Medicare rate setter could save $2 bln by 2019 - CBO

  • World
  • Sunday, 26 Jul 2009

WASHINGTON (Reuters) - A White House proposal to establish an independent council to set Medicare fees and other changes to the government health program for the elderly could save up to $2 billion from 2016 through 2019, the Congressional Budget Office said on Saturday.

The nonpartisan CBO said, however, that the plan, if added to a sweeping healthcare reform bill, could also easily produce no additional savings because it lacks specific goals and proposes no "fall-back" mechanism to ensure cost-reduction objectives are met.

"The estimated savings of $2 billion over the latter half of the 2010-2019 period represent a probabilistic assessment of a range of possible outcomes," CBO director Douglas Elmendorf wrote in a letter to House of Representatives Majority Leader Steny Hoyer and other leaders in Congress, which is considering legislation to overhaul the $2.5 trillion healthcare industry.

President Barack Obama and his Democratic allies have seized upon potential savings within the Medicare program in a bid to counter Republicans and fiscally conservative Democrats who say the reforms aimed at providing more health care coverage to Americans are too costly.

Elmendorf said it was unlikely an independent rate-setting council appointed by Obama would recommend actions that add "substantial additional savings" to those anticipated under a healthcare reform bill in Congress.

He said the council might be weighted toward medical providers who might not be inclined to recommend deeper cuts in provider payments. Further savings also may be limited without more substantial changes to the structure of payments and incentives to medical providers -- something that would require politically difficult legislation.

Rep. Pete Stark, a critic of Obama's Medicare commission idea who chairs the House Ways and Means Health Subcommittee, said the CBO report showed little added benefit from creating an independent commission.

"CBO states HR 3200, the House health reform bill, controls long-term costs in the health care delivery system. CBO further contends that an independent commission for Medicare-IMAC would have a 'high probability' that there would be no long term savings," the California Democrat said in a statement.

The federal Medicare program insures some 44 million elderly and disabled Americans at an annual cost of about $450 billion, almost one-fifth of total U.S. healthcare spending.

Elmendorf in his letter said the plan also needs a fall-back mechanism to ensure some minimum spending cuts are achieved. That mechanism could include an across-the-board cut in payments if goals for cost reduction are not met, he said.

More substantial savings could be achieved if that and other enhancements were approved, including the setting of specific, feasible goals and giving the president's council clear authority to recommend broad changes to coverage, benefit design and payment systems.

Those savings could reach "several percent" of annual Medicare spending in the years beyond 2019 -- a level that would reduce Medicare outlays by tens of billions of dollars annually. But by that time, the original Obama health care plan would already be kicking in savings of tens of billions of dollars, Elmendorf noted.

"Substantial additional savings from an Independent Medicare Advisory Council-type proposal would probably require significant changes in coverage, benefit design, and payment and delivery systems aimed at reducing the quantity and intensity of services provided," Elmendorf wrote.

His letter noted that total federal resources devoted to health care programs would still increase because of provisions in the Obama plan to make health insurance available to more people.

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