Editor’s Note: The Centers for Medicare and Medicaid Services has been deprived of needed resources and authority by Congresses and Presidents of both parties, former CMS acting director Kerry Weems said in a recent Health Affairs interview with the journal’s founding editor, John Iglehart. To follow up on this interview, the Health Affairs Blog convened a roundtable discussion involving Weems and three other former senior officials in CMS’ predecessor agency, the Health Care Financing Administration: Urban Institute Senior Fellow Robert Berenson, who directed Medicare payment policy and managed care contracting at HCFA from 1998 to 2000; Bruce Vladeck, a senior advisor at Nexera Consulting, a firm associated with the Great New York Hospital Association, who led HCFA during the administration of Bill Clinton; and Project HOPE senior fellow Gail Wilensky, who led HCFA during the administration of President George Herbert Walker Bush. The transcript of the roundtable appears below, and a shorter highlights post is also available.

JOHN IGLEHART:  To begin, I would remind you of a letter that Health Affairs published a decade ago, that was signed by over a dozen distinguished participants in the health policy realm, including a number of HCFA [Health Care Financing Administration] Administrators. I’ll read a few sentences and then ask you whether the situation facing the agency is any different today than it was a decade ago.

The letter started:

“The signatories to this statement believe that many of the difficulties that threaten to cripple the Health Care Financing Administration stem from an unwillingness of both Congress and the Clinton Administration to provide the agency the resources and administrative flexibility necessary to carry out its mammoth assignment.  This is not a partisan issue because both Democrats and Republicans are culpable for the failure to equip HCFA with the human and financial resources it needs to address what threatens to become a management crisis, for the agency and thus for millions of Americans who rely on it.”

Is the situation is the same today, or different? I’ll ask Kerry to begin since he was the latest person to preside over the agency.

KERRY WEEMS:  I don’t think the resources are anywhere near adequate to the task, and typically, as functions and responsibilities are added, those don’t come with the necessary resources.  So many times as the law changes, you find yourself further and further behind. 

There has been one notable exception to that, and that was the resources devoted to the Medicare Modernization Act, especially the prescription drug benefit. Things probably could have been done better, but time more than money was the rate-limiting function – timelines to get the benefit up and running were necessarily very tight. At least there were adequate resources for the task. 

Given the very high political stakes involved in the MMA, it’s somewhat unsurprising that the resources were adequate there.

GAIL WILENSKY:  Do you think that the specific line-item appropriation that was included in the legislation for the MMA, which was distinct from other major legislative changes that I’m aware of, is something that should be regarded as a singular activity?  That did not happen, for example, with regard to the implementation of the [Resource-Based Relative-Value Scale] RBRVS.  I don’t believe there was anything comparable when the [Balanced Budget Act] BBA was passed.  Therefore I agree that the MMA was a time where there was what seemed like a significant amount of resources specifically allocated to the implementation, but the MMA was really a one-off kind of environment.

WEEMS:  I think it was singular in that it was sufficient.  Subsequent acts — for instance [the Medicare Improvements for Patients and Providers Act of 2008] MIPPA and some of the others that have occurred in the last three or four years — have carried in the acts themselves appropriations. However, most of those — and I’ll cite last July’s MIPPA — have not been sufficient to the task. So MMA was singular in that it was sufficient, but not singular in form.

Fighting Fraud: Inadequate Resources, And A Misguided Emphasis On Recovery Over Prevention

IGLEHART:  In his interview Kerry was emphatic about was the inadequacy of antifraud resources at CMS, and I’d be curious to know whether the other former administrators share that view.

WILENSKY:  It was even worse when I was there, before the anti-fraud trust fund that came in with HIPAA in the late 90s. Despite the belief that there was a very high rate of return on anti-fraud activities, there was no way to use trust fund money to supplement the meager amounts appropriated for anti-fraud activities. The difficulties that Kerry described in his interview are important and frustrating, but they actually are somewhat improved over what had happened in the early 1990s.

BRUCE VLADECK:  Gail pointed out the improvements that came with HIPAA and the new anti-fraud trust fund, and Kerry made reference in his interview to the recent press conference  with the Attorney General and the Secretary. He also noted that, even when more money becomes available, there is incredible competition for that money between CMS, the HHS Inspector General’s office, and the Justice Department.

