In his speech at the annual meeting of the AMA yesterday, President Obama outlined his case for healthcare reform, including some basic ideas on where he would get the bulk of the money to pay for reforms. Most of what he had to say was relatively uncontroversial and unsurprising, but it still represented his most comprehensive speech on healthcare reform since taking office. One surprise is that he voiced implicit support for a proposal to expand the role—and authority—of MedPAC. Last month Senator Rockefeller introduced a bill that would convert MedPAC into an executive branch agency with the power to set payment rates in Medicare. Essentially, it appears to be a back-door method of establishing a Federal Health Board (Senator Rockefeller even stated that it would be modeled on the Federal Reserve Board)—taking payment decisions out of the hands of Congress and putting them in the hands of a board that supposedly would be immune from political pressure. Since Congress is not prone to willingly give up power, my guess is that this proposal is going nowhere.

Coincidentally, however, yesterday MedPAC released its annual report to Congress. It contains useful discussions of several important topics relating to payment reforms, including accountable care organizations, disease management demonstration programs in Medicare (a topic we are addressing in this week’s issue of our Shuho weekly report), and Medicare Advantage. One chapter also explores some of the issues MedPAC is considering for follow-on biologics.

Also yesterday, the CBO released an analysis of the bill Senator Kennedy introduced last week. The cost of the bill to the federal budget as calculated by the CBO—just above $1 trillion over ten years—does not come as a big surprise. What many commentators are focusing on, however, is that, even after spending over $1 trillion, the CBO projects that 37 million people—13% of the non-elderly—will remain uninsured. Partly this is because the version of the bill introduced last week lacked key provisions, such as a pay-or-play mandate on employers, an expansion of the Medicaid program, and the addition of a public plan, that are expected to be added later. These provisions will reduce the number of uninsured, but they may also add to the cost of the bill, if the cost of expanding Medicaid exceeds the net cost reductions associated with a pay-or-play employer mandate.