June 15, 2009 / 4:57 PM / 11 years ago

Medicare advisers eye imaging, biologics savings

WASHINGTON (Reuters) - Tighter controls are needed on medical tests, biological drugs and private insurance plans to help rein in costs to the U.S. Medicare health insurance program, a panel of advisers said on Monday.

The Medicare Payment Advisory Commission (MedPAC) urged Congress in its June report to consider how the program for the elderly and disabled pays for such services in order to temper expenses that totaled $468 billion in 2008.

Its recommendations come just days after U.S. President Barack Obama called for $313 billion in Medicare reductions to help fund his $1 trillion healthcare reform plan. These would be achieved through cuts in payments to healthcare providers, lower drug prices and greater attention to fraud.

Medicare is uniquely under pressure as rising health care costs and an aging population threaten its financial solvency, which experts say could end in 2017.

But Obama said on Monday in a speech to the American Medical Association in Chicago that aging and demographics are not the only factor in rising costs.

“What accounts for the bulk of our costs is the nature of our health care delivery system itself, a system where we spend vast amounts of money on things that aren’t necessarily making our people any healthier, a system that automatically equates more expensive care with better care,” Obama said.

MedPAC, an independent body authorized by Congress to advise lawmakers on the Medicare program, said use of imaging scans to diagnose cancer, heart problems and other conditions is growing twice as fast as other care.

“There are reasons to be concerned that some of the increased use in recent years may not be appropriate, which contributes to Medicare’s growing financial burden on taxpayers and beneficiaries,” it said.

Part of the problem is that reimbursement rates for such procedures are “mispriced ... thereby creating financial incentives to provide more imaging,” the 17-member panel said.

The commission also urged reductions to what it called “unfair” higher payments to private Medicare Advantage plans, which are offered by companies such as Humana Inc, WellPoint Inc and UnitedHealth Group Inc.

Such private plans can offer more benefits than traditional fee-for-service Medicare coverage but will cost the government an estimated $12 billion in 2009, it found.

Reducing payments would help encourage providers to be more efficient, MedPAC said.

The advisers also called for a legal way for the U.S. Food and Drug Administration to approve cheaper, generic versions of biological drugs used to treat cancer and other diseases that cost Medicare about $13 billion a year.

Less expensive generic biologics could save up to $12 billion over the next 10 years, with much of the savings going to Medicare, the report said.

“As a large payer for biologics, Medicare has a strong incentive to ensure that it gets value for the money it spends on these products,” it said.

Medicare, which covers roughly 44 million Americans, is the top payer for health care. A number of private insurers also look to the program when setting payment policies.

If Congress, which could tackle health care reform legislation as early as this week, adopts the commission’s findings, imaging and technology companies could be shaken up as well as the biotechnology sector.

Editing by Phil Berlowitz and Brian Moss

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