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Reshaping Medicare Brings Hard Choices

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Published: April 12, 2011

WASHINGTON — President Obama has deep disagreements with House Republicans about how to address Medicare’s long-term problems. But in deciding to wade into the fight over entitlements, which he may address in a speech Wednesday afternoon, the president is signaling that he too believes Medicare must change to avert a potentially crippling fiscal crunch.

So the real issue now is not so much whether to re-engineer Medicare to deal with an aging population and rising medical costs, but how.

Even before they debate specific proposals, lawmakers across the ideological spectrum face several fundamental questions:

Will the federal government retain its dominant role in prescribing benefits and other details of the program, like how much doctors and hospitals are paid and which new treatments are covered? Will beneficiaries still have legally enforceable rights to all those services?

Will Medicare spending still increase automatically with health costs, the number of beneficiaries and the amount of care they receive? Or will the government try to limit the costs to taxpayers by paying a fixed amount each year to private health plans to subsidize coverage for older Americans and those who are disabled?

Public concern about the federal deficit and debt has revived interest in proposals to slow the growth of Medicare, including ideas from Mr. Obama’s deficit reduction commission. Here are some leading proposals:

  • Increase the age of eligibility for Medicare to 67, from 65.
  • Charge co-payments for home health care services and laboratory tests.
  • Require beneficiaries to pay higher premiums.
  • Pay a lump sum to doctors and hospitals for all services in a course of treatment or an episode of care. The new health care law establishes a pilot program to test such “bundled payments,” starting in 2013.
  • Reduce Medicare payments to health care providers in parts of the country where spending per beneficiary is much higher than the national average. (Payments could be adjusted to reflect local prices and the “health status” of beneficiaries.)
  • Require drug companies to provide additional discounts, or rebates, to Medicare for brand-name drugs bought by low-income beneficiaries.
  • Reduce Medicare payments to teaching hospitals for the cost of training doctors.

In debate last year over Mr. Obama’s health plan, Republicans said repeatedly that he was “raiding Medicare” to pay for a new entitlement providing insurance for people under 65. The Senate Republican leader, Mitch McConnell of Kentucky, said the Democrats were using Medicare as a piggy bank. Senator Jim Risch of Idaho said, “We are talking about a half-trillion dollars that is being stolen from Medicare.” Senator Charles E. Grassley of Iowa said the cuts “threaten seniors’ access to care.”

Now it is Republicans, especially House Republicans, proposing to cut the growth of Medicare, with a difference.

“Any potential savings would be used to shore up Medicare, not to pay for new entitlements,” said Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee.

The House is expected to vote this week on his budget blueprint for the next 10 years.

Mr. Ryan points to Medicare’s prescription drug coverage as a model. That benefit, added to Medicare under a 2003 law, is delivered entirely by private insurers competing for business, and competition has been intense. Premiums for beneficiaries and costs to the government have been much lower than projected.

Republicans rarely mention one secret to the success of Medicare’s drug program. Under presidents of both parties, Medicare officials have regulated the prescription drug plans to protect consumers and to make sure the sickest patients have access to the drugs they need.

Many Democrats like Medicare as it is: an entitlement program in which three-fourths of the 47 million beneficiaries choose their doctors and other health care providers, and one-fourth have elected to enroll in managed-care plans. These Democrats acknowledge that care could be better coordinated, but say that could be done in the traditional fee-for-service Medicare program, without forcing beneficiaries into private health plans offered by insurance companies.

Marilyn Moon, a health economist and former Democratic trustee of the Medicare trust fund, said serious discussion of changes in Medicare was warranted, and she noted that the government spent more than a half-trillion dollars a year on the program. Still, Ms. Moon said, it would be preferable to shore up Medicare without “the philosophical sea change” sought by Republicans, who would give private insurers more latitude to decide what benefits are available and what services are covered.

Obama administration officials said Tuesday that Medicare could save $50 billion over 10 years by reducing medical errors, injuries, infections and complications that prolong hospital stays or require readmission of patients.

In any program as big as Medicare, which accounts for one-fifth of all health spending, even decisions about small, seemingly technical questions can have vast consequences for beneficiaries, the health care industry and the economy as a whole.

Gradually raising the eligibility age, for example, would save $125 billion over 10 years, the Congressional Budget Office says.

But it would increase costs for people who would otherwise have Medicare. Some of those 65- and 66-year-olds would obtain insurance from Medicaid or from employers, as active workers or retirees, thus increasing costs for Medicaid and for employer-sponsored health plans.

If Congress decided to make a fixed contribution to a private health plan on behalf of each Medicare beneficiary, lawmakers and lobbyists could spend years debating how to set payment rates and how to adjust them, based on increases in consumer prices or medical costs or the growth of the economy.

Those decisions would directly affect beneficiaries. Under the House Republican proposal, the Congressional Budget Office said, beneficiaries “would bear a much larger share of their health care costs,” requiring them to “reduce their use of health care services, spend less on other goods and services, or save more in advance of retirement.”

The history of Medicare is filled with unsuccessful efforts to rein in costs. Private health plans entered Medicare with a promise to shave 5 percent off costs, but ended up costing more than the traditional Medicare program. For two decades, Congress has tried to limit Medicare spending on doctors’ services, but the limits have proved so unrealistic that Congress has repeatedly intervened to increase them.

