Deficit commission: Reform Medicare payments, long-term care insurance

Calling federal healthcare spending “our single largest fiscal challenge over the long-run,” President Obama’s deficit commission’s final report urged for immediate reforms to the formula for physician payments and a long-term care insurance program created earlier this year.

The report, released Wednesday morning, recommended freezing the sustainable growth rate (SGR), which determines doctors’ Medicare pay, through 2013 and providing a 1 percent cut in 2014. It further recommended that the Centers for Medicare and Medicaid Services develop an improved payment formula that encourages care coordination and pays doctors based on quality, instead of quantity, of services. The recommendations come as the healthcare industry urges Congress to delay a scheduled 23 percent cut in Medicare pay until at least the end of 2011.

The commission also recommended repealing or reforming the Community Living Assistance Services and Supports (CLASS) Act, established in healthcare reform to provide long-term care insurance through employers. Although the law said the program was sustainable for 75 years, the deficit commission said it is viewed as “financially unsound.” However, it noted that repealing the CLASS Act will increase the deficit over the next decade because the program’s premiums are collected up front and benefits are not paid out for five years.

To offset the costs of the SGR fix and lost receipts from the first decade of the CLASS Act, the commission identified $400 billion in savings from 2012 to 2020 through numerous actions, including: increasing funding and authority to combat Medicare fraud; reforming Medicare cost-sharing rules; extending Medicaid drug rebate to dual eligibles in Part D; reducing excess payments to hospitals for medical education; accelerating home health savings in healthcare reform; reforming medical malpractice and more.

The commission set a long-term goal for establishing a global budget for total healthcare spending that limits growth to GDP plus 1 percent starting in 2020.

The commission also recommended expanding the powers of the controversial Independent Payment Advisory Board (IPAB), which was created by healthcare reform. According to the recommendations, the IPAB should be allowed to make recommendations for: cost-sharing and benefit design and to look beyond Medicare; adjusting the federal-state responsibility for Medicaid; establishing a robust public option in the healthcare exchanges; raising the Medicare retirement age; and moving toward some type of all-payer system. Republicans have promised an effort to repeal the IPAB, which they criticize as providing too much power to “unelected, unaccountable bureaucrats.”

The deficit commission chairmen have already acknowledged they might not have the votes to support the final draft. A vote is expected Friday.