Sen. Amy Klobuchar, D-Minn., has advanced this proposal as part of her Medicare Payment Improvement Act, and it is now at the center of the Senate's discussion on how to craft health care reform.
The value index would penalize Medicare providers that spend above the national average and reward providers that spend below the national average with more funding. The idea is to raise the quality of health care and encourage efficiency, but in reality it will undercut those with the greatest health care needs, namely the poor and minorities.
By failing to consider major factors driving regional spending differences, the value index is not what proponents make it out to be. Consider this: The average monthly rent in San Mateo is $1,658 while it's $873 in Minneapolis. Salaries for medical support staff are considerably higher in California than in Midwestern states. None of that is reflected in the value index's calculation. So absent any other factors, the proposal would direct more funding to places with a lower cost of doing business, which has nothing to do with the quality or efficiency of medical treatment.
A version of the value index is part of the health care reform plan unveiled Wednesday by Sen. Max Baucus, D-Mont. (The House's health care reform bill, HR 3200, would commission a study on Medicare's spending differences and consider what to do about them at a later date.)
(these studies have been done, and are already available from previous medicare data)