Today was the day that Medicare was supposed to take an axe to physicians' fees, slashing them by an average of 10.6 percent, across the board. But last week, in a stunning turn-around, the House voted 355 to 59 to block a pay cut for physicians. The Senate leadership reacted by reneging on a compromise that progressives had forged with conservatives. What ensured included name-calling and open threats on the Senate floor.

Reading about the battle, I couldn't help but think that HHS Secretary Mike Leavitt may be correct when he suggests that Medicare reform could require "a degree of bipartisan statesmanship" that a highly polarized Congress just doesn't posses. Health Care reform may be too hot to handle. Perhaps Congress should delegate the job to someone else.

But I'm getting ahead of my story. When Congress went home for a 7-day holiday recess last Friday, it still wasn't clear how the dispute will end. The Bush administration was forced to post-pone the physicians' pay cut until July 10, when Congress will be back in session.

The legislation at hand could have serious consequences for Medicare recipients The 10.6 percent hit is only the first in a series of planned cuts Medicare is scheduled to slice doctors' fees by another 5 percent January 1, 2009. Some physicians have threatened that they will stop taking Medicare patients

And the truth is that, in the face of a 15 per cent cut many primary care physicians might well decide to retire early. As I've explained in the past, primary care physicians, family doctors, gerontologists, and palliative care physicians who practice "thinking medicine" (listening to and talking to the patient) are not well-paid.

Yet, these are the very doctors who seniors need to co-ordinate their care.

Who to Cut: Physicians or Insurers?

At the same time, Medicare does needs to find a way to save money. It cannot keep shifting costs to seniors. A Nov/Dec 2007 article in Health Affairs reveals that between 1997 and 2003, the average Medicare beneficiary watched his out-of-pocket spending climb by 50 percent while median income for seniors rose by only 15 percent. By 2003 the average beneficiary was spending 15.5 percent of his or her income on health care--and 25 percent of beneficiaries were forced to lay out nearly 30 percent of their Social Security and other income to pay health care bills.

This is no longer your grandmother's Medicare. Yet Medicare is being as generous as it can be. The fact is that the program's financial outlook is "shaky" according to the Medicare Payment Advisory Committee's March 2008 report.

For example, MedPac notes, "expenditures for the Hospital Insurance (HI) trust fund, which funds inpatient stays and other post-acute care, began to exceed its annual income from taxes in 2004. Since then, HI has remained solvent due to existing trust fund balances and interest income--but the fund is projected to be exhausted in 2019."

Overall, MedPac reports, "The Medicare trustees and others warn of a serious mismatch between the benefits and payments the program currently provides and the financial resources available for the future."

Concerned, progressive legislators recognize the need to trim waste in the Medicare system. But rather than slashing physicians' fees, they would rather raise the money Medicare needs another way--by bringing an end to the private fee-for-service version of Medicare Advantage by 2011. This is what the House voted to do, 355 to 59. According to the Washington Post, the legislation could result in $14 billion less for insurers over five years, though an estimate by a conservative House Republican caucus put the tally at $47.5 billion over 11 years.

As you may remember, when Congress originally voted to let private insurers offer Medicare through a program called "Medicare Advantage," it agreed to pay insurers a huge premium --13 percent more than traditional Medicare lays out to provide care for similar seniors.

Then as the program unfolded, some insurers began setting up private fee-for-service (PFFS) versions of Medicare Advantage that do not rely on provider networks and are even more expensive, costing Medicare 17 percent more than it would spend if it provided the care directly.

In December, I wrote about these fee-for-service Medicare Advantage programs, explaining that they are not providing the quality of care that the Medicare Payment Advisory Commission (MedPac) had envisioned. When the panel reviewed data on quality, MedPAC Commissioner Jack C. Ebeler called it "disappointing."

"I'm struggling to get to 'disappointed" said MedPac chairman Glen Hackbarth. "I'm more depressed."

The problem is that while the fee-for-service Medicare advantage plans are becoming more popular than plans that use networks, doctors providing the services are not co-ordinating care. "I feel like we're going backward,'" said Hackbarth.

"Since PFFS was only supposed to be a transitional product to real network plans when it was first created in 2003, it's hardly seems unreasonable," to suggest that insurers phase it out by 2011, Laszewski observes.