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Doctor privacy advocates defend a 30-year ban on releasing data from challenges on Capitol Hill and in the courts.

By Charles Fiegl, amednews staff. Posted April 4, 2011.

Washington — A Senate bill aimed at curtailing Medicare fraud would publish physician billing data online, letting viewers determine how much individual doctors earn annually from the program.

The release of the data has been prohibited by a court ruling for more than 30 years. But some lawmakers recently stepped up their efforts to lift the ban and bring Medicare billing data to light to prevent fraud.

Sen. Charles Grassley (R, Iowa) introduced a program integrity measure before a Senate Finance Committee hearing on Medicare and Medicaid fraud on March 2. The bill in part would require the Dept. of Health and Human Services by the end of 2012 to start publishing Medicare claims and payment data on the website

In making the information public, the government could help prevent billions of dollars each year from going to those defrauding the program, Grassley said. Sen. Ron Wyden (D, Ore.) said he was drafting his own legislation that would make Medicare claims data publicly available.

“More transparency about billing and payments increases public understanding of where tax dollars go,” Grassley said. “The bad actors might be dissuaded if they knew their actions were subject to the light of day.”

But the American Medical Association, along with HHS, has opposed challenges to the decades-old ban on publicizing the information. Physician organizations have said allowing public access effectively could permit anyone to determine how much an individual doctor makes in a year, especially if that doctor has a patient population that is mostly Medicare. Publicizing raw claims data without any necessary context would be of dubious anti-fraud value, they said.

“Releasing Medicare claims data to the public does not further the goal of combating fraud, as those tasked with this responsibility already have access to the data,” said Ardis Dee Hoven, MD, chair of the AMA Board of Trustees.

However, Grassley said the government is not the only entity trying to smoke out Medicare fraud. During the Finance hearing, he cited a recent series of Wall Street Journal articles that examined Medicare claims from 1999, 2001 and 2003-08. Under a special arrangement, the journal, working with the Center for Public Integrity in Washington, D.C., paid the Centers for Medicare & Medicaid Services $12,000 for a 5% sample of the Medicare carrier payment file for those years. The newspaper reported that it was able to identify tens of thousands of physicians and other health professionals who could be considered outliers based on the relatively large amounts they billed Medicare in those years.

However, the journal could not name the physicians based on its data usage agreement with CMS. That policy stems from the federal court decision that protects the privacy of the physician data.

“I think it’s time to revisit this decision and make some transparency of payment physicians receive from Medicare,” said Grassley, a long-time farmer. “Pretty much like you will see Chuck Grassley’s name in the newspaper sometimes that I’ve gotten a farm subsidy through the U.S. Dept. of Agriculture.”

Reviving an old court fight

In 1978, the Florida Medical Assn. and six physicians filed a class-action lawsuit to prevent the predecessor department to HHS from disclosing a list of all medical professionals who received Medicare payments the previous year. The AMA joined the lawsuit as a plaintiff in June 1978.

In October 1979, the judge in the case ruled that individual billing data were exempt from public disclosure laws and barred the department “from disclosing any list of annual Medicare reimbursement amounts, for any years, which would personally and individually identify those providers of services under the Medicare program.” The ruling protects AMA members and doctors in Florida, but HHS has applied the prohibition to all physician billing data.

Several recent challenges to the 1979 ruling have failed. In 2009, an appeals court decided that the government was not required to release claims information to the marketing firm Real Time Medical Data based in Birmingham, Ala. The same year, another appeals court denied a similar request from Consumers’ Checkbook/Center for the Study of Services, a nonprofit consumer organization based in Washington, D.C. In that case, the court said release of the data was an “unwarranted invasion of personal privacy.”

In the latest legal challenge, The Wall Street Journal‘s parent company, Dow Jones & Co., filed motions on Jan. 25 to reopen the 1979 case and intervene as a defendant. A federal judge is scheduled to hear arguments on these motions on April 14.

The paper said the original decision prevented reporters from naming physicians they believed were defrauding the Medicare program.

In a series of articles, titled “Secrets of the System,” the newspaper cited doctors with questionable billing records. For instance, one New York family physician took in more than $2 million in 2008 from Medicare, the journal reported.

The AMA, meanwhile, “intends to vigorously defend the current injunction, which protects the privacy of physician data while allowing it to be seen by the agencies working to identify fraud,” Dr. Hoven said.

“Medicare fraud threatens our entire health care system, and the AMA supports targeted efforts by the Dept. of Justice, [HHS] Office of Inspector General and others to identify perpetrators of fraud — the vast majority of whom are not physicians,” she said.

There’s little doubt that the vast majority of physicians are billing the Medicare program appropriately, said Jason Conti, an attorney for Dow Jones in New York. However, restrictions on access to the claims data prevent further investigation of true outliers in the program.

“If the data is released, more fraud will be exposed,” he said.

As it has since 1979, HHS is opposing reopening the case. The restrictions placed on the newspaper in the data usage agreement are based on a statutory exception to the Privacy Act of 1974 and not the 1979 court decision, HHS said in court papers.

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