Congress Floats Plan to Fix Medicare Physician Fee Schedule


Any legislative approach to fixing Medicare's sustainable growth rate system “would be prohibitively expensive,” according to House Ways and Means Chair Bill Thomas (R-Calif.).

Attaining a permanent fix is possible, however, provided that Congress and the Bush administration work on efforts to combine administrative and legislative actions, Rep. Thomas and Nancy L. Johnson (R-Conn.), health subcommittee chair, wrote in a letter to Mark McClellan, M.D., administrator of the Centers for Medicare and Medicaid Services.

The plan is one of several in Congress that seek to fix the Medicare physician fee schedule, as physicians face a looming 4.3% cut to their reimbursement in 2006. CMS actuaries project negative payment updates of minus 5% annually for 7 years, beginning in 2006, if the flawed sustainable growth rate (SGR) is not corrected.

CMS could do its part by removing prescription drug expenditures from the baseline of the SGR, something it should have the authority to do, the letter suggested. Because drugs aren't reimbursed under the fee schedule, it's illogical to include them in the expenditure total when calculating the schedule's update.

The agency should also account for the costs of new and expanded Medicare benefits, which are included in the SGR calculation, the letter stated.

On a legislative fix, Rep. Thomas wrote that “the time is ripe” to tie physician payments to quality performance. CMS demonstration projects on performance-based payments in Medicare “will provide us with the experience we need to design appropriate rewards for delivering quality care,” he wrote.

At press time, Rep. Johnson was prepping to introduce a pay-for-performance bill that would repeal the SGR and base future updates for physician payments on the Medicare Economic Index (MEI).

At a recent hearing, Dr. McClellan told Rep. Johnson such a measure could come at a high cost: that is, MEI-based increases would be $183 billion over 10 years.

CMS, meanwhile, is working to remove Part B drugs from the formula, although the procedure “presents difficult legal issues that we haven't yet been able to solve.” It also would not solve the entire problem, as positive updates would not take place for several years, regardless of whether CMS removed drugs prospectively or retrospectively, his testimony indicated.

In addition, he cautioned Rep. Johnson's subcommittee that removal of drugs would increase beneficiary premiums.

Physicians groups offered support for this legislative approach at the hearing. “We're committed to improving quality of care, but to make further quality improvements physicians must be adequately reimbursed for treating Medicare patients,” John H. Armstrong, trustee to the American Medical Association, testified.

Leaders on the Senate Finance Committee have since introduced a pay-for-performance bill, although it may not get the same kind of support from physician groups as the forthcoming Johnson bill.

Applying the notion that Medicare should attain better “value” for its money, the bill from Sen. Chuck Grassley (R-Iowa) and Sen. Max Baucus (D-Mont.) proposes to link a small portion of physician Medicare payments to reporting of quality data and demonstrated progress against quality and efficiency measures. The measures would focus on health care processes, structures, outcomes, patient experience of care, efficiency, and use of health information technology.

Participation would be voluntary, but those choosing not to report quality data would receive a reduced payment update.

Unlike the Johnson proposal, the Senate bill fails to include a fix to the SGR, Mary Frank, M.D., president of the American Academy of Family Physicians, said in a statement. Instead, the legislation “attempts to improve the payment system to physicians without attempting to stem the declining Medicare reimbursement rate.”

Physicians could face lower Medicare payments and additional costs under such requirements, Dr. Frank said. While it might increase doctors' costs in order to meet and report specific care standards, the bill “doesn't help them obtain the technology to do so,” she said. Without the technology to participate in the bill's proposed reporting system, physicians' reimbursement will be cut even further, hindering their ability to afford the technology.

The outcome is family physicians may be forced to drop Medicare beneficiaries, Dr. Frank said. In addition, “tons of implementation questions” aren't broached in this bill, said Michele Johnson, senior governmental relations representative of the Medical Group Management Association.

“Right now, there are no evidence-based, valid scientific measures of efficiency, unless you're talking about clinical measures,” Ms. Johnson said. It's unclear how such measures would be developed under the legislation, and how people would physically report these quality measures.

In a summary of the bill, the authors said they didn't address the sustainable growth rate because they wanted to limit provisions to quality improvement, value-based purchasing, and health information technology. However, “sense of the Senate” language (nonbinding language that accompanied the bill) did acknowledge that the negative physician update needed to be addressed, based on the “unsustainable” nature of the SGR.


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