I’ve enthusiastically urged the new bipartisan super committee established by the debt ceiling agreement to consider delivery system and payment reforms in its health care cuts, while accepting the likelihood that it will likely propose a series of reimbursement cuts to providers and privatization schemes that will only shift the costs of health care to beneficiaries. The Incidental Economist’s Austin Frakt offers these nine sensible proposals:
1. Competitive bidding, also known as competitive pricing. This idea really puts the market to work to buy Medicare benefits for the lowest possible price on a market-by-market basis. Participants can be public and private entities. It piggybacks on the exiting, hybrid structure of Medicare (FFS Medicare + Medicare Advantage) and makes all participating plans compete directly in a way they never have. Scholars have estimated the savings to be 8% of Medicare spending. I’ve written a lot about this elsewhere. Perhaps this post is the best place to start.
2. Competitive bidding can be put to work for durable medical equipment too. See the work of Peter Crampton.
3. Part D formulary design and drug pricing. Did you know the VA buys drugs for 40% less than Medicare? True! That alone suggests Medicare could spend a lot less on drugs. There are many possible Part D reforms that would lower program spending. Kevin Outterson wrote about some. For more about what it would take and mean to make Medicare’s drug benefit more like the VA’s see my post, which links to my paper with Steve Pizer and Roger Feldman.
4. Reference pricing. This idea came to me via David Leonhardt and Peter Orszag (smart guys, by the way; you should talk to them). The basic idea is that Medicare should only spend an amount on therapy for a condition equal to the lowest cost, effective one (that’s the “reference price”). If individuals want more costly therapies that are no more effective, they should pay the difference out of pocket. There’s more to this. See this prior post and related links therein.
5. There are lots of things Medicare shouldn’t even be paying for at all because they don’t work. See Rita Redberg’s NY Times op-ed on this.
6. Support comparative effectiveness research so we can learn more about which therapies are most effective. There is too much we don’t know and it is costing us.
7. Let ACOs be tested. We don’t know if they’ll work, but they’re worth a try.
8. Support the IPAB. Isn’t it obvious by now that Congress itself can’t control Medicare costs?
9. Consider all-payer rate setting. More on that here. Perhaps this post is a good starting point.
Meanwhile, I’m wondering how long it will take before Republicans start pressuring McConnell and Boehner to only appoint members who publicly commit to defunding the Affordable Care Act, ensuring — yet again — that the committee won’t produce a unified plan and triggering up to 2 percent in cuts to providers participating in Medicare. In that case, all of these recommendations are for naught.