Medicare pay must be fixed, says HHS pick Daschle

Washington -- Former Sen. Tom Daschle, appearing at his first confirmation hearing to be Health and Human Services secretary, pledged to replace Medicare's sustainable growth rate formula with a system that bundles payments in an attempt to reward good patient outcomes.

Daschle also promised to examine inefficiencies in private Medicare plans, discourage tobacco use, support the training of primary care physicians and work with lawmakers in a bipartisan manner.

Daschle elaborated on his positions at a Jan. 8 hearing for the Senate Health, Education, Labor and Pensions Committee. The Senate Finance Committee, which has primary jurisdiction over the HHS nomination, had not scheduled a hearing as of press time. A full Senate vote will determine if Daschle's appointment is confirmed. President-elect Barack Obama also has named Daschle to direct the White House Office of Health Reform.

Daschle, a former Senate majority leader, said Medicare's SGR formula "just isn't working right." The latest in a series of temporary payment patches expires at the end of 2009. If Congress doesn't act before Jan. 1, 2010, doctors will undergo an estimated 21% Medicare pay cut. He said a new formula should focus on bundling payments based on episodes of care instead of paying per procedure.

"I'm not one who supports the so-called performance-based approach, but I do believe that there are episodic ways with which to look at reimbursement that give us a lot more latitude" to reward better outcomes, he said. He added that this would lower costs and lessen hassles for physicians, though he did not elaborate further.

Daschle also said he wants to provide more scholarships and student loan payment help to medical students who agree to enter primary care.

Sen. Mike Enzi (Wyo.), the ranking Republican on the HELP committee, asked Daschle if he favored lawmakers using budget reconciliation to adopt health reform legislation. Reconciliation is a partisan process used to limit debate and amendments on bills that change tax law or address mandatory federal spending. The procedure also permits adoption with a simple majority vote instead of the 60 votes usually needed to cut off debate and move to a final vote.

Daschle said his goal is to see health legislation adopted through the normal order of business with 70-vote or higher majorities. "I really want to work in a collaborative way. It's the only way we're going to get this done."

Sen. Richard Burr (R, N.C.) asked Daschle about funding private Medicare plans. Medicare Advantage plans will be paid an average of 114% of traditional Medicare rates in 2009, says a Dec. 2008 Medicare Payment Advisory Commission report. The American Medical Association and other physician groups support equalizing private Medicare plan pay with fee-for-service pay, and the money saved could go toward boosting physician rates.

Daschle responded that Medicare Advantage has improved health care access for people in rural areas but that the plans have become expensive. "We have to look at whether or not we're getting our money's worth," he said. Obama wants "to look at the inefficiencies and the problems associated with spending in Medicare Advantage and address them."

Daschle pledged to have HHS agencies work together to address complicated problems such as childhood obesity.

He said the National Institutes of Health, the Food and Drug Administration, the Centers for Disease Control and Prevention, and the Centers for Medicare & Medicaid Services don't communicate enough.

Enzi also asked if Daschle supported directing the FDA to regulate tobacco. Enzi is concerned that such measures would give tobacco legitimacy when the product offers only health risks. The nominee didn't say he opposed regulating tobacco but that he would try to use FDA authority to discourage tobacco use.

Committee Chair Edward Kennedy (D, Mass.) asked Daschle for an update on a nationwide series of community meetings on health reform. The Obama transition team asked Americans to hold forums to discuss views and concerns about health care, then to report the results by Dec. 31, 2008. Daschle said more than 8,500 people have held discussions, and more than 4,000 people sent feedback to the transition team.

"We are currently compiling their reports to share with each of you and the president-elect and everyone else. But one thing was crystal clear: America cannot afford more of the same when it comes to health care in this country," he said.

Daschle attended a discussion in Durbin, Ind., on Dec. 29. The conversation focused on rural health care access and health costs, he said.