Garber, MD, PhD, on Medicare

Medicare has been in the health policy spotlight in recent months, with the launch of political ads and bus tours to promote the new prescription-drug benefit; a flurry of behind-the-scenes lobbying by health-care providers to influence implementation of the broader Medicare Modernization Act, and other recent initiatives announced by the Centers for Medicare and Medicaid Services, also known as CMS.

To gain an understanding of the challenges the program faces, Medical Center Report turned to Alan Garber, MD, PhD, the Henry J. Kaiser Jr. Professor, who is chair of the CMS Medicare Coverage Advisory Committee and is lead investigator for a research project to develop a proposal to reform the Medicare program. He is also director of the Center for Health Policy and of the Center for Primary Care and Outcomes Research.

1. How will the prescription drug benefit affect Medicare's financial problems?

Garber: This year's report by the Medicare trustees states that the Medicare Modernization Act, which includes the drug benefit, will exacerbate Medicare's existing financial problems. They're referring to the fact that we have a shrinking number of working, tax-paying Americans to support the growing number of Medicare beneficiaries, who will soon be receiving additional benefits -- that kind of system can't be sustained.

This doesn't mean the prescription drug benefit is a bad idea. Despite these concerns, the Medicare Modernization Act was addressing a very real problem - the absence of a drug benefit for Medicare, which had become a glaring and seemingly illogical omission, particularly as drugs have become a more important part of health care. That said, there has been plenty of controversy about the way the benefit has been implemented, and plenty of concern that Congress has failed to put in place a sustainable mechanism to pay for it.

2. Medicare's system for paying health-care providers has grown incredibly complex. What's the biggest problem with the reimbursement system?

Garber: The real issue is not how complicated Medicare's reimbursement system is -- though that is true -- but the fact that it offers inappropriate incentives for care. There is nothing in Medicare's typical reimbursement approach that discourages inappropriate care, and in fact it may encourage inappropriate care.

As one example, Medicare had a reimbursement system that gave oncologists a strong incentive to administer chemotherapy, whether it was appropriate or not.  Oncologists who administered chemotherapy in their offices were usually paid much more than it cost them to purchase and administer the drugs.  According to many oncologists, Medicare underpaid for the other services they provided to cancer patients.  CMS has decided to fix the problem by cutting reimbursement for chemotherapy, but not by addressing complaints of under--reimbursement for other services.  When you have a fee-for-service reimbursement system -- which applies to the more than 85 percent of beneficiaries who are enrolled in traditional Medicare -- it's very hard to get the incentives right. If you set the fees too high for services you tend to see overuse. If you set the fees too low, you tend to see underuse.

3. Should we change to a fully managed care version of Medicare that pays providers using a prepaid, flat-rate reimbursement?

Garber: I don't think that's the answer. It's not likely to be politically acceptable; most of us believe that any Medicare reform needs to preserve choice for beneficiaries, offering them traditional Medicare along with managed care options. The question is, how can we make their choices more meaningful and how can we make options available that will ensure higher quality care?

4. What are some encouraging recent developments in the program?

Garber: Mark McClellan, the administrator of CMS and a faculty member on leave from our centers, is doing some interesting, promising things.

One initiative he's promoting is to offer financial rewards to clinicians and hospitals who provide care that leads to better outcomes, known as "pay for performance." For example, as a hospital you'd receive higher reimbursements if you have better outcomes for heart attack patients or if you have lower-than-expected rates of preventable infections in the hospital.

Another promising initiative could catalyze the rapid adoption of electronic health records.  CMS is now making available to physicians a version of VISTA, the VA's electronic system, at greatly reduced cost.  While computers have become ubiquitous in our lives, they have been slow to make inroads into doctors' offices, where paper charts and handwritten notes remain the norm.  The CMS has made a bold move in trying to make it easy and inexpensive for physicians to implement electronic health records. They recognize that this is an important tool for improving quality of care

5. Are there signs that Medicare is rethinking its long-standing reluctance to consider cost-effectiveness in making coverage decisions?

Garber: It does seem odd that cost-effectiveness is not explicitly considered when CMS decides what Medicare should cover. We're in a real quandary because the Medicare program is running out of money, yet Medicare is being asked to pay for new technologies that are extraordinarily expensive, while beneficiaries still fail to receive some forms of care that are both inexpensive and highly effective.

Virtually every other country that has a centralized health-care system does consider cost in deciding what it will pay for. Yet whenever the administrators of the Medicare program have sought to introduce notions of cost in deciding what to cover, they have met with powerful political resistance. Any politician who gets out in front on this issue risks attracting the ire of politically powerful and active constituents. The leadership will have to come from members of the public. They can participate most effectively by gaining a better understanding of Medicare's challenges and letting their senators and representatives know about their views concerning the future of Medicare.  Politicians would be ready to lead on this issue, if they knew the public was behind them.



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