Fixing Medicare? Equity is issue

WASHINGTON - When a chronically ill patient turns up at Hennepin County Medical Center in Minneapolis, the doctor gets about $56 by Medicare for treatment.

The same visit at Florida's South Miami Hospital would net that doctor $68, while a physician at North General Hospital in New York would get $73.

That cost comparison for patients in the last two years of life, done by the authoritative Dartmouth Atlas of Health Care, cuts to the heart of the regional cost inequities that are complicating efforts in Congress to overhaul the nation's $2.4 trillion health care industry.

Now, as President Obama and congressional Democrats struggle to find a way to cover nearly 50 million uninsured Americans, the prospect of spiraling costs -- unevenly distributed across the nation -- has become a stubborn sticking point in the debate, like a bone lodged in a patient's throat.

Minnesota lawmakers, as divided as any on the expansion of the government's role in health care, are united on this one point: Any new health care system must not entrench the inequities that penalize Minnesota and others for their cost-effectiveness.

"We can't do health care reform without fixing the Medicare reimbursement system," said Fourth District Rep. Betty McCollum, D-Minn., a leading advocate for fixing the reimbursement rates. "This is an issue of fairness and equity."

Analysts say the state is a victim of its own success.

"The unfortunate legacy of our historically low costs has been that the mathematics that go into determining these payments are steeped in what's been a penalty for being efficient," said Mike Harristhal, vice president for public policy and strategy at the Hennepin County Medical Center. Medicare reimbursements fell $42.5 million short of the center's Medicare-related costs last year.

While Democratic leaders in the House say they have brokered an agreement to phase out regional disparities over time, no one is sure the deal will hold up, and skeptics say it still may not be enough.

"This has always been a politically difficult issue to address," said Dave Renner, director of federal and state legislation for the Minnesota Medical Association. "I'm sure [lawmakers from high-cost states] are hearing from their physicians saying 'You can't cut our payments.'"

The House deal, spearheaded by McCollum, would guarantee that no locality would lose money before 2013. After that, the Institute of Medicine, a congressionally chartered private nonprofit, would recommend rates based on best outcomes, which Congress could accept or reject but not alter. Intended to depoliticize the process, it also would diminish Congress' role.

"I'm not sure a pair of studies by the Institute of Medicine is going to fix it," said Minnesota Republican John Kline, who joined McCollum and other Minnesota delegates in asking the White House to address regional disparities. "You'll still have politics involved."

Part of the problem is that the regions with the highest reimbursement rates are also political powerhouses. Populous California, New York, Florida and Texas have large congressional delegations and loads of political donors.

Lower reimbursement states, by contrast, are clustered in the Upper Midwest, including Wisconsin, Minnesota, Iowa and the Dakotas -- states with far less political clout in Washington.

The Democrats' plan, which House Speaker Nancy Pelosi calls a "giant step forward," would cut medical spending growth by rewarding doctors and hospitals for efficient, high quality care. The current system, McCollum says, encourages volume of tests and procedures rather than healthy outcomes.

Blue Dog support

The agreement on regional health care variations is designed to win much-needed votes among fiscally conservative "Blue Dog" Democrats in the House, who are balking at the $1 trillion-plus cost of Obama's health overhaul.

But some Blue Dogs, including Minnesota's Collin Peterson, remain ambivalent, questioning whether reform will produce lower rates in high-cost regions or simply raise rates in low-cost areas such as Minnesota, further aggravating spending.

"It's a step in the right direction," Peterson said. "But it's not anywhere near enough to win us over."

Others say that while rewarding quality and effectiveness sounds good on paper, it would require health care providers in high-cost coastal areas to keep a tighter lid on costs in exchange for less money from the feds. That scenario seems unlikely to some.

"In terms of principle, we would fare well," Hennepin County Commissioner Peter McLaughlin said after a recent meeting with White House health care officials. "But it will be a major battle to make those principles real."

More disparities

The same regional differences exist for medical tests, prescription drugs, specialized treatment and hospital admissions, making for vast differences in the costs of care. Unwilling to lower their quality, states such as Minnesota struggle to make up the difference between cost of care and federal reimbursements.

The gap can be significant. Average Medicare reimbursement is $6,600 per recipient in Minnesota. Compare that with California, where the rate is $8,899 or Texas, which gets $9,361 per beneficiary. The U.S. average is $8,304.

Equalizing those payments, backers say, is not a zero-sum game. The differences are rooted partly in health practices that lead to the overuse of doctors, medical procedures and specialized treatments.

For example, a Congressional Budget Office report last year found that among Medicare beneficiaries who are otherwise similar, "individuals who live in high-spending areas receive approximately 60 percent more in services than do those who live in low-spending areas."

Simply put, older people in Florida tend to go to the doctor for more things than those in Minnesota, but that doesn't mean they get better care.

The same report found that nearly $700 billion a year in health care services do not improve health -- a level of waste that some say could be squeezed out of the system without increasing costs.

"We have to fundamentally change the way we deliver health care," said Sen. Amy Klobuchar, D-Minn., who has authored "value index" legislation that would wean Medicare from simply paying a fee for every eligible service. A similar proposal has been introduced in the House by Minnesota Democrats Tim Walz and Keith Ellison.

"It needs to be more like Minnesota, because otherwise all our taxpayer money is getting sucked down to Florida and Texas and states that are less efficient," Klobuchar added. "If we simply expand a system that's not working, or just get different people to pay for it, we'll never get to where we want to be."

Kevin Diaz • 202-408-2753