Rethinking Medicare

Although Republicans are eager to repeal the entire 2010 health-care reform law, they started the new session of Congress last week by taking aim at one provision in particular: the Independent Payment Advisory Board, a yet-to-be-named group of 15 presidential appointees from various health-care disciplines that could play a key role in limiting the growth of Medicare spending.

Critics argue that it's a bad idea and even un-American to put so much power in the hands of unelected bureaucrats. But with lawmakers seemingly unable to resist the pressure from the health-care industry to spend freely on Medicare, enlisting the help of independent experts may be the only way to hold down costs.

Medicare's budget is expanding rapidly in part because medical costs are rising faster than inflation and in part because the number of beneficiaries is growing as masses of baby boomers retire. The Patient Protection and Affordable Care Act tries to slow that expansion with a slew of pilot projects and other initiatives aimed at increasing Medicare's quality and efficiency.

The new payment advisory board is the act's fail-safe: If the cost per beneficiary grows faster than a formula set by the law, the board will recommend changes to the program to bring it back under the spending target. Those changes must be considered by Congress on a fast-track basis, and will go into effect automatically unless lawmakers adopt an alternative that achieves the same savings.

House Republicans took a new tack in their fight against the board when they convened for the first day of the 113th Congress on Jan. 3. In the procedural rules they passed for the coming two years, they declared that the requirement that Congress consider the board's recommendations simply does not apply to the House.

That's ridiculous, but it's likely to be more of a symbolic protest than a substantive one because the rules can't trump the statute itself. Besides, the Congressional Budget Office projects that spending per Medicare beneficiary won't grow fast enough to provoke action from the board until much later in the decade.

The first real battle over the board is more likely to take place in the Senate, where the 15 presidential appointees will have to be confirmed. President Obama hasn't nominated anyone yet, and the White House has offered no timetable for doing so.

The latter complaint, which echoes the American Medical Association's opposition to the board, reflects a crabbed interpretation of what the board's role will be. Congress has tried repeatedly to hold down payments to providers, but invariably it abandons those efforts because of complaints from doctors and Medicare advocates about draconian cuts in fees.

The solution doesn't lie in tweaking the current payment system, which encourages providers to perform as many procedures on their patients as possible; it lies in finding different approaches to care delivery and payment that encourage higher quality at lower expense. There's no reward in the existing fee-for-service system for doctors who find ways to heal patients at lower cost; the board's role is to find ways to do so, and spread them rapidly.

The strangest objection to the board is that it will somehow prevent doctors from treating Medicare patients as they see fit. Medicare already determines which procedures to cover - the ones it deems medically necessary, appropriate and within the generally accepted standards of practice - down to the level of fine detail. If anything, the board will push the system to focus less on the procedures done than on the results achieved.

The board might have drawn less controversy had the law been more explicit about its role in transforming Medicare into a more efficient and effective care delivery program. Instead, the law specifies only what the board cannot do, namely, "ration healthcare, raise revenues or Medicare beneficiary premiums . increase Medicare beneficiary cost-sharing (including deductibles, coinsurance, and copayments), or otherwise restrict benefits or modify eligibility criteria."

The law doesn't bar Congress from doing any or all of those things; it just prohibits the board from recommending them. Critics who call the board a "death panel" try to rationalize away those restrictions, but they're perfectly clear.

Lawmakers may grouse about having their hands forced in such a way. They've proved adept in recent years at simply waiving the "sustainable growth rate" formula they adopted in 1997 to limit the growth of provider payments, rather than coming up with another way to combat medical inflation.