Health & Science

Medicare major stumbling block for state leaders

WASHINGTON - As leaders in Congress counted votes in the rush to recess this month, Washington Rep. Norm Dicks stood up at a Democratic Caucus meeting and gave a warning to House Speaker Nancy Pelosi: She had better not take for granted his support unless a health care bill included a major overhaul in the Medicare funding formula.

Pelosi got the message. Within hours of the caucus meeting about 10 days ago, she convened a group of 15 to 20 lawmakers, including Dicks, to seek a solution.

The result was a compromise that Dicks and other Washington leaders support, but that some of their Democratic colleagues - including Rep. Adam Smith, D-Tacoma - do not.

As much as they all want to get behind a reform package, the Medicare formula issue is a major stumbling block.

Medicare reimbursement is an arcane topic for many people, but an important one in Washington. For years doctors, hospitals and other providers in Washington have been penalized because the state has one of the more efficient health care systems in the nation.

Reimbursement rates in such states as Florida, with a less efficient health care system, can be twice as high. Because of that, a growing number of doctors in Washington are reluctant to accept Medicare patients or even set up practice. The problem can be especially pronounced in rural areas.

With conservative Democrats already threatening to derail health care reform, Pelosi knew the support of House members like Dicks was critical.

Eventually, a small group working late into the night reached an agreement calling for a year-long study of reimbursement rates. The study is to be followed by a set of rate-adjustment recommendations given to the secretary of the Department of Health and Human Services.

Pelosi - along with the chairmen of the House Energy and Commerce and Ways and Means committees, which have jurisdiction over health care - promised the agreement would be included in any final bill.

"We got a really good reform package," Dicks said.

Others are skeptical.

"I'm not happy," Smith said. "There is nothing binding about this."

And even as the House recessed earlier this month without taking up a bill, representatives from states that benefit from high Medicare reimbursement rates were having second thoughts about their earlier decision to sign off on the agreement.

"We are getting some buyers' remorse from the other side," said Washington Rep. Jay Inslee, D- Bainbridge Island, a member of the Energy and Commerce Committee. "But Pelosi said she will stick with the agreement and I have strong indications there will be no changes."

Medicare reimbursement rates in Washington state are 11 percent below the national average, according to one congressional estimate. Other states with the same problem include Oregon, Idaho, Montana, Iowa, Wisconsin, North Dakota, South Dakota, Maine, Vermont and Virginia.

On the other side are states such as Florida, whose reimbursement rate is 13 percent above the national average. Other states with higher-than-average rates include Texas, California, Nevada, Louisiana, New Mexico and Maryland.

"There is no way to justify this disparity," said Inslee, who was part of the group that negotiated the reimbursement rate agreement.

With $1 in every $5 spent on health care nationwide coming through the Medicare program, its reimbursement rates have a major impact on health care costs.

"Medicare drives all health care costs, including private insurance rates," said Sen. Maria Cantwell, D-Wash., who along with Washington's other senator, Democrat Patty Murray, have lobbied to include a fix to the reimbursement rate problem in a Senate reform bill.

Under the House agreement, the Institute of Medicine, which is part of the National Academy of Sciences, will conduct a detailed study of reimbursement rates and issue recommendations to make them more fair.

The secretary of Health and Human Services will immediately implement a payment rate that takes into account the institute's recommendations. Congress may veto the new payment rate but not make its own adjustments.

The agreement also provides $4 billion to pay for the rate adjustments and calls for a broader study on changing the Medicare system so it rewards value and quality rather than just volume of care.

Gov. Chris Gregoire has also insisted the reimbursement rate problem needed to be addressed in any health care reform legislation. She backs the House agreement.

"She is absolutely supportive" said Mark Rupp. director of the governor's Washington, D.C., office.

But Smith said the Health and Human Services secretary could just ignore any reform recommendations or make only minor changes.

"The secretary doesn't have to do anything," Smith said. "That's the flaw in this. The whole system needs to be changed to get costs under control."

Inslee acknowledged Smith's concerns.

"There are no absolute guarantees in this process," he said, but added the agreement could be a "real game changer" when it comes to reimbursement rates.

Other representatives were cautious in their comments.

"Probably it will help," said Rep. Brian Baird, D-Vancouver. "It's a bit of a roll of the dice. But it's not just about throwing more money at it; we need fundamental change."

Rep. Rick Larsen, D-Lake Stevens, said "until we see the final language and it's in the bill, I don't want to comment. But the direction it is headed is good for Washington state."

In the Senate, Cantwell is a member of the Senate Finance Committee, which has jurisdiction over the health care bill and the reimbursement rates. Cantwell has lobbied the chairman, Montana Sen. Max Baucus, but he has been huddled behind closed doors with Republicans trying to reach agreement on a bipartisan health care bill.

Cantwell is not a huge fan of the House agreement on Medicare reimbursement rates.

"This doesn't go far enough," the senator said. "It's like a half step, when we need to take a big step."

If a highly efficient system like Washington's was adopted nationwide, Cantwell said it could save $55 billion.

She said she has told the White House and Baucus that she won't support health care legislation that fails to include a comprehensive fix to Medicare reimbursement rate problems.

"Right now Northwest residents are subsidizing health care nationwide," Cantwell said. "That has to stop."

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