WATERLOO - Delores Zimmer cheerfully tells her physician, Dr. John Sutherland, the good news on her blood pressure.

It went down since her last visit. Sutherland arches his eyebrows in surprise.

"It did? Really? That's good," he said.

Zimmer is one of Sutherland's many on Medicare, the government-provided health care system for seniors. Patients like her are also at the center of a battle over how to fund health care reform.

House Democrats may have found a way late Thursday to change the way Medicare pays for patients like Zimmer across the country, and as a result, drastically alter its health reform bill.

The deal paves the way to pay doctors and hospitals who treat Medicare patients for the quality of care they receive regardless of geographic location. The change that would boost reimbursement to states like Iowa, which ranks 49th in the nation in Medicare payments despite providing some of the best quality care in the nation.

It is an idea that has received strong bipartisan support, including from Iowa's entire Congressional delegation, though some have expressed reservations about the overall health care reform bill.

Still, the chairman of the House Energy and Commerce Committee, Rep. Henry Waxman, D-Calif., called the deal a "a significant breakthrough," and crucial to securing enough votes to pass a larger health reform bill.

Rep. Bruce Braley, D-Iowa, along with Iowa Democratic representatives Leonard Boswell and Dave Loebsack, were involved in the negotiations. Braley said he was thrilled by the deal and did not expect to reach one so soon.

"I think the Speaker (of the House Nancy Pelosi) adopted an attitude of let's lock everybody in a room and get a deal done," he said.

Earlier this month the nonpartisan Congressional Budget Office said the health reform proposals being debated would add more than $200 billion to the deficit in the next 10 years.

If predicted cost savings materialize, the deal could go a long way toward reducing those costs while still funding health insurance for every American without increasing the country's deficit, a stated goal of both Democrats and Republicans.

It also has the potential to drastically reduce the cost of a proposed public insurance option because the option is based on Medicare.

A group of legislators from states that benefit from current Medicare reimbursement rules and those that are penalized by them, like Iowa, hammered out the deal with Democratic House leaders.

As part of the agreement, the Federal Institute of Medicine will study and recommend possible changes to how states are reimbursed by geography, and most significantly, by the quality of health care provided.

If reforms are recommended after studying geographic reimbursements, Iowa providers should see increased payments in about a year, Braley said.

Perhaps the most meaningful change - for Iowa and the entire House health reform bill - will give the government two years to study options to pay medical providers based on quality of care instead of strictly quantity.

This change is what Braley, through a bill he helped introduced last month, and other Republicans and Democrats from low reimbursement states have been pressuring House leaders to support.

Any changes will be enacted by Health and Human Services Secretary Kathleen Sebelius unless Congress votes to disapprove them.

The deal would also adjust Medicaid reimbursement to increase payments over time when providers reach 100 percent of Medicare pay.

Broken system

With so many older patients, if Dr. Sutherland lived in New York or Florida he would be a much richer man.

Under the current Medicare system, doctors are paid according to geography - where they work - and how many procedures they perform. Critics say this drives everyone's health bill up by creating an incentive to order more tests and procedures, regardless of whether they improve a patient's health.

For example: In 2006, Medicare spent $6,671 on the average beneficiary in Waterloo, compared with $16,351 in Miami, Fla. Despite spending nearly three times as much, Florida provides some the lowest quality health care in the country, while Iowa doctors deliver some of the highest quality care.

But the battle over payments doesn't fall entirely along traditional lines, such as rural vs. urban or big state vs. small state. Medicare, for example, spends about half as much per patient in the San Francisco district of House Speaker Nancy Pelosi, D-Calif., as in Miami.

Despite the potential benefits for the nation as a whole, until Thursday night those pushing for meaningful Medicare reform said they hadn't seen proposed changes necessary to fundamentally change Medicare. They said that's because too many states benefit financially from the current system.

"It makes absolutely no sense. This is a broken health care delivery system, and every Iowa health care provider has known this for 25 years. And yet because of the way people benefit from these inequities, nothing has changed to improve this system," Braley said last week.

Huge costs

Medicare accounts for 22 percent of the country's health care spending, in large part because the last two years of a person's life are often the most expensive.

Because of inefficiencies, the system is also a source of significant waste: Medicare economists estimate $500 to $700 billion are thrown away on treatments, tests or hospitalizations that do not improve a person's health.

The system is so expensive experts estimate without reform Medicare will go broke by 2017.

That contributes to a rising cost of health care that bankrupts millions of Americans every year; people like Katie Wickham of Waterloo. At a health care forum last week, she said she spent $66,000 over four years to battle lung cancer.

She and her husband are bankrupt, and don't know if they will stay in their house much longer.

"I am so angry. After all this, I'm still trying to save my home," she said.

Despite the significant shortcomings of a broken Medicare system, health care reform proposals in the House expanded Medicare without reforming it - until Thursday's deal was struck.

A public insurance plan designed to compete with private insurers would pay physicians the rate of Medicare plus 5 percent.

Now House members hope that within two years, the cost of a public insurance plan, if created, will be significantly reduced.

"These changes should not cost a dime and save us hundreds of billions of dollars. The providers in Iowa should benefit enormously, as should all taxpayers of this country, who should see significant reduction in cost for individual Medicare recipients in areas where we see the problem of over-utilization," Braley said.