Two of Paragon’s experts are testifying on Capitol Hill this week. Theo Merkel will testify this morning at 10:00 a.m. EDT on high health costs before the Senate Budget Committee. Tomorrow at 10:00 a.m. EDT, Joe Albanese will testify on how Medicare pays doctors before the House Committee on Energy and Commerce. Theo is a senior research fellow with Paragon and directs our private health reform initiative. Joe is a senior policy analyst who specializes in Medicare. Below are highlights of what Theo and Joe will discuss, followed by a review of the Congressional Budget Office’s new report showing the failures of the Center for Medicare and Medicaid Innovation.
Go here for the Senate Budget Committee hearing and here for the House E&C hearing.
Merkel: Government Policy Pushes Up Health Care Prices and Spending
In his testimony, Theo explains, “Decades of policymakers have sought to avoid the primary factors driving wasteful spending, preferring Washington-driven micromanagement that has failed to bring spending growth to a sustainable rate while distorting the delivery of care and the timing and direction of innovation.” Theo reviews the rise in government health care spending and how Americans do not get a good return for all the spending. The government subsidizes inefficient and wasteful health care and limits who can provide health care services and how they can be provided. Although often well-intentioned, these government policies increase demand and restrict supply, thus raising both health care prices and spending.
Theo provides Congress with recommendations for how to begin reforming the failed status quo:
- Shift financial risk away from taxpayers, such as reforming Medigap and reducing states’ ability to use financing schemes to raise Medicaid spending.
- Get the government out of the business of dictating who should be paid and how much they should be paid, and reduce distortions in government payments such as by enacting site neutral payments in government programs.
- Favor bottom-up solutions instead of top-down approaches, such as increasing coverage options for families and small businesses and building on the Trump administration’s price transparency rules.
Albanese: Reforming How Government Pays Doctors
On Thursday, Joe will testify for the second time this year on the problems with how Medicare pays doctors. In 2015, Congress enacted the Medicare Access and CHIP Reauthorization Act (MACRA), which was Congress’s attempt to stop the practice of annual “doc fixes” that were needed to negate the physician payment cuts that would have resulted from letting the sustainable growth rate formula take effect. MACRA created two new payment options for doctors—the Merit-based Incentive Payment System (MIPS) and bonuses for participating in advanced alternative payment models (APMs)—and in Joe’s previous testimony, he explained how both suffer from serious flaws, including burdensome and often counterproductive government quality metrics. On the positive side, as Joe highlights in his new testimony, MACRA helped to control physician spending by slowing fee growth, and almost all physicians still accept Medicare payment rates. However, access to physician services remains a long-term concern for policymakers.
In tomorrow’s testimony, Joe focuses more on reforms and suggests that Congress should balance three goals: 1) controlling costs to patients and taxpayers, 2) maintaining long-term access to care for beneficiaries, and 3) addressing the distortions of Medicare fee-for-service (FFS) administrative price-setting. Joe’s testimony provides the necessary details, but here is the summary of his recommendations:
The best way to pursue these goals is to (1) offset increases in physician spending with other Part B savings, (2) pursue market-based pricing of physician services in Medicare, and (3) eliminate financial incentives for MIPS and advanced APM participation. Over the long run, the organic growth of Medicare Advantage will provide a more effective alternative to FFS since structural reforms across Medicare’s payment systems would otherwise be necessary.
CMMI Falls Flat
In both testimonies, Theo and Joe discuss how CMMI is Washington’s latest failure to concoct schemes that reduce Medicare spending. The Affordable Care Act created CMMI and provided a recurring $10 billion funding stream every 10 years. CMMI can waive a huge number of rules that govern Medicare and Medicaid without congressional approval and their decisions are not subject to administrative or judicial overview. When the ACA passed, CBO expected CMMI to significantly reduce Medicare spending. On its expected trajectory, it would have saved about $3 billion in its first decade, but it lost more than $5 billion.
CBO’s report demonstrates how CMMI has been an abject failure thus far, providing further evidence that Washington central planners cannot divine payment models or schemes that reduce the spending trajectory of Medicare. The vast majority of CMMI’s models have led to higher spending, and there have not been any quality improvements. In a National Review piece, Joe explains CBO’s updated analysis and how it could spur congressional action:
CBO’s previous methodology discouraged Congress from making any changes to CMMI. CBO scores are very influential in the legislative process; bills that increase deficits rightfully face more scrutiny. But this dynamic insulated CMMI from congressional accountability. Although CBO previously admitted that it had no basis for judging how untested models would impact cost or quality of care, its faith that CMMI’s process would produce savings “on average” meant that any attempt by Congress to delay or block individual models or to cut back on CMMI’s unique powers would also reduce savings (i.e., increase spending) on paper.
Thus, CBO’s methodology encouraged Congress to cede significant authority to CMMI — that is, to unelected government officials rather than voters’ elected representatives. This contradicts our Constitution’s requirement that legislation happen in the legislature.
In closing, I think it’s worth noting that Paragon is not yet two years old, and yet this week, we have two of our experts testifying before key congressional committees on crucial issues facing the country. Paragon’s mission is to improve Americans’ well-being by empowering patients and reforming government, and we welcome these opportunities to convey our research and analysis.
All the best,
Paragon Health Institute