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House and Senate Committees Discuss Cost-Saving Reforms to the Medicare Program

March 1, 2013—The House Ways and Means Health Subcommittee and Senate Finance Committee Feb. 26 and 28 held hearings that explored potential reforms designed to achieve savings in the Medicare program, including structural reforms, payment reforms, and ongoing reforms out of the Centers for Medicare and Medicaid Innovations (CMMI) such as accountable care organizations (ACOs).

The Ways and Means Committee hearing reviewed the current benefit design of the Medicare fee-for-service (FFS) program and discussed ideas to update and change the benefit structure with regard to Parts A and Part B. Health Subcommittee Chair Kevin Brady (R-Texas) opened the hearing saying Medicare “maintains separate programs and benefits for hospital and physician services, and doesn’t coordinate care between the two.” He continued, “Because of the outdated structure of the Medicare benefit, today’s beneficiaries are inundated with an array of confusing deductibles, coinsurance, and copayments with no protection from high health care costs unless they enroll in a private plan.”

Ranking Member Jim McDermott (D-Wash.) disagreed, stating that changing the benefit structure by combining Parts A and B will leave Medicare beneficiaries with higher out-of-pocket costs. He said, “Moving to a combined deductible of $500 or more will more than triple the current Part B deductible.”

Testifying before the subcommittee, Glenn Hackbarth, J.D., chair, Medicare Payment Advisory Commission (MedPAC), said, “The Commission has been considering ways to reform the traditional benefit package with two main objectives: to give beneficiaries better protection against high out-of-pocket (OOP) spending and to create incentives for them to make better decisions about their use of discretionary care.” Hackbarth said combining Parts A and B with one shared deductible would increase costs for beneficiaries primarily using Part B physician services, and decrease costs for those 20 percent of seniors in a given year who use inpatient services.

Hackbarth also said that MedPAC does “not express a definitive position,” but “combining Part A and Part B deductibles presents important challenges for implementation.”

The Senate Finance Committee also reviewed the progress of cost-saving reforms that were included in the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152) implemented through the Centers for Medicare and Medicaid Services (CMS) and CMMI. Finance Committee Chair Max Baucus (D-Mont.) touted the decrease in readmissions due to the Hospital Readmissions Reduction Program. He said, “The rate for Medicare patients returning to the hospital for treatment has fallen by more than a full percent over the past several months after being firmly stuck for years or decades.” He continued, “We also need to help providers work better together and coordinate care.  Medicare and Medicaid need to reimburse hospitals, doctors, and nursing homes to keep patients healthy.  Accountable Care Organizations are starting to make this happen.”

Ranking Member Orrin Hatch (R-Utah) said the ACA is doing little to reduce costs, and questioned “whether [Medicare] can be as nimble as the private sector in making systemic improvements.” However, he expressed interest in another hearing solely to discuss the progress being made by CMMI.

Jonathan Blum, acting deputy administrator, Center for Medicare, CMS, testified the agency is “making significant progress on transforming the Medicare program and promoting quality.” When questioned by the chairman about cost containment, Blum said that in the case of both hospital-acquired infections and readmissions, the last “12 months [they’ve seen] a consistent downward trend.” He added, “The 30-day all-cause readmission rate dropped to 17.8 percent in the final quarter of 2012. This decrease is an early sign that our payment and delivery reforms are having an impact.” This is down from an average of 19 percent over the last five years.

Blum also said CMS is working to reduce cost associated with “ensuring payment accuracy” by preventing fraud and abuse of the system. “The Administration’s efforts are paying off, with a record $4.2 billion in fraud recoveries collected in 2012, totaling $14.9 billion over the last four years.”


Len Marquez
Director, Government Relations
Telephone: 202-862-6281


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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

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