Report Advocates Changes to Medicare Physician Payments
The Medicare Payment Advisory Commission on Thursday released a report on the Medicare physician reimbursement formula that proposed alternatives to the current system, CongressDaily reports. For the past 10 years, Medicare has used the Sustainable Growth Rate formula to calculate physician reimbursements.
Under the SGR formula, Medicare physician reimbursements decrease when prior year payments exceed a target level based on the growth of the economy. The SGR formula would reduce Medicare physician reimbursements by 10% next year and by 40% during the next eight years, according to the report.
One alternative recommended in the report would "drop the SGR approach" and "create new incentives for practitioners to provide better preventive care to head off more expensive ailments," and a second alternative would "apportion physician payments on a regional basis tied to the varying costs of treating patients from one place to another" and "reward physicians who clearly improved their efficiency of care," CongressDaily reports (Hess, CongressDaily, 3/2).
According to the report, Medicare should:
- Provide physicians with more guidance on whether they overuse medical services and more accurately calculate prices to eliminate incentives for physicians to use unnecessary services;
- Encourage physicians and hospitals to organize into groups that are measurable on quality of care and efficiency;
- Establish incentives for physicians and hospitals to work together to improve the efficiency of treatment;
- Establish incentives for primary care physicians to provide more preventive and coordinated care;
- Conduct research to compare the effectiveness of different treatments for specific conditions (Reichard, CQ HealthBeat, 3/1); and
- Encourage younger physicians to establish geriatric practices (CongressDaily, 3/2).
MedPAC also released a separate report with recommendations to Congress and CMS on revisions to Medicare reimbursements for private Medicare Advantage plans (CQ HealthBeat, 3/1). The report recommended that Medicare reimburse MA plans at the same rate as the traditional fee-for-service program.
According to the report, Medicare reimbursements for MA plans are 12% more than those for the fee-for-service program for equivalent benefits.
The Congressional Budget Office last month estimated that the recommendation would save Medicare $8.1 billion in 2008 and $64.8 billion over five years (Werber Sarafini, CongressDaily, 3/1). According to the report, Medicare should revise reimbursements to MA plans over time to limit disruptions in care that could have "unintended consequences" (Freking, AP/Atlanta Journal-Constitution, 3/1).
Senate Finance Committee Chair Max Baucus (D-Mont.) on Wednesday at a hearing of the committee said that Congress likely will not revise the SGR formula in 2007. "I think we're still at the point where we have to deal with this on a yearly basis," Baucus said, adding, "I think we're going to get there, but I don't think this year. It's premature" (CQ HealthBeat, 3/1).
At the hearing, Byron Thames of the AARP said that "the SGR simply doesn't work" but acknowledged that revisions to the formula will take time.
Cecil Wilson, who testified on behalf of the American Medical Association, said, "No amount of tinkering (with the SGR formula) can fix what is broken beyond repair" (CongressDaily, 3/2).
CBO Director Peter Orszag said that the cost of the elimination of the SGR formula indicates a need for a broader focus on health care costs, rather than only costs in Medicare and Medicaid, adding that "moving the nation toward capturing this opportunity is essential to putting the country on a sound long-term fiscal path" (CQ HealthBeat, 3/1).
The testimony from Orszag is available online. Note: You must have Adobe Acrobat Reader to view the testimony.
House Energy and Commerce Health Subcommittee Chair Frank Pallone (D-N.J.) said that the MedPAC report indicates MA plans are overpaid.
"The reason they were paid that extra amount is because of their relationship with the Republicans," Pallone said. Pallone added that he hopes to use overpayments to MA plans to fund other health care programs.
Baucus spokesperson Carol Guthrie said, "The report confirms that it's a place we need to look" to reduce costs.
However, Rep. Dave Camp (R-Mich.) said that reductions in reimbursements to MA plans would result in a loss of some benefits for beneficiaries and a loss of access to providers in rural areas. Camp said that MA plan reimbursements are "fast becoming the proverbial low-hanging fruit." He added, "As someone who has represented fruit growers, let me warn you: low-hanging fruit tends to be the least ripe and the most sour."
CMS Deputy Administrator Herb Kuhn said of MA plans, "It's good care, it's additional benefits. It's a nice value being brought to Medicare beneficiaries."
America's Health Insurance Plans President and CEO Karen Ignagni said, "Congress shouldn't take away benefits for seniors who depend on this program." (AP/Atlanta Journal-Constitution, 3/1).
The MedPAC reports on the SGR formula and Medicare provider reimbursements are available online. Note: You must have Adobe Acrobat Reader to view the reports.
APM's "Marketplace" on Thursday reported on the MedPAC report and Medicare physician reimbursements. The segment includes comments from Wilson and Tricia Neuman, a Kaiser Family Foundation vice president and director of the Medicare Policy Project at the foundation (Palmer, "Marketplace," APM, 3/1). Audio and a transcript of the segment are available online.
In addition, NPR's "Morning Edition" on Friday reported on Medicare physician reimbursements, the State Children's Health Insurance Program reauthorization and federal health care expenditures. The segment includes comments from Paul Ginsberg, president of the Center for Studying Health System Change; Orszag; Pallone; and House Ways and Means Health Subcommittee Chair Pete Stark (D-Calif.) (Rovner, "Morning Edition," NPR, 3/2).
Audio of the segment is available online.