The Congressional Budget Office said Saturday that proposals to create a federal agency that could impose cost controls on Medicare will only save $2 billion over the next few years, and there was a high probability that "no savings would be realized," according to today's New York Times. CBO director Douglas Elmendorf said the reason was that the draft legislation "does not explicitly direct the council to reduce" Medicare spending. The council, he further warned, "could be weighted toward medical providers who might not be inclined to recommend cuts in payments to providers or significant changes in the delivery system."

Well, that's easily fixed. Change the legislation to read that the council is mandated to come up with savings. And Congress could create a council that wasn't stakeholder controlled.

The alternative to what Congress appears to have under consideration is an independent council staffed by physicians, health care economists, behavioral economists and health care experts operating under rules set by a board comprised of government officials from the Center for Medicare and Medicaid Services, Agency for Healthcare Research and Quality, the National Institutes of Health, the Veterans Administration, the Centers for Disease Control, and a few state Medicaid directors.

Uh oh. Isn't this federal bureaucrats coming between you and your doctor? (To read more, click 'read more' below) Yes it is, just like we now have insurance company bureaucrats coming between you and your doctor and Congressmen pretending to be health experts telling Medicare what to cover.

But instead of hitting back against CBO's logic, White House budget director Peter Orszag issued a mushy-headed claim that the proposal was never meant to generate savings over the next decade. Powerful Democrats in Congress -- Charles Rangel (D-NY) and Pete Stark (D-CA) -- also came out against the idea, fearing a Republican-controlled administration down the road will use the new council to impose deep cuts in Medicare regardless of their medical impact.

That's a more substantive criticism. But, again, those fears could be easily addressed by stating in the legislation that any proposed changes to Medicare by the new council must be accompanied by scientific and economic justifications (studies by the new comparative effectiveness agency, perhaps) that they will not result in reduced access or lead to a decline in the quality of care. If interest groups believe that the proposed changes would have deleterious effects (those claims could come from providers, patient groups, consumer advocates, whomever), they could raise their objections during an annual notice-and-comment process. The council would then have to respond to those complaints, and possibly adjust its recommendations if they were found to be substantive.

Congress doesn't determine if a new drug meets the FDA's criteria for safety and efficacy. It shouldn't be in the business of determining what is "reasonable and necessary" medical coverage.

This latest CBO statement probably reflects the same caveat attached to its recommendations from last December. It is being evaluated in isolation from other proposed reforms. Yet its true power is only in conjunction with those other reforms.

For instance, what if the new council adjusted annual fee-for-service payment rates to reflect expected productivity gains over the next decade? This would save Medicare $200 billion (Option 54 in the December 2008 CBO report). What if the new council reduced acute care hospital payments by just one percentage point over the next decade's expected increase (Option 55)? That would save $93 billion over ten years. What if the new council radically expanded Medicare's use of "accountable care organizations" staffed by salaried physicians willing to scrap fee-for-service medicine in favor of fixed payments for episodes of care?

That reform, alas, were not evaluated by CBO. But they are ultimately necessary to hold down costs in the years ahead. The only question is how we get there. As discussed in "Forget Who Pays Medical Bills, It's Who Sets the Cost" by David Leonhardt in today's Times, this is an old discussion, one where the doctor-as-small-businessman model has always triumphed. It's time to scrap this failed 20th century approach to delivery care. (For another perspective on why restructuring care delivery is key to long-term savings, see former CMS director Mark McClellan's comments in "Focus on Health Savings Obscures Other Issues" in today's Washington Post.)  

Save just $2 billion? That's what you would get from a toothless tiger that's on a leash firmly held by doctors, hospitals and the drug companies. I hope that's not the "MedPAC on steroids" that the Blue Dogs had in mind when they put this important reform on the table.