The work of the Medicare Payment Advisory Commission is always worth reading carefully. (Medpac website) It is one of the government groups that seems to do its job with a high degree of professionalism. MEDPAC’s reports contain useful data and it often provides unvarnished analysis and insight into America’s health care cost issues. MEDPAC’s primary mission is to provide Congress and the Administration with information and recommendations regarding the operation of the Medicare program. It has spent a lot of time looking at reimbursement issues and puts out an annual report with a recommendation for Congress and the Center for Medicare Services on payments to providers.
This year’s report with recommendations on payments in 2010, and the accompanying testimony to Congress are interesting reads. MEDPAC, in relatively restrained fashion, sets forth the dire financial situation for the Medicare trust funds and the increase in taxation or beneficiary premiums that would be required if spending continues along its present path. The Commission then sets out payment recommendations for specific groups of providers. One of the most important points made by the reports and testimony is that we have basically gotten no productivity gains in health care, in sharp contrast to most sectors of our economy. MEDPAC suggests that it is important to keep providers under financial pressure to give them an incentive to find ways to cut costs and be more productive.
MedPac supports this thesis with data showing that hospitals that are under pressure, defined as having low Medicare margins, tend to restrain their costs of providing care. High margin hospitals have higher costs. The Commission also identified a subset of hospitals that have low costs and much better than average performance on quality measures. These hospitals also made a small amount of money on Medicare patients. The MEDPAC reports and analysis demonstrate once again that it is possible to provide care in an efficient, yet high quality manner. In working on health reform, Congress needs to ensure that it includes some combination of positive and negative incentives to move more hospitals and physicians in the right direction.