The key to Obama's thinking on the structural deficit, again, is bending the health care cost curve. Two stories in today's Times point toward how that may be done over time -- and why Obama fought so hard to retain a strong Independent Payment Advisory Board (IPAB) for Medicare in the PPACA, along with a host of pilot programs to test new payment systems.
First, David Leonhardt spotlights a not-so-modest proposal:
In the new issue of the journal Health Affairs, two doctors [Dr. Bach and Dr. Pearson], both former Medicare officials, have laid out a plan to do so. It would give expensive new treatments three years to prove that they worked better than cheaper treatments, or their reimbursement rates would be cut to that of the cheaper treatments.
To illustrate the need and possible workings of such a plan, Leonhardt returns to a topic he covered in depth during the health care debate (cited by Bach and Pearson): treatment for prostate cancer. Briefly, three forms of radiation are now available, costing, respectively, $10,000, $42,000, and $50,000 on average (naturally, the oldest is the cheapest; the newest, the most expensive, requiring massive new equipment investments from practitioners). There is no evidence that any of these treatments is more effective than the others. Medicare pays for all three without distinction. Providers' profit margins, needless to say, are much higher on the more expensive treatment. Under the Bach-Pearson proposal, if the newer treatments were not proved more effective within the three years, Medicare would only reimburse $10,000 for each treatment.
Such proposals might ultimately prove to be within the power of IPAB to implement, though there are severe constraints. James C. Capretta of the Ethics and Public Policy Center explains how IPAB works:
To hit its budgetary targets, the IPAB is strictly limited in what it can recommend and implement. It can’t change cost-sharing for covered Medicare services. Indeed, it can’t change the nature of the Medicare entitlement at all, or any aspect of the beneficiary’s relationship to the program. The only thing it can do is cut Medicare payment rates for those providing services to the beneficiaries.
This wasn’t an accident. It reflects the cost-control vision of those who wrote the bill. They believe the way to cut health care costs is with stronger federal payment controls. They envision the IPAB coming up with new payment models which will push hospitals and physicians to emulate today’s most efficient delivery models. Call it “government-driven managed care.”