In terms of the politic optics of the situation, Justice and the IG have an enormous advantage because they have guys with guns breaking down doors and creating wonderful photo ops. But what that means is that what expenditures there are get skewed towards the detection and apprehension side of the effort, at the expense of the prevention or deterrent sides. 

To make it worse, when you have activities that are financed at least in part by the purported fraud recoveries associated with those activities, the incentives are, in a bizarre way, to not spend the money on preventing the fraud in the first place, or on detecting it very early, or deterring it. The incentives are to catch people who have engaged in egregious behavior because that’s what not only produces the headlines for the political leadership, but it’s also what produces the revenue to support a further expansion of the cops and robbers side of the house.

The real problem, and again Kerry makes reference to this in his interview, is that a relatively modest investment on the initial front-end of the claims processing operation — just in terms of things like claims review and profiling and data mining — could probably save more money at the margin than any other forms of expanded expenditures for fighting fraud and abuse. But (a) that stuff doesn’t score nearly as well in the congressional budget process, and (b) it’s not nearly as sexy politically.

WILENSKY:  I would reverse the order in terms of the importance of those two, but I agree.

VLADECK:  Then, of course, the other agencies involved in these efforts get the headlines and the congratulations, and CMS gets blamed for not doing what any sort of prudent insurer would do in terms of claims review and other analyses of what is coming in the door.  And then you extend that to the [Deficit Reduction Act of 2005] DEFRA requirements on Medicaid and the new Medicaid [Inspector Generals] IG’s, which is an even worse example.  You really distort the entire process in ways that are self-reinforcing: You’re not preventing the fraud and abuse, you’re investing more resources in catching particularly egregious violators.  That creates both a budgetary and a political process in which those activities continue to get more emphasis and more resources, while the relatively more bread-and-butter kinds of investments that would actually do something about preventing fraud and abuse in the first place are starving.

IGLEHART:  Bruce, I’ve heard from Senator Grassley’s chief staffer on fraud and abuse, from a top HHS OIG official, and from Kerry as well, all lamenting the so- called “pay and chase” model that is used in the anti–fraud world. Has there ever been serious consideration given to the point that you made, that it would make a lot more sense to try to prevent fraud and abuse than to go after it after it has occurred?

VLADECK:   Some of that analysis was done while I was at the agency, though it was tied up in a whole set of calamitous data-systems issues that we had more generally.  We tried to make the case, as energetically as we could, that getting away from pay and chase required in the first instance considerable investment in data processing capabilities for the agency. We’d get sympathetic nods in oversight hearings and budget meetings and so forth, but we’d never get any appropriations for this.

WEEMS:  Bruce is exactly right about the perversions induced by the budget system.  You get credit for money you get back after it leaves, but you don’t get credit for money you don’t pay out.  It’s just that simple.

IGLEHART:  Kerry, was this ever explored during your time at CMS?

WEEMS:  Well, there is a restructuring underway that mostly has to do with existing work and existing resources.  The former payment safeguard contractors — the PSCs — all of that’s being recompeted, and there will be new contractors who are supposed to, under the statement of work, use some of these more esoteric payment safeguards, data mining, etc., and to do some of it, though not all of it, in a prepay mode. The first two awards were made, I think, last August, and there are still more awards in the pipeline.  There will be a number of these and they’ll match up with the 15 [Medicare Administrative Carrier] MAC regions.  So it’s kind of a different concept of operations, but I would say not the kind of fundamental change that all of us would like to see.

IGLEHART:  What about the data systems and the computer capacity of the agency today versus a decade ago? Kerry, are the kind of resources being invested in those tools that should be?

The Consequences Of Contracting Out The Bulk Of CMS’ Work

WEEMS:  Well, the computational capacity has changed a lot. One of the things to remember is that CMS does very little work on its own.  It contracts almost everything out.  The agency spends $640 billion, but only has about 4600 employees. 

So all of this work is contracted out.  That’s good in that you can take advantage of the latest technologies.  It’s bad in that there’s not a unitary strategy all around the Medicare and Medicaid programs.  Instead, it’s the strategies that the particular contractors might have.

