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Last Minute Deal On Medicare Highlights Dilemma On Curbing Costs

Mar 23, 2010

A last-minute deal to win votes for the health care overhaul underscores the political dilemma for Congress as it tries to reduce health care costs.

As part of a manager’s amendment to the bill, House Speaker Nancy Pelosi agreed to increase Medicare payments by $800 million over the next two years to hospitals and physicians in Iowa, Wisconsin, Oregon and other states that argue they are low-cost, efficient providers of medical care.

The agreement also includes a commitment from Health and Human Services Secretary Kathleen Sebelius to commission two studies by the Institute of Medicine (IOM) on geographic payment disparities for doctors and hospitals and to implement recommendations from those studies on how to improve health care quality and reduce its cost. Sebelius also has promised to convene a national summit this year on geographic inequity and access to care.

Proponents of the additional funding say it is simply a matter of fairness: more efficient, low-cost Medicare providers should not get paid less than providers who are not as efficient and cost the government more.

The increased payments are “just considered as a bridge until we get to the new reimbursement formula, until the IOM is able to complete their studies and we’re able to get a new reimbursement formula that will be incentivizing high-quality outcomes,” said Rep. Ron Kind, D-Wis.

The Democrats’ health care bill would decrease Medicare spending by more than $400 billion over the decade and establish an independent commission to make recommendations on how to reduce Medicare spending.

Some health care analysts questioned whether increasing Medicare reimbursement rates as Congress tries to overhaul the program was the right choice.

Stephen Zuckerman, a senior fellow and health economist at the Urban Institute, said he was surprised to see the additional funding for low-cost hospitals since hospitals in the Midwest do not have "access issues" and the bill was trying to reduce Medicare spending.

"The question is whether low-cost hospitals should be rewarded with higher payments or whether high cost hospitals should be penalized with lower payments," Zuckerman said.

KHN staff writer Phil Galewitz contributed to this report.

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