Obama Medicare Panel in Health Law Targets Costs, Spurs Lawmaker Backlash

Many Democrats and Republicans agree on one aspect of President Barack Obama’s health-care overhaul: They despise the Medicare payment commission the law will create.

The White House overcame objections from allies in Congress, including House Speaker Nancy Pelosi, to include provisions taking away part of Congress’s ability to set Medicare policies and handing it to a board of outside experts. That upset lobbyists for doctors, drugmakers and the elderly, as well as lawmakers, and some are vowing to press for changes.

The board, a priority of White House Budget Director Peter Orszag, is designed to force spending cuts in the medical insurance program for the elderly, which serves more than 45 million Americans and is among the main drivers of the federal deficit. Orszag called the board’s creation Congress’s “single- biggest yielding of power to an independent entity since the creation of the Federal Reserve.”

In an interview, he said it would amount to a “huge change in how Medicare policy is set -- for the better.”

Orszag and other board backers view it as setting in motion a sustained effort to rein in Medicare’s costs. Rising health- care costs are the biggest threat to the government’s long-term financial standing with spending for Medicare and Medicaid, which serves the poor, projected to grow by 7 percent per year over the next decade, according to the Congressional Budget Office.

Lawmaker Concerns

What concerns lawmakers, though, is the prospect of losing their say-so in decisions on Medicare’s operation. The board plan was opposed by members of Congress from across the political spectrum who rarely find common cause -- such as Republican Senator Jon Kyl of Arizona and Democratic Representative Henry Waxman of California.

House Ways and Means Health Subcommittee Chairman Pete Stark, a California Democrat, said the board would have “unprecedented power to make sweeping changes” through a procedure that would “virtually lock Congress out of the process of making changes of Medicare.”

“I certainly do not intend to acquiesce to an independent body,” said Representative Richard Neal, a Massachusetts Democrat who sits on the House Ways and Means Committee. “We will revisit this.”

15 Members

The plan would go beyond the Medicare Payment Advisory Commission, known as MedPac, created a decade ago to offer Congress non-binding suggestions on cutting the program. The new board would have 15 members chosen by the administration and confirmed by the Senate to six-year terms. The appointees must include those “with national recognition for their expertise in health finance and economics,” as well as health-care providers and representatives of consumers and the elderly.

The board is to devise a plan for program cuts if Medicare costs exceed prescribed levels, with its proposals taking effect unless Congress and the White House agreed on alternatives that generate equivalent savings.

Some moves would be off limits for the board. It couldn’t reduce Medicare benefits or increase premiums. That would leave Medicare payments to doctors, pharmaceutical firms and insurance companies such as Humana Inc. participating in the Medicare Advantage program and nursing homes such as Kindred HealthCare, Inc. subject to the panel’s scalpel. Also targeted for payment cuts, beginning in 2020, would be hospitals.

Senator Jay Rockefeller, a West Virginia Democrat who sponsored the proposal, said it’s designed to take Medicare “out of the hands of lobbyists.” He said the idea ran into “a lot” of opposition from colleagues, “but I had the president on my side.”

‘Big Deal’

Former CBO Director Robert Reischauer said the new panel, formally known as the Independent Payment Advisory Board, is a “big deal” because it is “establishing an institution and a process which, with minor modifications, when the going gets tough, could generate substantial savings.”

He predicted that as lawmakers come under growing pressure to reduce the federal budget deficit, they will loosen restrictions on the board and increasingly farm out difficult decisions to it. “We’re going to get into an environment in which overall fiscal pressures require reductions in Medicare spending” and “some members of Congress might be thankful they won’t have blood on their hands.”

Interest Groups

Interest groups with reservations about the board include the American Medical Association. In a letter to lawmakers, it called for “substantial modifications” to what it termed the board’s “broad discretionary authority to make radical changes” to Medicare’s operation.

The Pharmaceutical Research and Manufacturers of America said the board’s “overly broad powers” could lead to “sweeping Medicare changes without action by Congress.”

The AARP is seeking to drop provisions preventing the panel’s decisions from being challenged in court, said Nora Super, a lobbyist for the Washington-based advocacy group for the elderly.

Unintended aid from Republican Senator Scott Brown of Massachusetts helped the administration push the plan through Congress. His victory in a special election forced Democrats to use the legislative procedure known as reconciliation to approve the health-care overhaul. And the rules for that process blocked efforts by House Democrats and others to remove the Medicare pay board from the larger bill.

To contact the reporter on this story: Brian Faler in Washington at   or bfaler@bloomberg.net

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