House leaders reach deal on Medicare payments

WASHINGTON (Reuters) - Democratic leaders in the U.S. House of Representatives said an agreement reached on Friday over ways to reduce regional disparities in Medicare payments would go a long way toward advancing an overhaul of the healthcare industry.

The agreement to address regional disparities and ways to promote quality of care in the health program for the elderly came as leaders tried to quell a rebellion by a group of conservative Democrats over details of the reform plan.

"I think what we gained this morning was a lot of votes, a lot of people who were withholding support because this was so important to them," said Representative Robert Andrews, one of the lawmakers involved in the negotiations that produced the agreement.

The federal Medicare program insures some 44 million elderly and disabled Americans at an annual cost of $450 billion, almost one-fifth of total U.S. healthcare spending.

Rural state lawmakers say the current Medicare payment structure discriminates against their regions, which they say offer better-quality care and lower costs than other parts of the country. But lawmakers from high-cost states, such as New Jersey and New York, argue their higher reimbursement rates are justified because of the high cost of doing business in those areas.

Under the agreement, which is to be included in overhaul legislation, the Institute of Medicine will have a year to complete a study on regional variations in costs and quality of care and make recommendations to the health and human services secretary. The secretary would then implement new payment rates taking into account the study's recommendations.

Some $8 billion would be set aside by the legislation to implement those payment adjustments.

Representative Ron Kind said the proposal could help reduce costs throughout the healthcare system because Medicare is such a huge part of medical coverage in the United States.

"We anticipate that private insurance, too, will be greatly influenced by this change with the focus on value over volume,' Kind said.

The proposal also calls for the Institute of Medicine to conduct a second study addressing ways to reward value and quality care over quantity. Medicare now bases payments on the number of medical procedures. That report would be due by September 2011 and propose ways to pay for "high quality, evidence-based, patient centered care."

The health and human services secretary would report the recommendations to Congress, which then would have to act by the end of February 2012 to stop them from automatically going into effect.

(Reporting by Donna Smith; Editing by Peter Cooney)