Forum Speakers Decry Inadequacies of Medicare Physician Payment System

Congress should replace the current Medicare physician payment structure with a more equitable system that "adequately reflects increases in medical practice costs," AAFP member Edward Langston, M.D., of Lafayette, Ind., speaking as chair-elect of the AMA Board of Trustees, said during an April 3 forum here on Medicare physician payment.

"If Congress and the administration do not address this challenge now, the Medicare program will not have an adequate foundation to ensure access to high-quality health care services for our senior and disabled patients," said Langston, one of five panelists speaking at a forum sponsored by the American Enterprise Institute for Public Policy Research, or AEI. "This could spell disaster as Medicare prepares to accept this huge influx of baby boomers in the next few years," he added.

The sustainable growth rate, or SGR, determines annual Medicare payment rates by using a formula that aligns actual spending rates with specified targets. In the past few years, spending has exceeded targeted rates, triggering steep reductions in physician reimbursement -- reductions only averted by last-minute interventions by Congress and the Bush administration. The SGR is projected to cause a 40-percent reduction in physician payment rates during the next eight years, including an approximately 10-percent reduction in 2008.

"No business, especially small businesses like physician practices, can sustain these cuts and invest in health information technology and quality issues that are the wave of the future," said Langston. "This is no way to do business and no way to treat Medicare patients."

Langston, like other forum speakers, denounced the SGR as an "artificial target system" that has "trapped both physicians and policy-makers in a vicious cycle."

"Further spending targets presume that physicians alone can control the utilization," said Langston. "The reality is, many other factors contribute to the growth of volume."

Joseph Antos, Ph.D., the Wilson H. Taylor Scholar in Health Care and Retirement Policy at AEI, moderated the panel discussion. He concurred with Langston's assessment of the SGR's focus on physician costs, saying the SGR "only addresses one component of spending -- mainly price. It ignores the other components that are as least as important -- the buying of services and the appropriateness of care delivered by a physician."

"Physician payment policy is Medicare's version of Russian roulette," Antos said. "Congress loaded the pistol otherwise known as the SGR, and every year (Congress) helps to find a way to dodge the bullet."

That bullet is a 5-percent reduction in physician fees scheduled for essentially every year into the future, he noted, calling the dilemma of the SGR a "big, big problem."

Other members of the panel included Mark Miller, Ph.D., executive director of the Medicare Payment Advisory Commission, or MedPAC; Bruce Steinwald, director, health care team, Government Accountability Office; and Gail Wilensky, Ph.D., the former administrator of the Health Care Financing Administration, now known as CMS, which administers the Medicare and Medicaid programs.

Wilensky, now a senior fellow at Project Hope, an international health education foundation based in Millwood, Va., urged Congress to adopt a gradual fee schedule fix for Medicare physician payment, saying that if legislators do so, the SGR could and should be eliminated. "Simply lifting the SGR is not likely to be a good policy, as much as I deplore the SGR," said Wilensky.

Without some type of cost-control mechanism, physician expenditures under Medicare are likely to grow faster than other parts of the program, she predicted.

During the forum's Q-and-A segment, former Rep. Bill Thomas, R-Calif., past chairman of the House Ways and Means Committee, said the SGR was "flawed from the outset and Congress knew it."

"But we didn't have a better measurement structure," said Thomas, a visiting fellow at AEI who attended the forum as a member of the audience. "Reluctantly, Congress adopted it with the naive belief we could modify it as we went along."

Responding to Langston's remarks during the forum, Thomas accused the AMA and other physician groups of blocking attempts to base Medicare payment rates on physician performance standards and geographic differences.

"Hospital facilities and other providers have accepted quality measures," he said. "You continue to say you are working on it, but you provide 86 outs as to why it won't work."

Thomas told Langston that the "solution to your problem and the physicians' problem about dollars out front is to accept quality measures and a structure of payment that you may not like. … that is the only way to provide a structure that will replace the sustainable growth rate."

Langston said the AMA has accepted the challenge of quality performance. He pointed out that the AMA convened the Physician Consortium for Performance Improvement -- to which the AAFP belongs -- to develop quality measures for physicians, and he cited one CMS program in which 59 of 70 quality parameters were developed by the consortium.

"We can get physician buy-in on those parameters -- on those particular metrics," said Langston. "They were developed by professional groups, and (the groups) have done it in concert."