Report Calls for Medicare Reform To Improve Efficiency, Cut Costs

The Medicare provider payment system must be reformed to eliminate wasteful spending and facilitate more efficient and better care coordination, according to a Medicare Payment Advisory Commission report released Monday, the Washington Post reports (Hilzenrath, Washington Post, 6/16).

The 275-page report identifies four issues that might help lawmakers stem rising care costs and boost quality:

• Accountable care organizations;
• Graduate medical education;
• Physician use measurement; and
• The impact of physician self-referrals for imaging services.

The report, however, stops short of offering specific recommendations, according to CQ HealthBeat.

According to the report, Medicare's current spending trends will make the program "fiscally unsustainable" over the long term. The report also highlights an inconsistency in coordination of care and Medicare's greater emphasis on specialist care rather than primary care (Norman, CQ HealthBeat, 6/15).

In a statement, MedPAC Chair Glenn Hackbarth said, "Current incentives reward volume instead of value and costly care instead of efficient, effective care," adding, "To achieve better care coordination and efficiency, Medicare must change the way it pays health care providers" (CongressDaily, 6/16).

Proposals

The report suggests that primary care physicians, specialists and hospitals form accountable care organizations. Organizations meeting quality and cost targets would be eligible for higher bonuses, while those that do not meet the targets could be penalized (CQ HealthBeat, 6/16).

The report also suggests implementing a more streamlined approval process for follow-on biologics -- or low-cost, generic versions of brand-name biotechnology drugs -- on which Medicare spends about $13 billion annually.

In addition, the report urges the government to review what it deems "unfair" higher payments to private Medicare health plans. While private plans offer more benefits than conventional fee-for-service Medicare coverage, they are expected to cost the government about $12 billion this year, the report says.

The report also notes that use of imaging devices to diagnose cancer, heart problems and other conditions has grown at twice the rate as other services. The commission suggests the high use of the devices might be because payment rates have created "financial incentives to provide more imaging" (Heavey, Reuters, 6/15).

The report also urges the government to consider reforming graduate medical education subsidies, noting that Medicare in 2008 spent $9 billion on the subsidies but failed to see adequate returns.

It said, "Our medical schools and residency programs need to emphasize a set of skills and knowledge that will equip students and residents to practice and lead in reformed delivery systems that work under restructured payment incentives" (CQ HealthBeat, 6/15).