Monday, December 9, 2013

Fwd: qotd: MedPAC conflicted between fiscal neutrality and paying private programs more

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-------- Original Message --------
Subject: qotd: MedPAC conflicted between fiscal neutrality and paying
private programs more
Date: Mon, 9 Dec 2013 11:03:34 -0800
From: Don McCanne <>
To: Quote-of-the-Day <>

Medicare Payment Advisory Commission (Medpac)
Public Meeting
November 7, 2013

From the transcript:
Okay. It is time to begin….
Our first topic today is synchronizing Medicare policy across the
options that Medicare beneficiaries will face in the future….[Medpac
staff] Julie [Lee] is going to lead the way on this topic. Julie, it is
all yours.
DR. LEE: Good morning. In recent months, the Commission has been
thinking about the relationship between … ACOs, Medicare Advantage
plans, and traditional fee-for-service….
In the past, the Commission has expressed a general desire to "move away
from fee-for-service." In today's presentation, we want to clarify what
you mean by "moving away" and by "synchronizing" Medicare policy across
delivery systems…. [pp 3-4]
The title of this presentation says, "Synchronizing Medicare policy
across delivery systems," but we haven't defined what we mean by
"synchronizing." Does it mean payment neutrality across delivery
systems? In other words, would Medicare pay the same amount for the same
beneficiary whether she gets her Medicare through fee-for-service, ACO,
or MA? …. Alternatively, if not neutrality, does synchronizing mean
moving toward one system over another? For instance, would Medicare
policy create incentives to move away from traditional fee-for-service?
If so, what would that entail? ….[pp 13-14]
DR. [MICHAEL] CHERNEW [VICE CHAIR]: My view is that we have to start
with fiscal neutrality…. [p 62]
DR. CHERNEW: I've heard … broad consensus [from other commission
members] around the notion of some type of fiscal neutrality…. [p 72]
program savings of about 0.5 percent…. The ACOs we spoke with confirmed
that the cost of running the ACO was about one to two percent….[p 164]
MR. HACKBARTH: If your ultimate goal is to try to move everybody
or a high percentage of care delivery into this new [ACO] model,
then I think … you've got to have a clear, explicit strategy for how
you're going to make fee-for-service increasingly uncomfortable. [p 222]

Comment by Kip Sullivan:

The Medicare Payment Advisory Commission (Medpac) has set an impossible
task for itself. Even though the traditional fee-for-service (FFS)
Medicare program is indisputably less expensive than the Medicare
Advantage (MA) program and probably less expensive than the new ACO
pilot programs, the commission wants to move doctors and patients out of
the FFS program and into the MA and ACO programs while still maintaining
"fiscal neutrality," that is, while paying the same amount per
beneficiary regardless of whether the beneficiary is enrolled in the
FFS, MA, or ACO program.
Medpac has been weaving the intellectual trap it now finds itself in for
many years. On the one hand, Medpac has been urging Congress for decades
to honor the rule of fiscal neutrality in deciding how much to pay MA
plans vis a vis the FFS program and, specifically, to stop paying MA
plans more per beneficiary than it pays for FFS beneficiaries. As the
excerpts above indicate, there appears to be a consensus among
commission members to make fiscal neutrality a fundamental criterion in
deciding how much to pay ACOs as well.
On the other hand, over the last decade Medpac has taken the position
that Medicare's FFS program encourages unnecessary services and must
either be shrunk ("moved away from") or transformed from a
"volume-based" program to a "value-based" program by somehow subjecting
doctors to the managed care methods – the financial incentives, report
cards and third-party oversight – used by MA insurers and ACOs.
The statements by commissioners Chernew and Hackbarth, quoted above,
capture the tension created by Medpac's conflicting goals. Dr. Chernew
notes a consensus among commission members that Medicare should not pay
more per beneficiary to the ACO program than it pays to the FFS program,
but Mr. Hackbarth, a former HMO executive, argues that unless Medpac is
prepared to recommend making doctors in the FFS program "uncomfortable,"
that is, make them suffer financially for staying in the FFS program,
doctors won't migrate into ACOs.
To sum up Medpac's dilemma: They want to "move away from the FFS
program" and "toward" the ACO and MA programs, and they know they can't
do that unless they starve the FFS program and fatten the ACO and MA
programs, but they don't want to starve FFS and fatten the ACO and MA
programs because that would violate fiscal neutrality.
To those who are unfamiliar with the groupthink that currently dominates
the debate about the American health care crisis, this dilemma seems
unnecessary, even nonsensical. It would seem that Medpac has it
backwards – that Medpac should support "moving away from the MA and ACO
programs" and "toward" the FFS program unless and until the MA and ACO
programs can demonstrate they cost no more than the FFS program. If
Medpac were to adopt this goal, it could also honor the fiscal
neutrality rule. That is, Medpac could simply recommend fiscal
neutrality and know that fiscal neutrality would bankrupt all or most MA
insurers, and would probably bankrupt all or most ACOs, and thereby
"move Medicare toward" the FFS program.
But Medpac gives no sign of taking that position despite decades of
evidence indicating MA insurers are less efficient than FFS providers,
and a small but growing body of evidence that ACOs are also less
efficient than FFS providers. As the excerpt above indicates, Katelyn
Smalley, a member of the Medpac staff, reported to the commission that
the latest results from the Pioneer ACO program indicate ACOs raise
rather than lower health care spending. Ms. Smalley said CMS reported
last summer that the 32 ACOs participating in the Pioneer ACO pilot cut
total spending by Medicare by half a percent but expenditures by the
ACOs rose by one to two percent. Neither Ms. Smalley nor any commission
member pointed out the obvious: While Medicare may have saved a half
percent, the health care system as a whole suffered an increase in total
spending on the order of half to one-and-a-half percent.
Medpac appears to suffer from a split personality. One personality has
the integrity to follow the evidence wherever it leads. It is this
personality which constantly calls on Congress to stop overpaying MA
plans. But Medpac's other personality suffers from two delusions that
afflict much of the US health policy establishment: (1)the delusion that
volume, not price and the administrative waste which contributes to high
prices, is the main cause of the US health care crisis; and (2) the
delusion that the managed care tools pioneered by HMOs will someday
demonstrate their ability to reduce volume and thereby lower medical
costs more than the managed care tools themselves cost.
Medpac is an influential voice in the US health policy wars. We must
hope that Medpac will soon recognize that the evidence does not support
an endless experiment with managed care and that what America really
needs is to move Medicare "toward" a true single-payer system, not just
for the elderly and the disabled but for all Americans.

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