Sen. Baucus Proposes ‘Pay-for-Performance’ System To Reward Quality in Medicare

Sen. Max Baucus (D-Mont.) on Wednesday introduced a bill that would establish a "pay-for-performance" system for some parts of Medicare, CongressDaily reports (Rovner, CongressDaily, 6/24). According to The Hill, the legislation would "lay the groundwork to link Medicare reimbursement levels to quality of care," and it serves as "an indication that health care providers are facing a potentially revolutionary new way of being paid for by the government amid a gloomy financial outlook for the Medicare system" (Marre, The Hill, 6/23). Beginning in 2008, the "Medicare Quality Improvement Act" would establish a series of bonus payments for Medicare Advantage -- the program's managed care plans, formerly called Medicare+Choice -- and Medicare's End Stage Renal Disease providers, which serve kidney dialysis beneficiaries (CongressDaily, 6/24).

The bonus payments would be available to "any participating provider, hospital or health plan that demonstrates improved quality of care through structural or capacity improvements such as translator services, telemedicine or cultural competence," according to the bill summary (The Hill, 6/23). The bonus payments would be "budget neutral" because they would be funded by withholding 2% of payments to managed care plans and kidney dialysis programs and depositing the payments in a pool, CongressDaily reports (CongressDaily, 6/24). The measure would also establish a "Quality Advisory Board" to advise the HHS secretary "on quality measurement, pay-for-performance, and the development of a national quality agenda," according to the bill summary. In addition, the legislation would seek input from HHS and the Institute of Medicine to create a "roadmap" for implementing a pay-for-performance system to all of Medicare (The Hill, 6/23).

"The United States spends twice as much on health care than any other country, but studies have shown that quality is about the same," Baucus said, adding, "No matter how you cut it, that means that the value of our health care -- what we are getting for each dollar -- is less in the United States than in other developed countries." However, Baucus' measure is "already taking heat" from some quarters because of the withholding provision, CongressDaily reports. In a letter to Baucus, Jack Ebeler, president and CEO of the Alliance of Community Health Plans, said, "[W]e do not believe that a withhold provides the firm financial foundation for quality improvement that your legislation envisions." However, Ebeler added that ACHP does support programs that create incentives for higher quality of care and praised the bill for extending the pay-for-performance system beyond private health plans, CongressDaily reports. "It is essential to include all of Medicare as quickly as possible if performance incentives are to yield long-term improvements for all beneficiaries," Ebeler wrote (CongressDaily, 6/24).