CBO Report Says Plan for Medicare Panel Won’t Have Big Effect on Costs

An Obama administration plan to create an independent advisory council to set Medicare payment rates would save just $2 billion over the next 10 years, according to a Congressional Budget Office report released Saturday, the Washington Post reports (Shear, Washington Post, 7/26).

In the report, CBO Director Douglas Elmendorf states that the proposal does not go far enough to guarantee that Medicare costs would decrease, noting that it "does not explicitly direct the council to reduce" Medicare spending, "nor does it establish any target for such reductions." He added that the first savings would be realized in 2016 and amount to $2 billion between 2016 and 2019.

Elmendorf wrote that because the proposal recommends that the five members of the Medicare panel be doctors or experts in medicine or health policy, "the council could be weighted toward medical providers who might not be inclined to recommend cuts in payments to providers or significant changes to the delivery system."

He noted that the panel could better reduce spending if it were allowed to recommend broad changes in Medicare coverage and benefits, and if Congress could pass across-the-board decreases in Medicare payments if spending-reduction plans were not met.

White House Office of Management and Budget Director Peter Orszag said that the "point of the proposal was never to generate savings over the next decade." Instead, Orszag said, "[T]he goal is to provide a mechanism for improving quality of care for beneficiaries and reducing costs over the long term" (Pear/Zeleny, New York Times, 7/26).