Congressional Hearing Wades Into Medicare Payment Reform

Congress needs to reform the Medicare physician payment system by taking steps to promote primary care services, according to witnesses who testified before the House Ways and Means Subcommittee on Health here on Sept. 11.

Bruce Vladeck, Ph.D., a former administrator of the (then) Health Care Financing Administration under the Clinton administration and one of four witnesses to testify before the subcommittee, said primary care reduces the need for more acute services, resulting in higher quality and greater cost savings. Yet, the Medicare fee schedule has "led to a gradual relative devaluation of primary care services relative to (sub)specialty services," said Vladeck. This makes it "harder and harder for physicians to make a living providing primary care services."

In written testimony to the committee, Vladeck described the current Medicare physician payment system as "profoundly broken," saying, "The annual drama associated with the irrationality of the sustainable growth rate (SGR) serves no one's interests very well."

The SGR employs a formula that aligns actual spending rates with specified targets to determine Medicare payment levels. During the past six years, Medicare spending has exceeded targeted rates, triggering steep reductions in payments to physicians that have been averted only by last-minute congressional intervention.

"Preoccupation with fixing the effects of the SGR also diverts time and attention from other important dimensions of the physician payment issue, most notably the continuing reallocation of funds from primary care services to (sub)specialty procedures, precisely in the wrong direction," said Vladeck.

Vladeck alluded to the inequities of the resource-based relative value scale, or RBRVS, which is used to determine the cost of Medicare procedures. Congress should ask the Medicare Payment Advisory Commission, or MedPAC, and the Government Accountability Office to consider the development of alternative coding systems for physician services, especially those for primary care, said Vladeck. At the same time, Congress should adopt a version of MedPAC's recommendation for a primary care add-on to increase the fees of physicians who are truly providing primary care services.

"I would support the policy recommendation made by MedPAC -- that Medicare recognize, through data technology, which physicians are really serving as primary care physicians to Medicare beneficiaries," said Vladeck. "It is not a question of specialty labeling. It is a question of actually looking at the claims."

"There should be some additional investments for (primary care physicians)," he added.

AMA President Nancy Nielsen, M.D., Ph.D., an internist practicing in Buffalo, N.Y., also described the SGR as broken and called for its outright appeal. In July, Congress approved an 18-month update to the Medicare payment rate, thus providing a slight increase in the Medicare physician payment rate and averting deep reductions that would have occurred under the SGR. Without congressional intervention, physicians face a 20 percent payment reduction by Jan. 1, 2010, a prospect that Nielsen said was like "going over a cliff."

"It is really important that we try to figure out what we are going to do over the next 16 months," Nielsen testified. "We need a stable payment system that allows physicians to focus on what they want to do, which is to take care of patients."

Congress has not determined how it wants to reform the Medicare payment system, but any type of reform must involve widespread physician input and consensus because of the impact on physicians and their patients, said Nielsen. "We now have the opportunity to work together and achieve real change," she added.

Rep. Dave Camp, R-Mich., the ranking Republican member of the subcommittee, called for a better Medicare payment system, one that "rewards physicians for providing, comprehensive, efficient, high-quality care." He said he hoped the hearing would eventually lead to a long-term solution to Medicare physician payment.

Camp spoke about the importance of the physician-patient relationship, saying that the impending 20 percent SGR cut in 2010 would "undermine the foundation of the Medicare program and the doctor-patient relationship."

"There is no one on this (subcommittee) who thinks physician payments should be cut by 20 percent," he said.

Rep. Pete Stark, D-Calif., chair of the subcommittee, also assailed the SGR, saying it is "not very sustainable." But Stark said he does not believe physicians would stop taking Medicare patients because of low payment rates.

However, Nielsen told Stark during the question-and-answer period that the threat of physicians not treating Medicare patients is very real and should be taken very seriously.

Gail Wilensky, Ph.D., a senior fellow with Project Hope in Bethesda, Md., also said the current SGR system threatens physician participation in the Medicare program. Like other speakers, Wilensky said "primary care appears to be undervalued by any measure."

She urged Congress to adopt the MedPAC recommendation to provide a fee schedule adjustment that would raise payments for primary care services.

"(MedPAC) has suggested using a modifier for billing codes for primary care services provided by practitioners who focus on primary care," said Wilensky, a former CMS administrator. "The modifier would provide a mechanism to target increases in payment for selected services to practitioners who primarily provide primary care services and do so on a budget-neutral basis so as to not increase total physician spending."

Wilensky also noted that Medicare has increasingly moved away from a fee-for-service type of payment system toward a bundled payment system, except in the area of physician payment. She called for adopting bundled payments for physicians starting in 2010.

Meanwhile, Donald Crane, president and CEO of the California Association of Physician Groups in Los Angeles, urged Congress to adopt a capitated payment model to achieve higher quality, more efficient and less costly health care. A capitated payment system encourages providers to work within a budget and to invest in systems and infrastructures that reduce costs and improve efficiencies. A fee-for-service system, by contrast, creates incentives for episodic, acute care, leading to more treatments and procedures, he said.