House Subcommittee Considers Pay-for-Performance System for Medicare Reimbursements to Physicians

The House Ways and Means Health Subcommittee on Thursday held a hearing to consider a proposal to tie Medicare physician reimbursements to performance measures -- a move that was recommended by the Medicare Payment Advisory Commission in January -- CQ Today reports. MedPAC advised reforming Medicare's provider reimbursement system by tying payments to quality and earmarking 1% of Medicare funds used for hospital and doctor reimbursements to offer bonuses to providers who improve their quality of care (Schuler, CQ Today, 2/10).

In addition, CMS late last month announced a demonstration project under which Medicare would provide bonuses to physician groups that make specific improvements in the quality of care they provide to fee-for-service beneficiaries (California Healthline, 2/1).

According to CongressDaily, Congress is likely to "take up physician payments this year" because the temporary formula under which the reimbursements are calculated is scheduled to expire (Heil, CongressDaily, 2/10). Beginning in 2006, physician reimbursements will be reduced 5% annually until 2012 if reforms to the system are not made (CQ Today, 2/10).

Speaking at the hearing, physicians said the scheduled cuts could result in reduced access to care for Medicare patients and argued that a fundamental change in the provider reimbursement system is needed. "Without action to implement a long-term solution now, repeated congressional intervention would be needed to block payment cuts that jeopardize continued access to high-quality care for the elderly and disabled," Nancy Neilson, an executive committee member for the American Medical Association, said (CongressDaily, 2/10).

Rep. Nancy Johnson (R-Conn.) advocated changing the reimbursement system to a pay-for-performance formula, saying, "We need to fundamentally rethink how we pay our doctors. The current system has no incentive for performance. It's time ... to reward providers who provide quality care."

MedPAC Chair Glenn Hackbarth, who supports such a system, warned that it is "not an easy approach," adding, "It's not automatic. It requires decisions about what we want and don't want. It also requires some risks."

Meanwhile, Rep. Pete Stark (D-Calif.) said that an earlier MedPAC report found that "aggregate payments to physicians" have increased "comfortably," with spending on physician services increasing 6% annually since 1997 (CQ Today, 2/10). Noting the likelihood of public pressure to increase physician payments, he added, "If we link quality, I think we're going down a road that we're not prepared to" (CongressDaily, 2/10).

In related news, two newspapers on Thursday examined reaction to the Bush administration's announcement this week that the estimated cost of the new Medicare prescription drug benefit will be $720 billion over 10 years.

• Christian Science Monitor: The Monitor examined how "sticker shock and awe" from the new cost estimate is "focus[ing] the minds of many lawmakers," who are calling to "reopen the issue" of Medicare reform -- "or enough of it to rein in future costs." In what the Monitor says is an "early glimpse of a debate likely to dominate American politics into the next decades," both Republican and Democratic lawmakers "are testing the waters for alternatives, ranging from revisiting the hard-fought 2003 Medicare prescription drug bill to casting the Social Security debate in a much larger frame, including Medicare, pensions and new savings initiatives" (Russell Chaddock, Christian Science Monitor, 2/11).
  


• San Francisco Chronicle: According to the Chronicle, analysts are saying that the "new price tag" for the drug benefit "is a sign of worse to come for the federal budget" and that the recommendations to reduce entitlement spending in Bush's fiscal year 2006 budget proposal would do little more than offset recommended spending increases. Robert Moffit, director of domestic policy at the Heritage Foundation, said the new Medicare cost estimate "is going to cast a shadow over the entire conservative domestic agenda," adding that "members of Congress have just simply been in a state of denial" (Lochhead, San Francisco Chronicle, 2/11).

NPR's "All Things Considered" on Thursday included a news analysis on the new projections on Medicare costs (Schorr, "All Things Considered," NPR, 2/10) The broadcast is available online in RealPlayer.