BOB BERENSON:  It also means that CMS is contracting out its intellectual capital.  A lot of the expertise doesn’t reside in Baltimore, it resides in various contractors who are relied upon.  Tom Stanton published a paper in which he found that there were actually more employees at HCFA in 1980 than exist today at CMS, and he also documented a dramatic reduction in the percentage of spending for administration. What’s happening is that, to the extent that work gets done, a lot of it gets done through contractors because there’s not an adequate staff and that’s a problem for the agency when it doesn’t have the expertise in-house, as we’re trying to evolve the health care system and need Medicare to be a more prudent purchaser.

WILENSKY:  Bob’s comment — that when you have some of the newer activities contracted out you don’t incorporate them into agency thinking and behavior — is an interesting observation which I hadn’t thought about very much. I’m not sure whether this is something that the Congress has explicitly decided and pursued, or whether it is the result of the earlier decision of having most of the actual bill-paying and related activity done by contract, rather than done in-house as Social Security does.  I’m curious what the rest of you think.

WEEMS:  It’s probably not the result of an explicit decision, but the way that decisions are made, it’s almost forced that way.  Under the time limits that legislation has to be implemented, it’s very difficult to hire the type of intellectual capital required to be able to put that together.  Hiring in the federal government today is very, very difficult, especially for people who are at the top end of their field.  At that point you’re asking them not to take a salary but to make a sacrifice for public service. In contrast, if you can quickly just go rent it, contract it out, a lot of times you can get those people without that sacrifice.

BERENSON:  The contracting trend occurs even in the Medicare demos area. We’re all trying to figure out a way to save money on better management of patients with chronic conditions.  Who do you go to talk to?  You go to experts at Mathematica, at RTI, you go to the contractors who CMS over the years has developed good relationships with.  That’s, I suppose, a good thing. 

I don’t think you go to CMS staff themselves, although there are some people there who have some insights. They’re just burdened with the administrative management of contracts.  There’s just not enough people with the right backgrounds to actually bring the intellectual expertise needed to sort of figure out a better mousetrap.

VLADECK:  That is definitely what I would take as a deterioration in the agency’s capacities over time. My first real involvement with HCFA was in the late seventies, early eighties, putting together the New Jersey [diagnostic-related group] DRG program. That was the result of a specific legislative mandate relative to experimenting with alternate payment systems, but the structure and design of five or six separate major demos was very closely driven by HCFA staff. They were very much involved

Everybody was always fighting over the appropriate balance between what the states which had gotten these contracts were supposed to do independently, and what they were supposed to do to meet a federal agenda. But the folks in Baltimore were very heavily involved in substantive issues as well as project management issues. This extended not only to the research and demo staff, but to the program policy people as well.

Later, during my time as Administrator, there was a fair amount of effort devoted, I think, in a relatively sophisticated way, to addressing some of the major policy issues through research and experimentation initiatives that were very much staff generated. However, every passing year the internal capacity to do that has diminished. This is in part because of some of the things Kerry references, in terms of the numbers of bodies and who you can recruit, and in part because of the workload demands associated with Congressionally mandated demonstrations. I think that is a place where the agency is noticeably weaker now than it was 15 or 20 years ago.

From Congress, Bipartisan Flip-Flopping On CMS’ role

WILENSKY:  Let me extend this thinking to the schizophrenic response the Congress keeps exhibiting with regard to CMS and the agency as a potential activist agency. On the one hand there are constant complaints about all of the things that CMS doesn’t do that the Congress sounds like it thinks it should do: being more creative in the implementation of the Medicare, changing the reimbursement structure and rewarding performance and quality. On the other hand, there is Congress’ actual chronic failure to provide the financial and political support to engage in these new activities. The MIPPA legislation was one of the few times I can remember where legislation was written that would allow the agency to look at the behavior of some of the outlier physicians, although the issue has been raised for countless years as to why more isn’t done on this front.

So in terms of the broader questions about what the agency might be asked to do in health care reform, it seems to me the Congress has to become a little more coherent about what it believes an administrative agency like CMS can and should do. To date Congress hasn’t been willing to come up with anything like a consistent vision, and that’s been true for Democratic majority congresses and Republican majority congresses. Of course, the same thing has been true for administrations of both parties.

