Ken Thorpe:

This presents a challenge because it has both political and policy questions that must be addressed. But there may be a way.

Most agree that we shouldn’t remove the chain of accountability that exists today. But Congress has not shown the will to make the kind of changes that many agree need to be made to reduce costs in Medicare. It is from this circumstance that the idea of a MedPac on steroids, as its name has become, has emerged.

Here’s an idea: Congress sets the broad strategy and targets for cost reductions in Medicare, then an independent board (members appointed by the President and confirmed by the Senate) provides three sets of recommendations -- a high option, a middle and a low option -- that reflect the strategy and targets set by Congress. Then, after a prescribed amount of time that would include hearings and floor debate, Congress votes on each option with the one receiving the most majority votes prevails and becomes law upon the signature of the President. In order to enforce such a plan, a trigger could be employed that, if Congress did not act in the prescribed amount of time, the high option would become law.

Using this plan, Congress would retain its accountability by setting the overall strategy and targets each year. However, there would be a balance in that the President would appoint the members of the panel, who in turn would not force a decision upon Congress, but would provide them with options. Congress and the President would make the final decisions. The natural inclination might be for Congress to always adopt the low option, but it would still be progress, and if Congress did follow this pattern, they would be accountable to the voter as the entire process would be transparent and open to challenge by stakeholders and candidates.

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Establishing an independent Medicare Council with authority to make payment and benefit design decisions within parameters established by Congress and subject to review by the President and Congress would help transform Medicare into a more active purchaser of high-value care, bend the growth in national health expenditures, enhance the long-term financial solvency of Medicare, and bring much-needed national leadership and coherence to the U.S. health care system. It should be possible to fashion a new Council in a way that both ensures accountability to the political process and generates significant health system savings.

The new entity could be given broad authority to set payment methods and levels as experience is gained, alter beneficiary incentives based on effectiveness of services, drugs, and devices, and establish provider participation standards. In order to unleash the full potential of a Medicare Council, Congress would need to provide the new entity with the authority and flexibility to develop, test, and implement payment reforms rapidly and flexibly—and collaborate in multi-payer initiatives. Allowing Medicare to join with other payers for state or area-wide regional rapid cycle testing of payment reforms would permit ongoing learning and allow for policies tailored to local circumstances. The Council would need sufficient resources to carry out this top-priority charge in an expeditious fashion.

Working within targets and guidelines recommended by the President and set by Congress, such new leadership authority must be accountable for access and high-quality care, as well as payment reforms focused on value. Guidelines could include goals for total health system spending as well as Medicare outlay growth, while ensuring access to care and financial protection for beneficiaries. Shifting costs to beneficiaries or other third parties should not be an acceptable strategy for slowing the growth in federal budget outlays. Requiring the Council to meet 10-year targets on spending per person and generate an annual report to Congress that evaluates policy impacts and major actions would help ensure accountability to beneficiaries and the political process.

To ensure Medicare policy and operations are coordinated, my own preference would be to house the council within the U.S. Department of Health and Human Services. Input of those responsible for implementing changes is essential to sound policy formulation, and the relationships between the Council and the Centers for Medicare and Medicaid Services would need to be close-knit. Establishing 7- or 10-year terms of service for full-time members of the Council would promote the independence and ability needed to implement a long-range vision. Deliberations of the Council should be public.

The Congressional Budget Office’s recent assessment of the federal budget impact of an Independent Medicare Advisory Council cautioned that such a Council would need to be carefully structured and given significant authority to have a substantial effect on the federal budget--and presumably on national health system savings. CBO offered several policy options that would both reduce federal costs and slow the growth in national spending, including giving the Council clear authority and requiring explicit goal-setting and fall-back plans if goals are not met.

Congress's concerns about handing over a substantial amount of the current operational authority it has for setting Medicare provider payment rates and benefit packages is understandable. But a change in the process may be required to control Medicare costs, stimulate needed payment system reforms, and promote national interests. A Medicare Council would insulate members of Congress from the undue influence and pressure of special interest forces, and enable members to focus where they should, on the performance and accountability of the entire system.

Under the contemplated Medicare Council, Congress's role would be to act upon Council recommendations in various domains with the advice of the Medicare Payment Advisory Commission, e.g., recommendations on payment levels, payment methods, benefits and beneficiary incentives, delivery system reforms, provider standards. Such recommendations would go into effect if Congress failed to act with an up-or-down vote on different blocks of recommendations within a reasonable time frame. In this process, Congress would not be abrogating its responsibilities. Rather it would be asserting a responsibility that is difficult under the current process. Properly structured, an independent Medicare Council could achieve needed cost savings, make Medicare a leader in high-value purchasing, and help shape the incentives and standards necessary to move the nation toward a high performance health care delivery system.

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Updated at 11:00 a.m. on July 27.

Imagine a corporation whose Board of Directors are allowed to do business with or accept money outright from vendors to the company.

Imagine what a mess that would be in practice and what kind of decisions the Board would make. It would violate all tenets of good corporate governance.

