As baby boomers begin to retire, the nation's Medicare program will soon feel the effect of thousands of new beneficiaries seeking health care. The healthcare industry also is rewarding consumers for practicing preventive care and providers for practicing care management. Despite this trend, Medicare continues to pay for healthcare delivery and not for preventive measures. Glenn Hackbarth, JD, chairman of the Medicare Payment Advisory Commission (MedPAC), says the concept of care coordination is being considered for Medicare, but some important details need to be resolved before this concept can be implemented.

Hackbarth recently shared his thoughts about the cost-effectiveness of preventive care initiatives and other issues related to Medicare with hfm.

Q. Regarding the process of public discussion and receiving public input on the issues MedPAC takes up, do you think MedPAC will make more use of the Internet and advances in IT, such as webcasts, podcasts, and online surveys of providers and the public, to broaden its reach? With respect to informing the public, we've often wanted to be able to see the presentations MedPAC staff send the commissioners prior to the public meetings; are there any plans to make those available to the public on the web site to better inform us of the issues? Our membership is from all care settings; is there anything they can do to inform you of important issues they see developing?

A. MedPAC makes extensive use of the Internet. Our web site,, provides access to MedPAC reports, testimony, comment letters on proposed regulations, and meeting transcripts, as well as descriptive information about Medicare. We have no plans for webcasts, podcasts, or online surveys. The materials sent to commissioners prior to the meetings are not distributed because they might confuse more than enlighten. The materials are, in essence, drafts that are constantly changing in response to further research and commissioner comments. We would run the risk of circulating thousands of copies of materials that, by their nature, become quickly outdated.

The best way for HFMA members to provide input to MedPAC is through MedPAC's professional staff in Washington, D.C. The MedPAC staff make an extraordinary effort to gather information from anyone and everyone with an interest in Medicare. Because the professional staff is small in number, they cannot meet individually with everyone, so wherever possible, it is best to communicate through association representatives.

Q. Is it law or regulation that says changes to provider payments generally have to be "budget neutral," requiring increased spending in one area to be balanced with reductions in others? Do you feel budget neutrality has kept the program on an even keel or prevented badly needed changes?

A. There is not a Medicare-wide requirement that changes be budget neutral. Because policymakers are increasingly concerned about Medicare's long-run financial challenges, however, they often seek "offsets" for proposed increases in Medicare spending. From time to time, the Congress has also established "pay-go" rules for the entire budget process. Such rules require offsets for new spending, but those rules are not Medicare-specific. Within particular Medicare payment systems-for example, the inpatient prospective payment system-certain types of changes must be budget neutral. An example would be changes in DRG weights. This is a matter of design, not just law. Case-mix adjustments are systems of relative weights.

Q. One of the complaints with Medicare has been that it pays only for care delivered, and much could be saved by doing more to prevent the expenditures. We seem to see a trend toward more preventive care and care management. Does MedPAC support such initiatives?

A. It is true that Medicare does not pay for some activities that may reduce costs and improve quality. For example, there is much discussion of the idea that patients, especially those with multiple chronic illnesses, should have a "medical home." Such a "home" would be a physician, supported by nurses and other staff, who assumes ongoing responsibility for coordinating care and patient education. Medicare pays poorly, or not at all, for many activities involved in such care coordination. The concept of paying for care coordination seems compelling, but important issues must be resolved in order to convert the concept into action. For example, how would a patient designate a "home," and does that designation affect the patient's ability to self-refer to specialists? If Medicare makes a lump-sum payment for "care coordination," what exactly is it buying-and how does it verify that care coordination is actually being delivered?

Q. One of the charts of this year's data book shows the hospital Medicare margins trending downward, from a positive 2.4 percent in 2002 to a negative 3.3 percent in 2005. HFMA has been promoting the adoption of rational pricing and transparency, and in those discussions, someone always says that the federal government could help that process along dramatically if the Medicare program (as well as Medicaid) paid its fair share. Where does the commission come down on that issue?

A. The law creating MedPAC requires us to recommend payment levels that cover the costs of "efficient providers." In competitive markets-the sort of markets faced by most taxpayers, both individual and corporate-there is relentless, unforgiving downward pressure on prices, especially in this era of globalization. Healthcare providers should experience similar pressure to improve efficiency under Medicare's administered-price systems. I am not concerned so much about Medicare "cost-shifting" to private payers as I am about lax, overly generous payment policies in the private sector contributing to rising costs for Medicare. With the first "baby boomers" now reaching retirement age, this is a huge problem.

Q. Another of the charts, this one on urban and rural hospital margins, seems to indicate that the rural hospital margins, while still negative, have turned upward. That seems to bode well for access in rural America. Do you think cost-based payment for critical access hospitals is driving that trend and helps to ensure access to care?

A. Medicare margins for rural hospitals covered by Medicare's prospective payment system have improved relative to those for urban hospitals. This is the result of a series of policy changes affecting the base payment, wage adjustments, disproportionate share adjustments, and other aspects of the payment system. In addition, a large number of small rural hospitals have been designated "critical access" hospitals and removed entirely from the prospective payment system; they are paid on a cost-plus basis.

Publication Date: Tuesday, January 01, 2008

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