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Chairman Baucus, Ranking Member Grassley, distinguished Committee members. I am Glenn Hackbarth, chairman of the Medicare Payment Advisory Commission (MedPAC). I appreciate the opportunity to be part of the panel this morning and to share MedPAC’s views on delivery system reform. The Medicare Payment Advisory Commission (MedPAC) is an independent Congressional agency established by the Balanced Budget Act of 1997 (P.L. 105-33) to advise the U.S. Congress on issues affecting the Medicare program. The Commission’s statutory mandate is quite broad: In addition to advising the Congress on payments to private health plans participating in Medicare and providers in Medicare’s traditional fee-for-service program, MedPAC is also tasked with analyzing access to care, quality of care, and other issues affecting Medicare. The Commission’s 17 members bring diverse expertise in the financing and delivery of health care services. MedPAC meets publicly to discuss policy issues and formulate its recommendations to the Congress. In the course of these meetings, Commissioners consider the results of staff research, presentations by policy experts, and comments from interested parties. Commission members and staff also seek input on Medicare issues through frequent meetings with individuals interested in the program, including staff from congressional committees and the Centers for Medicare & Medicaid Services (CMS), health care researchers, health care providers, and beneficiary advocates.

Two reports – issued in March and June each year – are the primary outlet for Commission recommendations. In addition to these reports and others on subjects requested by the Congress, MedPAC advises the Congress through other avenues, including comments on reports and proposed regulations issued by the Secretary of the Department of Health and Human Services, testimony, and briefings for congressional staff. Our health care system today The health care delivery system we see today is not a true system: Care coordination is rare, specialist care is favored over primary care, quality of care is often poor, and costs are high and increasing at an unsustainable rate. Part of the problem is that Medicare’s fee-for-service (FFS) 2 payment systems reward more care, and more complex care, without regard to the value of that care. In addition, Medicare’s payment systems create separate payment “silos” (e.g., inpatient hospitals, physicians, post-acute care providers) and do not encourage coordination among providers within a silo or across the silos.

We must address those limitations—creating new payment methods that will reward efficient use of our limited resources and encourage the effective integration of care. Medicare has not been the sole cause of the problem, nor should it be the only participant in the solution. Private payer rates and incentives perpetuate system inefficiencies, and the current disconnect among different payers creates mixed signals to providers. This contributes to the perception that one payer is cross-subsidizing other payers and further exacerbates the problem. Private and other public payers will need to change payment systems to bring about the conditions needed to change the broader health care delivery system. But Medicare should not wait for others to act first; it can lead the way to broader delivery system reform. Because this roundtable discussion is intended to spark dialogue on the solutions, I will focus on the recommendations the Commission has made to reform the health care delivery system and to strengthen the Medicare program. MedPAC has testified previously before Senate Finance Committee on problems of our health care delivery system and a detailed discussion of these problems is in the attached Appendix.

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