But insurers didn't see it that way. Nor did President Bush, who made it clear that he would veto any legislation that squeezed insurers.

In response, the progressive Senators caved, and the Senate Finance Committee worked out a bi-partisan compromise that would freeze 2009 physicians payments and forget about making any changes to Medicare Advantage. "Everyone was ready to be happy with that--Democrats and Republicans--and go home for the week-long holiday recess," reported Robert Laszewski , one of the most astute observers of health care politics in Washington, on Health Care Policy and Market Place Review .

The End of a Bi-Partisan Compromise

Until last Tuesday, when the Senate saw the House vote 355 to 59 to save the physicians, and throw the insurers under the bus. Many thought this could never happen.

After all, Medicare Advantage insurers have been very successful in marketing their plans--even if they're not as good at delivering the promised care. By signing up so many seniors, they created a strong group with a vested interested in giving the insurers as much money as they demand. In the past, Laszewski observes, people often asked him: "'Would Congress really cut private Medicare with almost 10 million seniors in it?"

Last week-end, he offered his reply: "355-59--any other questions?"

Even the AARP is backing the docs, Laszewki notes, "giving members political cover with seniors to vote against the private Medicare plans.

Astonished by the landslide in the House, Senate Majority Leader Reid and the Senate Democrats decided to shelve the bipartisan compromise and bring the bill that had just passed the House to the Senate.

Late Thursday night they did just that and missed getting the necessary 60 votes by only one Senator.

This led to what Laszewski describes as "a very undignified scene on the Senate floor . . . Republicans felt betrayed," he explains, "thinking they had an amicable deal to get past the cuts and go home."

The Washington Post provides some of the gory details: "The roll call vote was held open for an additional 25 minutes so Sens. Barack Obama (D-Ill.) and Hillary Rodham Clinton (D-N.Y.) could make it to the chamber from their fundraiser at the Mayflower Hotel.

"Sen. Jim Bunning (R-Ky.) grew irritated about waiting for Clinton, the last to arrive, and called for 'regular order' to shut down the vote. That led to a shouting match with Sen. Robert C. Byrd (D-W.Va.), who yelled 'Who are you?' and mockingly called his colleague a 'great baseball man.'

"Bunning, a Hall of Fame pitcher in the 1950s and 1960s, shouted back that he has the same rights on the floor as Byrd, the longest-serving senator in history and the chamber's leading parliamentary expert. The exchange ended with Byrd loudly laughing . . 'That display last night on the floor is something I've never seen,' said Sen. Arlen Specter (R-Pa.)."

This is Probably Not How You Achieve Meaningful Reform

This is the sort of behavior--on both sides of the aisle-- that makes one wonder how legislators will ever manage to pass serious health care reform.

Let me be clear: what happened last week had less to do with health care policy (my main interest), than with partisan politics (which could ruin any chance of achieving true reform by sidetracking discussions.) There is a real danger than rather than focusing on what would be the best public policy legislators will become caught up in political strategy--i.e. how do we score points?

Granted, I don't expect bi-partisan compromise will come easily or quickly--not if we want serious reform that provides equitable, high quality, sustainable care for everyone.

Compare the current climate to the somewhat easier situation that the Clintons faced in 1993. Back then, compromise seemed possible. Keep in mind, 23 Republicans, including then-Minority Leader Robert Dole, co-sponsored a bill introduced by Senator John Chafee that sought to achieve universal coverage through a mandate that would require that all individuals buy insurance.

Today, by contrast, progressives and conservatives are so polarized on the issue that anyone who talks about "bipartisan compromise" is talking about health care "reform" in name only.

Perhaps those willing to sell out the middle-class could cobble together legislation that gives every American access to a piece of paper called "health insurance." But this would not mean that they had access to "health care." In some cases, exorbitant deductibles and co-pays would make the insurance too expensive for median-income Americans to use. In other cases "Swiss cheese" policies would be filled with holes that open, like trap doors, when the customer becomes sick.

Recently, I heard UCSF political scientist Jacob Hacker say that if we are going to have meaningful reform, conservatives will have to be "dragged kicking and screaming" into the plan. I agree.

