Unbiased Analysis of Today's Healthcare Issues

Medicare Oversight

Written By: Jason Shafrin - Dec• 14•09

One problem with any government-run health insurance program is that politicians have an incentive to make decisions that are attractive to small, wealthy, cohesive constituencies, rather than for the greater good.  For instance, although CMS administrator tried to stem the tide of rising physician costs, Congress has repeatedly reinstated the physician raises.  The following three examples from Pham, Ginsburg and Verdier (2009) also

  • “It is…appropriate for political debate to drive major policy directions in Medicare—such as when hospital prospective payment replaced cost reimbursement. But constituencies such as particular subgroups of hospitals can exert disproportionate influence, in turn spurring detailed legislation or rule making that is inconsistent with broader policy goals.”
  • “Congress has legislated specific decisions that favor narrow groups of providers or suppliers, such as which area’s geographic adjuster should be used for a given hospital.”
  • “The results of a demonstration convinced CMS that competitive bidding for suppliers of durable medical equipment would generate substantial savings without affecting beneficiaries’ access. Congress initially agreed, authorizing implementation of a competitive bidding program for durable medical equipment in 2003. But when suppliers protested because they anticipated lower payments, Congress postponed the program.”

Is there a solution?  Pham and co-authors believe so, but I am doubtful they will work.  They suggest a Medicare payment policy board which will remove payment from Congressional oversight.  Instead, it would be an independent commission like the FTC.  However, a board is not the most efficient way to run an organization.  The authors even state that “agencies headed by an individual rather than boards or commissions tend to general more cohesive policies…”  Further, the authors admit that establishing a payment policy board will not preclude political interference.

The other option Pham and co-authors suggest is to create a cabinet position for CMS and MedPAC review of payment legislation. However, interest groups are almost as likely to have an impact in the executive branch as in the legislative.  Public pressure to reduce cost is general and not terribly motivated by any issue.  Lobbying efforts by specialist physician groups, pharmaceutical manufacturers, and biotechnology firms are strong and difficult to avoid in any branch of government.

Although the British government has NICE, recreating this in the U.S. will be difficult.  The history of the Agency for Health Care Policy and Research (AHCPR) proves this.  Further, if the findings of an objective scientific finding concerning mammograms was much with such political heat, there will likely be similar backlash concerning payment modifications made by any NICE-style organization.  In short, any government-run healthcare system will have significant political “meddling” in payment decisions.

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