News Break: How the White House Hopes to Control Health Care Costs

By Ezra Klein  |  June 3, 2009

You've heard the line that "entitlement reform is health reform." Yesterday, at a meeting between Barack Obama and Senate Democrats from the Finance and HELP committees, that line grew up and graduated into something altogether sturdier: A policy. Senate sources confirm that the president argued in favor of a genuinely major Medicare reform -- a reform that could make Medicare the nation's most important laboratory for health care reforms.

You probably haven't heard of MedPAC. Most people haven't. It stands for The Medicare Payment Advisory Commission and it's an independent congressional agency formed in 1997 to advise the Congress on matters relating to Medicare. The commission is staffed by experts who are appointed for three-year terms, and its existence is due to a simple insight: Medicare payment policy is too technical for the Congress. There aren't five senators with an informed opinion on the "equipment use standard" for imaging machines, much less 50, and much less 100.

Every year, MedPAC releases a "report to the Congress on Medicare payment policy." The report contains acres of analysis (this year's "assessing payment adequacy and updating payments in fee-for-service Medicare" was particularly thrilling) and a final chapter on recommendations. The recommendations tend to be smart, aggressive, reforms. The sort of reforms experts agree are needed, but interest groups effortlessly stymie. The recommendations don't, in other words, matter. None of it does, really. The report sits on a shelf.

But what if it didn't? What if MedPAC had power?

That's what the White House wants. There are, I'm told, two policies under consideration. The first is a version of Senator Jay Rockefeller's MedPAC Reform Act. This legislation would move MedPAC into the executive branch. The commissioners would be approved by Congress and appointed for six-year terms. Beyond that, it would largely be an autonomous agency, able to set Medicare payment rates, conduct trial programs, and fund policy initiatives.

The theory is that it would act as a Federal Reserve for Medicare. "Congress has proven itself to be inefficient and inconsistent in making decisions about provider reimbursement under Medicare," said Rockefeller. "Congress should leave the reimbursement rules to the independent health care experts.”

That's the plan Obama spoke of favorably in yesterday's meeting. But what hasn't been reported is that senior administration officials are also considering another variant: This plan would package MedPAC's yearly recommendation and fast track them through Congress for a simple, up-or-down vote. No filibuster. No changes to the package of recommendations. Health reform, under this scenario, would become a yearly legislative project.

And that's how some in the White House would prefer it. The health system changes too quickly for Congress to address through massive, infrequent, efforts at total reform. New technologies and new care structures create new problems. A health care reform package signed in 2009 might miss some real deficiencies, or real opportunities, that present themselves in 2012. A health reform process that recognizes that fact is a health reform process that is continual, rather than episodic.

But the reason health reform is so infrequent is that it's structurally difficult. Small tweaks are too technically complex for Congress to easily conduct and so are dominated by lobbyists. Large reforms attract broad interest but are impeded by polarization and the threat of the filibuster. The MedPAC changes under discussion are, in other words, nothing less than a new process for health care cost reforms. They empower experts who won't be intimidated by the intricacy of the issues and sidestep the filibuster's ability to halt change in its tracks.

MedPAC, of course, is restricted to Medicare. But there's little doubt that where Medicare leads, the health care industry follows. Private insurers frequently set their prices in relation to Medicare's payment rates. Hospitals are sufficiently dependent on Medicare that a reform instituted by the entitlement program becomes a de facto change for the whole institution, and thus all patients. A process that empowers Medicare to aggressively and fluidly reform itself would end up dramatically changing the face of American health care in general.

Thus far, we've heard a lot of talk about cost control. But this is the first time, at least to my mind, that we've seen anything that actually looks able to deliver on controlling costs. To flip the old line, this is where health care reform becomes entitlements reform.