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Today, “The National Commission on Fiscal Responsibility and Reform” a bi-partisan group that President Barack Obama appointed earlier this year, released the final version of a report recommending ways to rein in the budget deficit.  I’m not going to try cover all of the Commission’s proposals in this post, but I think it’s important to compare how the Accountable Care Act reins in Medicare spending to the Commission’s more Draconian approach.

The commission takes aim at healthcare for seniors by hiking co-pays and deductibles for Medicare patients without considering what patients can afford. Under these proposals, many middle-class Medicare beneficiaries will not be able to afford health care. Those who are sickest would suffer most. The report then blindly freezes and ultimately cuts Medicare payments to all physicians--ignoring the fact that, today, some are underpaid for essential services.  Finally, it calls for reinstating the dreaded sustainable growth rate (SGR) formula as a benchmark for reducing reimbursements to physicians, beginning in 2015.

Friday, the 18-member panel will vote on the plan. If 14 members of the group say “yea,” it will go to Congress for its consideration.  

 How the Fiscal Commission Would Reduce Medicare Payments to Doctors: The commission’s co-chairs, Alan Simpson and Erskine Bowles, released an outline of the report on November 10 which called for "modest reductions" in Medicare reimbursement for physicians, but did not specify an amount. Today's full-fledged report unveils the numbers.

Over the short term, the Commission would freeze Medicare payments to doctors through 2013, and then trim payments by 1% in 2014. The Group also “directs the Centers for Medicare and Medicaid Services (CMS) to develop an improved physician payment formula that encourages care coordination across multiple providers and settings and pays doctors based on quality instead of quantity of services.” http://www.kaiserhealthnews.org/Stories/2010/December/02/fiscal-commission-medicare-recommendations-document.aspx

The Affordable Care Act (ACA) already calls for pilot projects that would pay doctors for value in the form of better outcomes rather than rewarding them for volume through fee-for-service payments.  The ACA also gives the Secretary of HHS the power to roll out successful pilots nationwide, without needing to go through Congress. (In the past, Congressional lobbyists have blocked expanding programs that would reduce spending.)

But the Commission goes one step further: “In order to maintain pressure to establish a new system and limit the costs of physician payments,” the proposal would reinstate the much hated “Sustainable Growth Rate” SGR formula in 2015 (using 2014 spending as the base year) “until CMS develops a revised physician payment system.”

The SGR formula, which was devised in the late nineties, requires that if increases in Medicare’s total payments to physicians exceed GDP growth by a certain amount in a given year, reimbursements must be sliced the next year. When Congress approved the formula, GDP growth was much higher than it is today. But by 2003, economic growth had fallen to a point that the formula kicked in, calling for across-the-board reductions in Medicare’s payments to doctors.

Knowing that some Medicare doctors are underpaid--and fearing that they might stop seeing Medicare patients if they could not cover their costs-- Congress was unwilling to lower fees for all services.  Instead, each year it kicked the can down the road, postponing the day of reckoning.

The Medicare Payment Advisory Commission (MedPAC) has recommended ditching the SGR.  And liberals in Congress have voted to repeal it, but fiscal conservatives have blocked repeal. So each year, the SGR cuts are debated, and each year, Congress has been able to muster only enough votes to postpone slashing Medicare payments. Meanwhile, virtually everyone in Washington understands that the SGR formula will never be implemented.  It has become a political tool that those who oppose health care reform use to frighten doctors that under “Obamacare” their incomes will fall. In fact, when President Obama took office he did not include the SGR savings in his budget.

Nevertheless, the deferred cuts have accumulated, and the SGR formula now directs Congress to whack all Medicare reimbursements to physicians by 25% % next year.  Everyone realizes that this is unthinkable. If asked to take such a hit, many doctors would stop taking Medicare patients.

Let me be clear: the Fiscal Commission does not propose lowering payments by 25% . It would “re-set” the formula making 2014 the baseline, but going forward, physicians would be subject to across-the-board reductions in payments for all services.

By contrast, the Affordable Care Act recognizes that while some doctors are over-paid for certain services, others are underpaid. Taking an axe to all reimbursements is a crude solution. Instead, the ACA calls for adjusting payments with a scalpel, giving the Secretary of HHS the authority to reduce payments for particular services that are overvalued, while lifting reimbursements for services that are undervalued. In addition the law calls for a 10% hike in pay for primary care physicians and other doctors who provide primary care, effective January 1, 2011.

Finally, if Medicare spending is growing significantly faster than consumer prices (using the Consumer Price Index plus 1% as a benchmark) the Independent Payment Advisory Board (IPAB) is charged with reducing Medicare spending--without cutting benefits or raising co-pays and deductibles. It’s likely that this would mean trimming fees for some tests and treatments.  (Congress could override IPAB”s recommendations only if it could realize equal savings, again without reducing benefits or increasing cost-sharing. Otherwise, IPAB’s proposals automatically become law.)

Shifting the Burden to Seniors:The Commission aims to raise $110 billion by requiring seniors to pay for the first $550 of visits to doctors and hospitals. In other words, Medicare would not reimburse for patients for any doctors’ bills or hospital bills until the patient had shelled out $550 of his own money. 

In addition, the Commission would keep a 20% co-pay on spending above the $550 deductible--with no cap on total out of pocket costs until the beneficiary has spent $7,500 out-of-pocket

This would no doubt lower Medicare spending; many seniors would have a hard time scraping together $7,500, and so would put off needed medical care. To make sure that even the sickest Medicare patients cut back on healthcare,  the report prohibits private Medigap plans (designed  to fill some of the holes in Medicare) from covering the first $500 of an enrollee’s cost-sharing liabilities and limits coverage to 50 percent of the next $5,000 in Medicare cost-sharing.

The Commission ignores the fact that median income among seniors is $18,000 a year. That includes Social Security, pensions, dividends, capital gains--every penny that comes into the household. In other words, half of Americans over 65 live on less than $18,000 a year.  “Middle-class” seniors (those on the third step of a five-step income ladder) are making do with roughly $15,000 to $21,000 a year. In many parts of the country, this means that they are barely getting by.  If they spent $7,500 out-of-pocket in co-pays, medical care would be eating up as much as 50% of their income.

By contrast, the Accountable Care Act eliminates co-pays for preventive care recommended by the U.S. Preventive Services Task Force. The goal is to reduce Medicare spending and improve the quality of care by encouraging seniors --many of whom suffer from two or three chronic diseases-- to receive preventive care before they land in a hospital.  If they visit a doctor, also will receive counseling on how they can help manage their chronic diseases. In 2011, the ACA  also provides  a 50% discount on covered brand name drugs if a senior hits the prescription drug “donut hole” and covers a free annual wellness visit.

Late this afternoon, it didn’t look likely that the report will garner the needed 14 votes. Even if it did, these recommendations would not make it through the House. Nevertheless, the Commission’s proposals are important because they offer a revealing snapshot of what Congressional conservatives would like to do. . .  

Read More: http://www.healthbeatblog.com/2010/12/comparing-the-fiscal-commissions-proposals-to-the-accountable-care-act.html