bertko of the Rand Institute (Santa Monica, California) remarked that "the need for CMS to be a better value purchaser is just overwhelming," adding that "its really time for" CMS to be able to implement reforms. Robert Reischauer, PhD, president of the Urban Institute (Washington), said he would be interested in how private payers use such mechanisms, noting that such information might make the case one way or the other as to the value of such efforts.

Commissioner Nancy Kane of the Harvard School of Public Health (Boston) said "I think that some of this is just political will," adding that the question of whether "government is just the good guy or the bad guy ... swings back and forth," adding that interest groups make it difficult to foster reform.

Hackbarth addressed "the concern that many members have about the exercise of this overwhelming power," but reiterated the point that "there are real bad consequences for the path that we're on." A failure to take action "means we're going to buy ourselves some huge problems" down the road, he said.

Commenting that "to the extent that you limit CMS's ability to act" to constrain costs in a direct manner, he added, "we need to create options where we can reward people to pursue value" and thus constrain costs by improving care and implicitly cutting waste. He also reiterated earlier comments to the effect that "there's some real confusion about legislative authority," and "one path is to recommend [to Congress] some clarification where it is particularly muddled."

A third notion Hackbarth brought up is that of a greater commitment of resources to pilot studies because "we have a demonstration model that really is not working for the program. We have a model that fails on multiple fronts," he said in reference to some concerns that CMS's pilot programs tend to be too large to isolate from influences that may skew the results.

Scanlon opined that the amount of effort CMS had to exert for the DME bidding program was more than it would be able to sustain for a full-blown, nationwide competitive bidding program. He also reminded commission members that Congress will react to any hint that beneficiaries will be harmed, and that evidence to the contrary "is the power you need in order to move forward."

Kane responded with the comment that "the beneficiary harm argument is valid, but it can't be done in a vacuum," because insolvency "is a bigger harm and we have to make that more paramount" than isolated cases of problems.

"I think it's a risk worth taking," she said.