BRUCE VLADECK:  Look at the history of HCFA’s and CMS’s efforts to experiment with competitive bidding for what are now Medicare Advantage plans, before Congress wrote its own  formula that had some real problems in the MMA. (Health Affairs has documented – this history at great length and with some degree of controversy.)  We were shut down in ’96 by a court intervention, which we might have prevailed at had the Congress not weighed in. Then Bill Thomas and others decided the reason there had been so much political opposition was because of our ineptitude and political clumsiness, so they legislated a very elaborate process, on the base closing commission model, to insure that the demos could go forward the next time. The agency followed this process precisely, but when the bidding was ready to go live it was still shut down by the local constituencies affected, who argued that they shouldn’t have to be guinea pigs. The whole thing died, so that when Congress finally decided to put in place a bidding-related pricing system for managed care plans they had no experience and no evidence.

You can also talk about the attempt to do competitive bidding for durable medical equipment. Look at how many years that goes back. Look at how many efforts to experiment with that died on the vine because the industry mobilized the Congress to stop it.  That’s been around at least since Gail’s time.

WILENSKY:  Yes, it started with me. And it does make me wonder about the political likelihood of having so much new power be granted to any of the various organizational public organizational structures that are being discussed, either at an agency level, or the public plan that’s been discussed, or some future version administering the Medicare program. We just have a very long and consistent history where, at the end of the day, Congress is unable to grant the kind of discretionary authority required to the administrative agencies running these programs.  It’s hard for me to really believe it’s going to change.

IGLEHART:  If you fast forward to the current reform environment, does anybody have a different conclusion than Gail just stated, that the political will of Congress is much stronger than considerations of how an agency should run and how much authority it should have to get its job done?

WEEMS:  I’ll step into those waters first. I think it depends on the form of what we’re going to see. In both of the instances that Bruce mentioned – the competitive bidding for what became MA plans, and the competitive bidding for DME — the agency was given specific discretionary authority that in the end threatened certain economic interests.  Under the one that I still bear the scars for, DME, a number of providers who were providing durable medical equipment would have been excluded from the Medicare program.  They would no longer be able to participate. That, in the end, was, in my view, the telling thing that turned the Congress around: “What do you mean?  These are small business people, they’re good, honest people, what do you mean they can’t participate in the program?”

WILENSKY:  That is the nature of competitive bidding. I’m trustee for the United Mine Workers and they have competitive bidding for their DME. They have a group that provides DME, and a group that was excluded.  The designation of a group of providers on any basis – price, quality, eye color, you name it — will mean that there is a small group that is enfranchised and a larger group that is shut out. The question is will the Congress actually be willing to do this to get better price and improved quality.  I see every indication Congress will find it very difficult politically to actually pull the trigger.

WEEMS:  That’s exactly my point.  If the agency is given discretionary authority that’s going to threaten some particular economic interest, especially one that’s as pervasive as DME providers — they’re everywhere — then ultimately I think that that discretionary authority is doomed to failure. We’ve seen that repeatedly.  you know, the Medicare program – many of the providers have long believed that it’s any willing provider, and that the program has very little right and very little discretion to exclude people, and if that is going to be in the new law, I think ultimately that will fail.

BERENSON:  It’s a reason why I’ve been somewhat skeptical of Lewin estimates about how much lower the premiums would be for the public plan, because of the constraints that are likely to continue to be imposed on the public plan. One constraint in particular that I would hope would not be replicated for a public plan is the arbitrary hard distinction between the mandatory budget and the discretionary budget.  Our administrators at CMS can’t spend money to save money because it comes out of a different pot.  Private plans don’t have that constraint, and if a competing public plan in the new structure did, it would not be able to compete adequately.

I assume the trust funds and the mandatory budget are a remnant of the history of Medicare and would not be replicated for a new public plan, but that would be an issue that would need to be determined.  The administrators of the public plan should figure out how much to spend on administration, in many cases to return much greater savings.

In fact, I’m interested in whether my colleagues think that there’s any way for Medicare itself to be permitted to have access to mandatory side spending if, in fact, the amount spent plus more is returned to the trust fund. Is there any way to supplement the actual appropriation in this manner, starting with fraud and abuse but then expanding it into other areas?

