Reforming the reimbursement structure of Medicare has been an elusive goal for Washington, Idaho and other states that have been unfairly placed at the low end of the national scale. But the need for cost-cutting to help pay for wider health coverage means the current inefficient system may be mothballed. Moderate Democrats in Congress are demanding more spending cuts before agreeing to support health care bills. The Obama administration appears to be on board, with budget director Peter Orszag recommending an independent commission setting Medicare reimbursement rates that would emphasize positive outcomes over fee-for-service.
Some seniors and members of the medical community are nervous about such change, but if it’s done right, the wasteful spending that affects everyone can be reined in without hurting the quality of care. Plus, low-cost medical regions such as the Inland Northwest could benefit.
When reimbursement rates were set long ago, the government took a snapshot of health care costs around the country and determined that the amounts being spent in each region were justified. So the reimbursement rates for inefficient communities, like Miami, were set at a higher level because of the greater spending. Efficient communities, like Spokane, were saddled with lower rates for the same patient care.
The Dartmouth Health Atlas has tracked the wide disparity in Medicare spending for 20 years and found no better outcomes in regions with more spending. In 2006, the average Medicare cost per patient in Washington state was $7,110. Nationwide, it was $8,304. In McAllen, Texas, it was an incredible $14,946.
The obvious solution is to follow more closely the model used in Spokane and other Washington cities. But politically that’s been impossible, because congressional representatives of high-reimbursement states aren’t about to volunteer for spending cuts, even if it would help the federal budget and instill fairness and the right incentives. Orszag likens the problem to the closing of military bases. To fend off the parochialism that hamstrung that process, Congress established an independent commission. Similarly, a Medicare panel would be guided by objective data rather than political pressure.
Of course, the details matter. If, after leveling the field, Congress were to still cut reimbursements to low-cost areas, then more Medicare patients would be dropped. The Washington State Medical Association polled members in December and found that about one-third of them either accept no new Medicare patients, see no Medicare patients or had dropped them, according to the Puget Sound Business Journal.
But if an independent commission can strike a balance between cutting waste and reimbursing health care providers at a reasonable level, it would be a boon to the entire health care system. Congress should give it a chance.