IOM: CMS Should Not Adopt a Geographic Pay Plan for Medicare
Medicare should not tie payments to the quality and cost of care in geographic regions, according an Institute of Medicine report released Wednesday, the New York Times reports (Pear, New York Times, 7/24).
For the report, a group of 19 prominent health care researchers -- led by Harvard economist Joseph Newhouse -- studied data from Medicare, Medicaid and private insurance over the course of three years to understand why patient treatment costs are higher in some areas of the country than others.
The topic of regional cost variance has been a hot-button issue among researchers for decades, according to Kaiser Health News. In order to address the issue, lawmakers have advocated for the creation of a "value index," in which providers in areas that offer high-quality services at relatively lower costs would be financially rewarded (Rau, Kaiser Health News, 7/24).
However, the IOM report -- titled, "Variation in Health Care Spending" -- found that implementing a geographic value index "would unfairly reward low-value providers in high-value regions and punish high-value providers in low-value regions" (Pittman, MedPage Today, 7/24).
Overall, the researchers found no link between the quality of care and spending in either Medicare or the commercial insurance sector. Further, the researchers identified no correlation between Medicare spending or commercial insurer spending and total health spending (New York Times, 7/24).
Because Medicare has fixed reimbursements, the report said that geographic spending variations largely are driven by the use of post-acute services by Medicare beneficiaries, such as skilled nursing homes, home health care and long-term-care hospitals. Meanwhile, in the commercial sector, hospitals, physicians and other medical providers are able to negotiate higher prices, which the report said was a key factor in regional variations.
The report also found significant variation within regions or metropolitan areas that were often as great -- or greater -- than between regions. "Potentially, hospitals across the street from each other could be spending different amounts," Newhouse said (Kaiser Health News, 7/24).
Ultimately, the researchers concluded that health care involved a wide array of stakeholders from private practitioners to large hospital systems and that "opportunities for value improvement exist at all levels of health care decision-making" (MedPage Today, 7/24).
They recommended that Medicare continue to pursue physician payment reforms -- such as bundled payments and accountable care organizations -- to encourage better care coordination (Kaiser Health News, 7/24). The report stated, "To improve value, payment reforms need to create incentives for behavioral change at the locus of care (provider and patient)." It added, "Therefore, payment should target decision-making units, whether they be at the level of individual providers, hospitals, health care systems or stakeholder collaboratives."
In addition, the report recommended that lawmakers and CMS:
- Improve access to Medicare and Medicaid data on spending and outcomes;
- Conduct ongoing evaluations of reforms' effect on value; and
- Ramp up the transition to new payment models that have been proven effective (MedPage Today, 7/24).
Reactions to Report
The report solicited mixed reactions from lawmakers and industry officials.
Rep. Betty McCollum (D-Minn.) said, "I'm disappointed that this study failed to provide more recommendations to address geographic variation."
Susan Van Meter -- a vice president of the Healthcare Association of New York State -- said that her organization is "pleased that there was no recommendation for a value index" (New York Times, 7/24).
Meanwhile, Elliott Fisher -- director of the Dartmouth Institute for Health and Clinical Practice -- said he agreed with the panel's view that geographically based payment changes would be unfair, but added that "we can also learn a lot from looking at regions" (Kaiser Health News, 7/24).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.