WEEMS:  Well, first of all, for fraud and abuse there is $720 million that’s on the mandatory side.  The chief complaint is that it literally hasn’t grown since Bruce was the administrator.  It was fixed in statute then, and it had some growth in it in the statute, and since then it’s leveled out.

So I’m going to utter a budgetary heresy here: For certain administrative workloads, I think that there’s a reasonable argument that they should be removed the appropriations process. The amount could be administratively determined – that is, determined within the confines of the administration.  An example of this already exists, and that’s the QIO’s – the Quality Improvement Organizations.  Their budgets are not subject to the annual appropriations process.  Instead, it’s a three year scope of work, I forget which, which is agreed within the administration for the Social Security Administration — which is suffering the same problems right now for its disability workloads — and for CMS.  You’d have to talk the Congress into this, but you could provide a permanent appropriation for administration, the way that there’s a permanent appropriation for benefits, and then it would be a deal between HHS and OMB for the amount of annual expenditures, the same way it is for QIOs.

IGLEHART:  A question in relation to reform. Should the Congress try to fix CMS in terms of the various points that have been made: that it’s a weakened agency, needs more resources, etc. Or should the Congress create a new agency from ground zero, to be shaped as they deem fit?

VLADECK:  I’m not optimistic about the Congress adequately supporting any administrative agency over time. You’ve got one under-financed, undermanned agency already; I think you’re better off with one than two.  I don’t know any reason why you wouldn’t expect all of the CMS’s problems to recur in the new agency. If you’re not going to fix the structural causes of CMS’s problems, why replicate them?

WILENSKY:  I agree completely with Bruce.

IGLEHART:  You’ve pointed out a variety of shortcomings of CMS, but if anybody wanted to summarize what Congress needs to do to strengthen the agency, to perhaps make it ready for an expanded role under some uncertain health reform measure, what would the key things be? 

WILENSKY:  I think Congress needs to empower CMS with a greater discretionary authority and fund it administratively to enable it to accomplish the goals Congress would like it to accomplish. Then, Congress needs to hold the agency accountable.  Right now it doesn’t do any of that.  It primarily beats up on the agency for performing in a way other than Congress would like, but precisely in the way that Congress has structured it to perform.

IGLEHART:  Discretionary authority, Gail, to do what, in short?

WILENSKY:  To be able to make decisions about how to improve payment so that it rewards goals the Congress says it would like reward, to begin to have value-based insurance as a part of its reimbursement philosophy, which would allow for cost to be an element in the consideration of reimbursement, and basically to transform Medicare from a passive bill payer to a program that promotes cost-effective, high-quality care.

IGLEHART:  Should Congress eliminate the notion that Medicare should take any willing provider? Kerry was quite critical of that in his interview with Health Affairs. He said that Medicare ought to look at limited physician networks containing the high quality doctors.

Reforming CMS’ Personnel System: Creating A Less Insular Agency

VLADECK:  Well, I’m not as inclined to attach as much importance to that as I think Kerry, and maybe everybody else on the call, is for two reasons. First, there are so many communities where, on the physician side anyway, you already have capacity issues. Second, I think the tendency of private insurers outside of real traditional group or staff model plans to actually maintain tight networks over time is much exaggerated.

In areas like DME or places where Medicare is the market, it would be a good thing for the program to be much more selective in contracting.  But there the question is not Congress giving the authority, it’s Congress giving the authority and keeping that authority open when the agency actually tries to make use of it.

So I’m maybe a little less sort of ambitious than Gail about some of these expectations. In addition to the obvious issue of resources, the first couple of things I would do to strengthen the agency to perform its existing functions, let alone to take on new ones, would be related to the personnel system, because it hobbles the agency.

Kerry talked about difficulties in hiring these days. The whole federal personnel system is still modeled on the military model:  Except in wartime, armies don’t recruit colonels from outside.  But the combination of the way the personnel system works and the prevailing paranoia about conflicts of interest these days makes it almost impossible to recruit below the political level externally.  It creates an ingrown culture in the agency.  Only when you have a major new initiative like Part D can you bring in outside expertise among employees, as opposed to having to contract it out.  In two instances, I was able to bring capable physicians into the agency from the outside, but in both cases it took a considerable amount of my personal time and effort as administrator.

