Senate Prepares to Debate Two Medicare Payment Proposals

The chair of the Senate Finance Committee introduced a bipartisan bill last week that would provide an 18-month update in the Medicare physician payment rate, thus blocking a steep payment reduction scheduled for July 1. Today, the committee's ranking Republican introduced an alternative bill that also would provide a positive 18-month payment update.

Sen. Max Baucus, D-Mont., introduced the Medicare Improvements for Patients and Providers Act of 2008, S. 3101, on June 6. If enacted, the bill would maintain the current physician payment rate for the last six months of 2008 and provide a 1.1 percent increase in the physician payment rate in 2009. In so doing, the Baucus bill would negate a 10.6 percent decrease in the physician payment rate scheduled to take effect on July 1 and a 5 percent decrease in 2009.

"The AAFP applauds and supports efforts by Sen. Baucus and his colleagues in both parties to ensure that America's Medicare patients have access to health care," said AAFP President Jim King, M.D. of Selmer, Tenn., in a prepared statement.

"Reforming America's health care system must meet two goals; ensuring that people can afford health care and ensuring that physicians can continue to care for them without fear of bankruptcy," King said. The Baucus bill makes a "significant step toward meeting those goals."

The AAFP also has issued a Speak Out alert asking members to contact their senators and voice support for the Baucus bill.

Sen. Charles Grassley, R-Iowa, the senior Republican on the Senate Finance Committee, introduced the Preserving Access to Medicare Act of 2008, an alternative to Baucus' bill that also would provide an 18-month payment update. Like the Baucus bill, the Grassley measure would maintain the current funding level through the end of the calendar year and provide a 1.1 percent increase for 2009.

Grassley's bill, however, proposes paying for the update by cutting Medicare indirect medical education payments to hospitals. Baucus' bill calls for paying for the update in part by reducing subsidies for Medicare Advantage private fee-for-service plans.

The Bush administration and some congressional Republicans oppose any cuts to the Medicare Advantage program, and Bush has threatened to veto any bill that contains cuts to Medicare Advantage.

"Although every Senate office we meet with tells us (their) senator strongly supports an 18-month positive update for physician payment, they don't agree on how to pay for the update and whether to include other important Medicare provisions that increase the price tag," said Kevin Burke, director of the AAFP's Division of Government Relations. "It is possible that Congress and the White House will not reach agreement in time to prevent the 11 percent reduction from being implemented on July 1."

The two proposals contain provisions beyond the Medicare payment update. For example, both proposals address electronic prescribing, or e-prescribing, and the Physician Quality Reporting Initiative, or PQRI.

The measures will encourage e-prescribing for Medicare patients by using a carrot-and-stick approach that provides incentives to promote the initial use of e-prescribing, followed by penalties for health care professionals who fail to adopt e-prescribing. Both proposals provide positive incentives for those who use qualified e-prescribing systems. Those incentives take the form of a 2 percent bonus in both 2009 and 2010, tapering down to a 1 percent bonus in 2011 and 2012. An incentive payment of 0.5 percent would apply in 2013.

For health care professionals who do not adopt e-prescribing, however, the proposals would impose payment reductions of 1 percent in 2011, 1.5 percent in 2012, and 2 percent in 2013 and beyond.

"We would prefer the e-prescribing provision to not include penalties," said Burke. "But at least the provision is balanced with bonus payments."

Both proposals also extend the PQRI for the next two years, increasing PQRI bonuses to 2 percent for 2009 and 2010.

The Baucus bill puts mechanisms in place that could lead to the expansion of a three-year medical home demonstration project established by Congress as part of the Tax Relief and Health Care Act of 2006.

The project is set to launch in eight states in 2009 and will pay practices a care-coordination fee for managing the care of patients with chronic diseases, while also allowing physicians to share in any savings obtained from reducing hospital admission rates. Under the Baucus bill, the HHS secretary would have the authority to expand the duration and scope of the demonstration project if certain quality and saving targets were achieved. The bill also would waive application of administrative obstacles to launching the demonstration.

King said he expects the medical home demonstration project will improve quality and produce savings, thus triggering a broad expansion of the project in accordance with the Baucus legislation.

"The patient-centered medical home concept will give patients access to a primary care physician who will coordinate their medical services in a complex health care system," King said. "In doing so, the medical home model of care can dramatically reduce fragmentation of care, duplication of services, patient confusion and interspecialty miscommunication."