Baucus Bill Yeas and Nays

The Baucus healthcare proposal contains some laudable measures aimed at reforming the wasteful way that Medicare buys healthcare services. It ties more of these purchases to parameters that measure the quality of care being delivered, and not just its volume.

But Senate Finance Committee Chairman Max Baucus (D-MT) has left wide discretion for setting these measures, and coming up with the schemes for linking payments to them, mostly to the Centers for Medicare and Medicaid Services (CMS). He needs to more seriously question whether the agency is really suitable to the task.

Mr. Baucus seems to have his own doubts. Earlier this year, in a committee hearing, he wondered whether CMS "is up to the job" of modernizing the Medicare program. Mr. Baucus said some critics view the agency as "hidebound, not very creative, a crank-turning bunch of folks there." Ouch, that.

Mr. Baucus said some critics view the agency as "hidebound, not very creative, a crank-turning bunch of folks there."

Indeed, Mr. Baucus' original "option paper" for a "public" insurance option for the under-65 crowd was clear to hand management of the program to a new agency, and not CMS--its logical home. But when it came time to draft "America's Healthy Futures Act" expediency has prevailed over other virtue. It's conceptually and administratively easier to foist new tasks onto an existing Medicare program rather than create new systems, collaborations, and alliances to take on these roles.

The lack of medical resources and expertise at CMS is going to be most troubling when it comes to the agency's newly proposed mandates to develop criteria to measure the quality and value of medical care--and regulate doctors (and their pay) based on these parameters.

By 2015, physicians will see their income "modified" by "quality" measures that are to be established by 2012--primarily by CMS--with a requirement that the resulting criteria be merely "endorsed" by the non-profit, private consensus group, the National Quality Forum. In a later section of the Baucus Mark, CMS is given carte blanche to "innovate" new payment reforms to "slow the rate of Medicare cost growth." A new office inside CMS, sardonically named "The Innovation Center," would develop its own payment criteria.

Moreover, while the metrics are supposed to measure "quality," the payment schemes are based on the "value of care delivered." This incongruence gives CMS discretion to modify the quality measures according to Medicare's own design for incorporating cost as a criterion, and not merely the quality and effectiveness of care. Ironically, Medicare isn't forced to furnish physicians with any information on how it judges their "quality" before the agency is required to start paying doctors according to these measures. Presumably, providers will know how Medicare has rated their care when the checks get cut--or not.

In implementing many of these payment reforms, Mr. Baucus is borrowing from practices already in wide use in the private sector. Health plans, and institutions like the Geisinger Clinic, have pioneered programs to tie financial incentives to improvements in clinical outcomes. The difference is that these private systems have built up substantial expertise in defining these parameters and measuring care. The number of medical experts they have working at these tasks is, literally, orders of magnitude greater than Medicare.

In fairness, CMS was never incepted as a clinical organization. It was a processor of payment claims. It has gradually been given the mandate to become a public health organization, but never the resources to carry out that task. Now it's about to see its mission--and its role in directing medical care through its payment tools--expand dramatically.

There was another way to draft this legislation. All of these tasks could have been left to private organizations, consensus groups, and medicine’s professional societies. In the haste to implement these measures, tasks were thrust on a poorly prepared Medicare program.

More than anything, the Baucus plan is about exerting control over the delivery of medical care as a way to control cost. CMS is anointed as the instrument of that coercion.

Scott Gottlieb, M.D., is a resident fellow at AEI.

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