Gail, I am sure you had a similar experience to this: When I got to the agency in ’93, I asked to see the resumes of all the [senior executive service] SES-level people in the agency — and by the way, the agency needs more slots. There were 42 or 43 of them, and they were wonderful people:  extraordinarily capable, dedicated, and experienced. I have never worked with the quality of the people I worked with when I was at HCFA.  But nonetheless, of those roughly 42 people, there were maybe five who had had any significant professional experience outside the executive branch of the federal government.

WILENSKY:  Certainly not very much private sector experience.

VLADEK:  Not very much at all, so there was a certain lack of empathy for providers because none of them had ever been there. The federal personnel system is still terribly slanted in that direction. The people at CMS are very talented, very bright, very committed, and very hard working, but their personal and professional experiences are limited because of the way the system works.

WEEMS:  MMA did bring in a few more into the SES cadre, but for the most part it exists as you said. Remarkably talented people, but for the most part career federal employees.

IGLEHART: I’d like to turn to CMS in relation to reform prospects and ask whether CMS is the logical place to administer a public plan or an insurance exchange. Is CMS capable of doing this if called upon?

WEEMS:  If the political stakes are as high as they were with the MMA, then CMS will be given the resources and the wherewithal to accomplish it.  I’m convinced that the talent exists in CMS to do that, but it needs the resources.  If, in fact, this does come about, the political need for success might in fact make CMS the place for that to happen. In the long run, the only way it succeeds is through a cure for the schizophrenia that Gail mentioned.

VLADECK:  Where the hell else would you put a public plan or insurance exchange, other than creating a new agency from scratch which has all its own difficulties and problems. I remember when we were working on HIPPA, both the legislation and then more importantly the regulations.  We had maybe four or five professionals in the agency who knew anything at all about how private health insurance markets worked. Four or five people able to write the regulations, or even think about the regulations, having to do with COBRA and pre-existing conditions.  It was the first time the federal government had gotten into the regulation of health insurance, other than as a purchaser through entities like [the Office of Personnel Management] OPM or [the Department of Defense] DOD.

So we had really just a handful of people with any knowledge of what we were talking about, but that was about 80 percent of the people in all of HHS who knew anything about it. It’s not like you have these extraordinary repositories of expertise or talent on any of these issues anywhere else in the executive branch of the government, except maybe on the part of the people who run Tri-Care.

I agree with Kerry entirely. The upside is that, with the right kind of investments and commitments, the agency could do a very good job at some of these tasks.  But the reverse argument is that, whatever their limitations and flaws and constraints, the people at CMS are a hell of a lot better at this stuff than any other organization that’s currently part of the federal government.

IGLEHART:  Any other closing comments?

BERENSON:  There will be an issue as to what extent things like fee schedules and payment rates are supposed to reflect regional and state based variations, as opposed to being national in scope, just taking price variations into a formula.  There are alot of views on that, and depending on what the shape of the exchange is and where the authority for that resides, I think that will partly determine the fit with CMS. I do think CMS would need to have more of a regional presence. There are ten regional offices now, so that could probably be worked through. Overall, I agree, I don’t know where else it would go.

VLADECK: We haven’t talked about the really hard part of running the agency, which is Medicaid.  For all the problems associated with congressional micromanagement and schizophrenia in the management of the Medicare program, it’s a fine-tuned Swiss watch compared to Medicaid.

WILENSKY:  But part of that is the unclear division of responsibility between the federal oversight and the actual operations of the programs which by the states.

VLADECK:  I couldn’t agree with you more, Gail.

WILENSKY:  There is, in addition to all of the other kinds of problems we’ve been dealing with, a fundamental lack of clarity about whether these are state programs with federal oversight. The extent of federal oversight and effective control has got to be determined before it’s clear what the federal government’s role ought to be.

Setting Physician Compensation: The RUC Process

IGLEHART:  There is one last subject I wanted to ask you about.  If you all read the interview with Kerry, he was quite critical of the so-called “RUC process,” in which a committee of the American Medical Association, the Specialty Society Relative Value Scale Update Committee (RUC), plays a large role in determining how much physicians of different specialties will receive from Medicare relative to each other and relative to primary care physicians.  Do other folks agree with Kerry’s criticisms? Do you believe that CMS should come up with a different process for determining physician fees?

