White House debt panel's health proposals to get second look in Congress

A bill will use the ideas, including dropping the Medicare sustainable growth formula and trimming Medicare GME funding, in a deficit-busting package.

By David Glendinning — Posted Jan. 3, 2011

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A report from President Obama's bipartisan debt commission that included a proposal to scrap the Medicare sustainable growth rate formula for at least five years did not receive enough support from panel members to force Senate action. However, a bipartisan group of lawmakers said they will introduce legislation based on that plan this year, with the hopes that it will serve as a legislative vehicle for needed deficit reduction proposals.

Eleven of the 18 members of the National Commission on Fiscal Responsibility and Reform voted in favor of the report the panel released Dec. 1, 2010. That was three votes shy of the number needed to require Congress to consider the proposal, although it was somewhat more support than observers at the time were predicting.

On Dec. 20, 2010, Sens. Saxby Chambliss (R, Ga.) and Mark Warner (D, Va.) said they would introduce a bill early in the new Congress that mirrors the White House panel's plan, using the proposals as a basis for a package aimed at controlling the national debt. The lawmakers said they already had gained support for the move from a bipartisan group of senators.

The commission, which Obama established by executive order in February 2010, made several sweeping recommendations for reducing deficits. They included cutting entitlement and military spending while increasing payroll taxes. The proposed SGR fix was among the items in the commission's final report.

Members said the Centers for Medicare & Medicaid Services should develop an improved physician payment formula that encourages care coordination and pays doctors based on quality rather than quantity of services. To maintain pressure to establish a new system and limit the impact on Medicare spending, the proposal called for reinstating the SGR formula in 2015 if CMS had not developed a permanent replacement.

But a proposed $400 billion in cuts to other health care services to offset scrapping the SGR, including a reduction of $60 billion from teaching hospitals' budgets, had some in organized medicine opposing the plan.

"We are gravely concerned that the commission's proposed cuts ... will seriously jeopardize our ability to educate and train enough doctors and ensure access to care at a time when the number of Medicare beneficiaries is rising at unprecedented levels, newly covered Americans are entering the health care system and the physician shortage is growing," said Darrell G. Kirch, MD, president and CEO of the Assn. of American Medical Colleges.

Chambliss and Warner said they did not agree on all the entitlement reforms and other revisions proposed by the debt commission, but that the report served as a good starting point for debate.

Under pressure from the American Medical Association and other physician organizations, Congress froze 2011 Medicare pay to doctors at December 2010 rates, preventing a 25% across-the-board cut from taking effect. The organizations said they would fight again for a permanent SGR repeal before the next reduction is scheduled to take effect.

More debt-reduction ideas

The Obama debt commission is not the only group that has ideas about how the government can reduce the nation's debt. At least one Washington, D.C.-based policy organization has offered its own plan.

The debt reduction proposal from the Bipartisan Policy Center's Debt Reduction Task Force recommends implementing several health care spending controls as part of a comprehensive savings plan. They include raising Medicare Part B premiums from 25% to 35% of program costs, revising Medicare's benefit package and co-payment structure, phasing out the tax exclusion for employer-sponsored health insurance, bundling Medicare post-acute care payments and reforming medical liability laws. The task force says its plan would save the federal government $756 billion in health care costs through 2020.

The task force plan calls for a "permanent fix" to the SGR mechanism, which it says requires unrealistic doctor pay cuts. The 10-year, $556 billion cost to overhaul Medicare physician pay is reflected in the task force's projections. It assumes the SGR formula will be replaced with annual updates based on the estimated increased cost to physicians of providing care, without a corresponding increase in Part B premiums.

"The actions needed to reduce the growth of national debt and bring deficits back to manageable levels are all unpopular," wrote former Sen. Pete Domenici (R, N.M.) and Clinton White House Budget Director Alice M. Rivlin, the task force co-chairs, in a letter introducing the report. "Other groups might prefer other combinations of policies to reach the same ends. We created this plan to show that it can be done."

The center says its proposal would balance the federal budget within five years, stabilize the national debt within the decade and create jobs.

"This is a starting point," said Tricia Neuman, vice president and director of the Medicare policy project at the Kaiser Family Foundation. "It's hard to tell which if any of these specific proposals have staying power over time. Whether there is action really depends on what the administration puts forth in its [fiscal 2012] budget."

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