Can the United States have a just, well-managed and cost-effective healthcare system if Congress insists on micromanaging reimbursement rates? Or loading reform legislation with special provisions that serve narrow local interests? Those are critical questions that no one seems to be asking as debate swirls around the Senate Finance Committee’s draft legislation released last week.
While AdvaMed and other device industry representatives decry Montana Democratic Sen. Max Baucus’ proposal to collect $4 billion annually in the form of market share-based levies on device manufacturers, the advanced imaging community has applauded a less-well-publicized provision included in the Finance Committee draft: That the utilization rate for advanced imaging equipment be set at 65 percent for purposes of calculating the technical component of Medicare’s payment rate for advanced imaging tests.
I’ve discussed this issue in detail in a previous post. The utilization rate determines the capital cost that can be allocated each diagnostic test; the lower the utilization rate, the higher the payment per test. Historically, Medicare used a 50 percent utilization rate assumption, but recent research from MedPAC led CMS to adopt a 95 percent utilization rate in its proposed 2010 fee schedule. This translated into a major per-test payment rate reduction for next year. The negatively affected providers and equipment manufacturers have made their displeasure known. They don’t believe that the 95 percent utilization rate found by MedPAC research is accurate; they don’t believe that the resulting 30-plus percent reduction in some test payments is fair and they want a “do over.” The Senate Finance Committee heard their pleas and proposed a four-year reprieve with only a minor change in the utilization rate.
This sort of thing is business-as-usual for Medicare payment rates. Another “fix” incorporated into reform proposals working their way through the Congress is correction of the 21 percent reduction in physician fees mandated by the combination of:
- The legislature’s 2005 imposition of a Sustainable Growth Rate to limit annual growth in total Medicare physician payments;
- And its subsequent annual “correction” of the payment reductions resulting from the law’s SGR formula.
Each year, CMS calculates payments as required by the will of Congress. Each year, Congress makes an ad hoc adjustment to rescue physicians from the payment reduction the law requires. Each year, the law requires a larger reduction to get back to the mandated SGR. Call it silly or dysfunctional, but this process bears no visible relationship to sound program management.
There is more. An amendment to the Baucus draft, championed by Senate Majority Leader Harry Reid (D-Nev.), would increase the revenues of four specific cancer treatment centers by exempting them from Medicare’s prospective payment system. The subject centers aren’t actually named in the amendment — that would too obviously label the proposal as pork and identify the butchers.
Rather, the exemption applies to “certain hospitals” if and only if they “received NCI comprehensive cancer care designation on July 27, 1978, February 17, 1998, June 13, 2000,” or were “designated on June 10, 2003 as the official cancer institute of its state.”
The hospitals that qualify under the amendment are the Karmanos Cancer Center in Detroit, University Hospitals in Cleveland, the Cancer Institute of New Jersey and the Nevada Cancer Institute. All four are “connected” to Congressional healthcare leadership.
Rep. Sander Levin of Detroit is on the House Ways and Means Committee and an outspoken proponent of a public insurance option; likewise, Sen. Sherrod Brown of Ohio is an author of the Senate Health Committee’s public option proposal. Could this aid to their constituent institutions help hold their support for a bill that doesn’t include such an option?
Rep. Frank Pallone of New Jersey, a member of the House Energy and Commerce Subcommittee on Health, has advocated an exemption for his state’s center for some years; and Sen. Reid expresses pride in his consistent and continuing support for the Nevada Cancer Institute. For them, I think, we are looking at good old-fashioned opportunism.
Congressional micromanagement of policy, along with its irresistible appetite for pork, has two pernicious effects on healthcare reform efforts:
- It substitutes response to lobbyists and constituent appeals for clear-minded program design and administration; and
- It, in turn, both complicates the process of effective program design and delegitimizes the policy option that emerges.
Think for a moment about the now-abandoned proposal to allow Medicare coverage for end-of-life counseling. The legislative language might have been quite simple: “End of life counseling, when delivered by a physician to a beneficiary diagnosed with a fatal disease or condition, under circumstances and limitations to be defined by the Administrator of the Centers for Medicare and Medicaid Services, shall be a Medicare covered service.”
What could be deemed objectionable about such a proposal? Nothing, and had the proposal been so simply written there would have been no controversy. But the proposal was pages long, with a multitude of enumerated details about processes, the character and content of the counseling, how it would be delivered, etc. The devil and the controversy — which should have been addressed through the coverage policy process, not the legislative process — were in those wholly unnecessary details. Why does the House Energy and Commerce Committee bill run to 1,018 pages? It’s that long, and complicated, and impenetrable, because it’s filled with details better left to the regulatory process.
The same is true for every other one of the healthcare reform proposals. Each unnecessary or ill-advised legislative detail creates leverage for politicization of what should be administrative functions, as well as obfuscation by ideological opponents.
Congress’ addictions to policy micromanagement (and to pork) lead, therefore, to bad politics and bad policy design. And they raise one final concern for me.
I’m a supporter of the public option. I don’t think it’s essential, but I do think it would provide a necessary counterweight — a competitive alternative — to the private insurance sector and would do so more effectively than the not-for-profit COOP proposal.
At the same time, I need to know that Congress, once it authorizes a public health insurance option and instructs it to operate without ongoing subsidy from the Treasury, will keep its hands off. If Congress can’t let the professionals run the show, can’t resist the urge to do special favors for the favored special few, how will the public plan serve as a model? If legislators feel compelled to respond to lobbyists representing those who might suffer payment reductions or business setbacks consequent to new standards of care and clinical protocols that emerge from comparative effectiveness research, then perhaps the opponents are right.
I’m reasonably convinced that the public sector is capable of running a well-managed and effective health insurance program; I’m equally convinced that Congress is not.
Edward Berger is a senior healthcare executive with more than 25 years of experience in medical device reimbursement analysis, planning and advocacy. He’s the founder of Larchmont Strategic Advisors and the vice president of the Medical Development Group. Check him out at Larchmont Strategic Advisors.
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