ROBERT BERENSON:  Well, let me jump in.  I’ve written about this, and I thought Kerry was largely right.  I don’t know if Bruce remembers, I was actually a member of the RUC in its first couple of years as a representative of the American College of Physicians. I came to Bruce pleading that the RUC was dominated by specialty interests and that primary physicians were getting rolled.  Bruce was sympathetic, but it didn’t change.

I think what initially happened, looking at German models of corporatism, there was this notion that the docs would figure out how to distribute the pie amongst themselves, and that Congress would figure out how big the pie was. We’ve learned over the years that the RUC does represent primary care interests enough.  CMS for its own part is responsible for the practice expense component of [resource-based relative-value scale] RBRVS, and I think the agency has been overly cautious in that area. The RUC, I think, is incorrectly blamed for what actually has been administrative decision-making on that piece of it.

The basic point is that, after 18 years of this current method of paying physicians, it’s time to move beyond estimates — even if they’re good faith estimates — by self-interested physicians of how much work it takes to do something, or what the practice expenses are to do something. We need to actually give CMS some greater authority, but mostly money to go get real data.  The House health reform bill would move in that direction in a pretty significant way, with a specific appropriation for CMS, so the agency would no longer have to rely on estimates coming from the RUC. 

The RUC would still clearly play a role.  The RUC is an advisory body, technically.  Physician fees are set in notice and comment rulemaking, and CMS doesn’t take every RUC recommendation.  The RUC has its place, but CMS needs the resources to go get real data if we’re going to continue the current model of the RBRVS.

GAIL WILENSKY:  Which I hope we don’t do.  But I don’t disagree with that comment.

VLADECK:  Bob was a little critical of the agency on the practice expense side because he wasn’t there yet when we got the stuffing beaten out of us by the Congress in ’96-’97 for trying to make the practice expense component more rational.  During the course of that process, I was in a meeting with leaders of the primary care community, from the American Board of Internal Medicine and the Academy of Family Physicians and the American College of Physicians.  They were making all their arguments, and meanwhile this was obviously an issue that had escaped the control of the agency and was being fought over by their respective lobbyists in Congress. 

I said to these guys — and this is back to Bob’s earlier comment — “Look, I’ve really had it.  I’m just sick of this stuff.  We tried to make this system as sound and as logical as possible, and it’s clear that the process is not going to permit us to do that, so here’s what I want to do.  I want the Actuary to tell me how much money I have for Part B Physician Services for next year, and I just want to put it all in a room and let you guys divvy it up.  Immediately the reaction of the primary care leaders was, “You can’t do that.”  I asked why not, and they said, “The surgeons will take it all.”

BERESON:  And it turns out it was the radiologist who did.

VLADECK:  It was the radiologists – but the surgeons did okay, too.  The problem is that the “organized” medical community is so fragmented and contentious these days, and frankly the [American Medical Association] AMA is some ways is so weak, that you can’t use the corporatist model of letting the physicians divvy it up among themselves –they’re not constituted in the way to do that sensibly. So it comes back to either trying to preserve a rational process in the executive branch, or letting them have the food fight in Congress.

BERENSON:  To make the record complete, CMS has just put out a notice on next year’s physician fee schedule. They finally got a new survey on practice expenses, and the notice actually would decrease payments for some procedures that have been overpriced because of overstated practice expenses for some specialists and technical services. The notice would move some money towards primary care, so it was good that that survey finally did happen, and it looks like CMS is taking some leadership in this area.  But it does go to Gail’s point: Is this where we want to be in 10 years?  I hope we have a better payment system in 10 years, but I think for the next five years, we need to improve this current model, and the agency shouldn’t be as dependent on the RUC as it currently is.  It doesn’t have resources otherwise, so it is getting a lot of free labor out of the specialty societies, and I think that’s just a reality. That’s why that special appropriation in the House bill is important.

JOHN IGLEHART:  Kerry, any closing thoughts from what you’ve heard about the RUC?

KERRY WEEMS:  Again, in my view it’s not so much the RUC that’s the problem, it’s the RBRVS.  That’s what we have for now, but any input-based system is going to have perverse results as opposed to a value-based system. I hope we will be talking about a value-based system soon.