Now, there is, in fact, a very large American insurance company where just such a system is operative and deemed perfectly acceptable. That insurance company is known as Medicare.

The Directors on Medicare’s Board are the members of the House Ways and Means Committee and the Senate Finance Committee. These Board members routinely accept money from vendors to Medicare. They may protest that their decisions are impervious to such financial inducements. But if that were believable, why is the Sarbanes-Oxley law on corporate governance so strict on this point? Are the directors on corporate Boards deemed ipso facto less honorable than politicians?

Let us contemplate what kind of decisions such a financially compromised Board is likely to make over time.

Such a Board, for example, might not show any interest at all in the question why vendors in some parts of the country charge the company more than twice as much as do vendors in other parts of the country for what appears to be roughly the same thing – think here Dartmouth Atlas.

Nor is it surprising that such a Board would have given the cold shoulder to the sensible idea of bundling the hospital-based services of radiologists, anesthesiologists and pathologists (the so-called RAPs) into the DRG for inpatient care, along with inpatient convalescent care.

Could any independent Board – such as MedPac -- that is nevertheless subject to some political supervision possibly do worse?

To be sure, the prospect of such an independent Board will trigger wailing and gnashing of teeth among the vendors to Medicare, because the affection of Board members of an independent Board cannot be purchased in the political market place. Presumably it would be illegal to for the vendors to Medicare to pay cash to members of an independent Board.

But this predictable wailing aside, why would anyone propose that a carefully chosen and publicly accountable body of stakeholders and experts would not make more reasoned choices than does the financially compromised Board of Directors of Medicare, especially when that independent body would have to make decisions in public hearings, and be fully transparent in its modus operandi?

In fact, Germany has used such an independent Board – the so-called Joint Federal Committee – since 2004. To learn more about it, click on this link and follow the links in that piece to the German site (which is in English).

As noted, much of the opposition to this idea for the US will come from people who, unlike the Congressional Budget Office’s off-the-hip, wild guess last week, believe that such a body actually could help to constrain the future growth in health spending. That is quite understandable, because to the supply side of the health care sector health spending = health care incomes. Any idea that will constrain the expected future growth of total health expenditures (care incomes) – traditionally a doubling within every ten years -- will naturally be opposed by the supply side. It is only human.

Additional opposition will come from people who believe on ideological grounds that health spending in America should be controlled by rationing health care on the basis of price and the patient’s ability to pay – by income class. Although they tend to cloak this proposition in mellower language, such as Consumer Directed Health Care, practically it has meant high deductible insurance policies and blindfolded health-care shoppers with only scant, if any, information on the prices and quality of health care services delivered by competing vendors. I view this as more of an ethical doctrine, which can be debated as an ethical proposition, than a solid and proven economic proposition.

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I’m in favor of a Medicare Czar with complete authority to form contracts with providers. And no ability of Congress to override the decisions. But I’m 100% against this idea if Peter Orszag is the Czar.

I like Peter. He’s smart. He’s capable. He’s competent. But his idea on how to reform Medicare is completely wrong. As the CBO has affirmed, it will save no money. Zip. Zero. Nada. And it may harm patients.

There are many examples in our health care system of high-quality, low-cost care. They all originated on the supply side of the market. Not one of them was created by Blue Cross, Medicare, or any other payer.

Why can’t we learn from this experience? Let the providers tell Medicare how to reform the system rather than the other way around. As proposed on my recent testimony every provider should be encouraged to repackage and reprice his services, provided that (1) the cost to the government does not go up and (2) quality of care does not go down.

I’m in favor of a Czar who is willing to liberate the supply side of the market. I’m not in favor of a Czar who wants to tell doctors how to practice medicine.

As a former HCFA Administrator and chair of MedPAC, I find it interesting, amusing and sad that the same Congress that has been so reluctant to cede any authority to the agency that runs Medicare proposes ceding major authority about the Medicare payment policy as well as specific reimbursement rate-setting to an as-yet non-existent MedPAC- like body. I appreciate the attraction but shifting authority to a once-appointed unaccountable body is the wrong answer to the problem.

Yes—the Congress has been woefully unwilling to make the hard decisions about changing reimbursement strategies that produce so much of what none of us like about the payment incentives in Medicare. I sympathize with the political pressures that individual Members of Congress face when they are asked to make these tough decisions. Congress needs to set the overall payment strategy that it thinks is appropriate for Medicare. It should also set budget limits and other payment parameters to the extent it is able to do so. Establishing a senior level advisory body, like MedPAC, to advise CMS might be helpful. More helpful would be for the Congress to provide CMS with far greater authority to establish new reimbursement policies and rates within the broad authority established by the Congress.

Why is this better than ceding so much authority to a new MedPAC like body? Unlike the members of this new commission who once appointed are accountable to no one, the Administrator of CMS is a Presidential appointee, subject to the consent of the Senate, reporting to the Secretary of HHS who is also a Presidential appointee subject to the consent of the Senate who reports to the President, who is ultimately accountable to the people. That’s as decision-making should be. Fortunately some senior members of Congress are beginning to have second thoughts about their own proposal.

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