Outside editorial: Cutting the fat in Medicare reform

Posted: Wednesday, July 09, 2008

In Spain, Pamplona has its annual running of the bulls. Sweetwater, Texas, has its Rattlesnake Roundup. And Washington has the annual farce of the physicians' Medicare fee cuts.

Not familiar with that last one? It plays out when an increase in spending on Medicare expenses triggers a statutory requirement to cut the amount doctors are compensated for the care they provide to elderly and disabled Medicare patients. Which is to say, it happens just about every year, including this one.

Congress must like the idea of cutting fees. It has written the requirement into a series of budget and Medicare bills over the past 10 years. Most recently, such a provision was included in the 2003 law that created a Medicare prescription drug benefit.

We've never believed that cutting the fees paid to physicians is a legitimate way to reduce Medicare costs significantly - not when there are many other opportunities for saving that go unexplored.

And we're not convinced that Congress really believes that's the way to cut Medicare costs, either. Our skepticism is well-founded: As often as the requirement to cut fees has been triggered, it has been overridden - by Congress.

There have been some interesting plot twists in this year's political theater. For example, instead of cutting physician fees, the House voted to cut the excessive payments made to private insurance companies that sell a type of managed care called Medicare Advantage plans.

Those plans cover about one of every five Medicare enrollees. And insurance companies get paid an average of about 13 percent more per enrollee than traditional Medicare would cost. At the high end of the range, the most wasteful plans cost about 17 percent more per enrollee. Cutting these overpayments would save about $54 billion over five years.

Yet President George W. Bush threatened to veto the proposal. Before he would have had to make good on his threat, Senate Republicans, who receive generous support from insurance industry lobbyists, used parliamentary maneuvers to kill the bill. In the meantime, Mr. Bush postponed the enforcement of any cuts in Medicare fee payments to physicians.

Republicans aren't the only ones with lobbyist friends, however. The Democratic House bill that would have postponed the physician fee cuts also would have pushed back competitive bidding on medical equipment such as oxygen tanks, power wheelchairs and diabetic testing strips, as well as competitive bidding for medical laboratory tests.

Making these products and services subject to a bidding process could save an average of 26 percent on what the government now pays for them, according to estimates earlier this year from the Government Accountability Office. That's how much it saved in 10 large cities during a test run.

We're going to hear a lot about health care reform in this year's presidential campaign. But any serious efforts to enact real reforms will have to deal with systematic overpayments to politically powerful groups, including the insurance companies and medical equipment manufacturing industries.

It turns out that giving political leaders control over Medicare's operational costs - not unlike running with bulls or rounding up rattlesnakes - is a terrible way to handle the problem.

But it is, at least, an amusing spectacle during an otherwise slow time of year.

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