The Daily Item, Sunbury, PA

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December 31, 2013

Medicare plays costly part in health pricing


"Our results indicate that the private sector will copy Medicare's pricing errors," Gottlieb said. "On the flip side, they would gain when Medicare payments better reflect the value of what is being delivered."

While that paper largely studied physician fees and outpatient services, other research published in May found that Medicare pricing for hospitals is similarly influential. The paper, by health care researcher Chapin White and published in Health Affairs, found that a 10 percent reduction in Medicare pricing yielded a 3 or 8 percent reduction in private prices, depending on the statistical method used.

Not surprisingly, given the importance of Medicare prices, Congress has struggled with the issue for years.

A new and untested approach known as the Independent Payment Advisory Board became law under the health-care law, creating a government panel to review Medicare costs. But one of the essential problems is that Medicare pricing so often becomes subject to political pressure.

"Go through every single payment system in Medicare and each one is highly political," Scully said. "I can tell you a war story about every one of them."

"When you are creating winners and losers, the losers will cry pretty loudly," said Stephen Zuckerman, a health economist at the Urban Institute.

In Congress, the pharmaceutical companies, doctors, hospital chains and medical device companies have donated more than $72 million to the current membership of three key health subcommittees, with about $42 million concentrated in support of a dozen of the most influential members, according to the Center for Responsive Politics, a nonprofit and nonpartisan research group.

"People can't not be affected by the money that comes in through campaign contributions," said Rep. Jim McDermott, D-Wash., who has long argued for reform of physician payments. "You know that at the end of the day, the donors are keeping score."

McDermott, however, believes the problems will eventually be addressed.

"Democracy is an evolutionary process," he said, "by which we figure out, 'This ain't working.' "

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