This is why I believe that, before we strive for national health reform, we may need to overhaul Medicare. Medicare gives us a manageable project that everyone in Congress knows is necessary--Medicare is running out of money.

Even lobbyists can be held at bay if legislators stand firm, insisting that neither taxpayers nor the elderly can afford to continue to be gouged by drug-makers, device-makers and those health care providers who over-medicate and over-treat elderly patients.

Politics Trumps Policy

In this case, Senate liberals should have not compromised in the first place. They should have stuck to their guns, and insisted on cutting the corporate welfare that Medicare Advantage insurers are receiving. Medicare cannot afford it. And, as the House vote shows, many independents and conservatives understand that the windfall is unwarranted. Medicare is not getting good value for its dollars.

But the Democratic Senators didn't stand on principle. It was only when they saw an opportunity to embarrass the Republicans that they did a 180-degree turn: "Compromise? What compromise?"

As Laszewski explains, the Senate Democrats set the compromise aside because "they saw a huge election-year opportunity--stick the Republicans out on a limb and start sawing it off."

Republicans are left with a politically unpalatable choice: either vote against their party's sitting president--or vote against the doctors and the AARP. For legislators who will be up for re-election in November, this is a lose/lose proposition

"At one point during Thursday's debate," the Washington Post reports, Senate Majority Leader "Reid literally hopped around the chamber, predicting Democrats would hold 'at least' 59 Senate seats next year because Republicans toed Bush's line.

"'I don't know how many people are up here for reelection, but I am watching a few of them pretty closely,'" Reid said, staring at the GOP side of the chamber. "'I say to all those people who are up for reelection: If you think you can go home and say, 'I voted no because this weak president, the weakest political standing since they have done polling, I voted because I was afraid to override his veto' -- come on.'"

Friday, Congress left town for its recess, and the Bush administration did the only thing it could do. Mike Leavitt, Secretary of the Department of Health and Human Services, announced a reprieve for the thousands of doctors expecting to be hit tomorrow with a 10.6 percent cut in Medicare payments. The freeze is scheduled to last 10 days. This will give Congress three days to resolve the matter when it returns on July 7.

Maybe Congress Should Hand the Job Over to Someone Else?

This brings me to the head-turning suggestion that HHS Secretary Leavitt recently made on his blog: (http://secretarysblog.hhs.gov/ )

Making it clear that he expressing his own views, not those of the administration, Leavitt wrote: "In our country we maintain special facilities called 'Level Four Laboratories' for handling lethal biologic agents. It would be unreasonable to expect anyone to handle lethal bio-agents without special protection.

"To members of Congress, fixing entitlements like Medicare is lethal. Persuading them to accept the inherent risks will require a system of special political protection. Without it, Congress is unlikely to ever deal directly with Medicare's problems."

Leavitt goes on to propose that: "In an era where Election Day marks the beginning of the next campaign season, the degree of bipartisan statesmanship needed to solve the entitlement problem will be hard to come by . . ..

"What if leaders of both parties in Congress met privately and acknowledged that while they could not agree on how to fix Medicare, they could agree that the approaching Medicare insolvency has to be dealt with. Both would likely be motivated by an understanding that it was in their party's long-term interest because solving such a problem would be especially costly in political terms to the party in power at the time the dilemma matures."

Leavitt suggests that Congressional leaders might agree on legislation "that would establish measurable trigger points for action. For example, if Medicare currently constitutes 3.2% of GDP, when the government actuary declares Medicare expenditures to have exceeded 4% of the GDP, a special decision-making process would be triggered.

"The special process could resemble the one Congress has used successfully for military base closure," he suggests. "A special bipartisan committee was established to assemble a proposal. The proposed plan is submitted to the President for review. Within a time certain, the President is required to approve or disapprove the entire plan. Once the President approved a plan, it was submitted to Congress, where they could not amend the proposal, but were forced to vote the proposal up or down within a specific time frame. It worked."

You know, it's not a bad idea. There are many details to be worked out, of course. But the truth is, we have a model for such a panel: the Medicare Payment Advisory Commission. But MedPac can only make recommendations. It can't force anyone to implement them. What we need, as someone in Washington said recently, is MedPac with teeth.