Debt-reduction Talks Should Lead to Medicare Payment Fix, Says AAFP

Academy Urges Congress, White House to Protect, Strengthen Primary Care

June 29, 2011 05:15 pm News Staff

The AAFP is urging the Obama administration and congressional leaders to agree on a debt-reduction proposal that reforms the Medicare physician payment system and addresses the nation's family physician and primary care workforce needs while also ensuring that everyone has access to and coverage for health care services.

In a strongly worded letter to Vice President Joseph Biden and House and Senate leaders from both sides of the aisle, who have been engaged in negotiations regarding how to reduce the nation's spiraling deficit, AAFP Board Chair Lori Heim, M.D., of Vass, N.C., said, "If any budget proposal is to restrain the growth in health care spending, it must also support programs that build the family physician and primary care workforce, pay for quality and outcomes of medical care, and ensure that everyone has access to that care."

"In the fee-for-service payment model that dominates our health care system, doctors and hospitals are paid for doing more," said Heim in the letter. "There is little incentive in the current model to coordinate care or to manage chronic disease. We urge you to recommend reforming physician payment to alter these incentives to pay for better care, rather than just more care."

Heim reiterated the Academy's support for a blended payment model for primary care that is delivered within the context of the patient-centered medical home, or PCMH, saying that the model should include the following three components:

  • fee-for-service for discrete services provided to patients, with a higher payment rate for primary care physicians providing primary care services;
  • a care management fee for the more global care coordination services provided to patients, often on a nonface-to-face basis, in the PCMH setting; and
  • pay-for-performance that rewards efforts to improve health care and recognizes demonstrated value to the patient.

"Specifically, we urge you to recommend a Medicare fee schedule that would support a rate for primary care services delivered by primary care physicians that is at least 3 percent higher than payment for nonprimary care," said Heim. She also urged that the Medicare primary care incentive payment be increased from the current 10 percent to 20 percent.

Heim stressed that reforming the Medicare physician payment system using only a different fee-for-service formula will not accomplish the congressional goals of restraining health care cost increases and improving the quality of health care. Fee-for-service, by itself, "encourages utilization, does not check avoidable duplication of services, wastes resources, and leads to inefficiency and unnecessary costs."

"The payment system should actively encourage care management and preventive health and reward quality improvement," Heim said.

To accomplish this, payment reform, at least for primary care delivered by a PCMH team, requires a blended payment, and, in time, the percent of the blended payment attributable to fee-for-service payments should decline, reducing dependence on a system that encourages volume.

An important first step in payment reform, said Heim, would involve "long-term relief for physicians from devastating reductions in payments resulting from the Medicare sustainable growth rate, or SGR, formula."

"Unless Congress acts again to override it, the SGR formula used to calculate annual updates will mean a 29.5 percent cut in Medicare payments to physicians and other health care professionals beginning on Jan. 1, 2012," Heim said. "The threat of these drastic payment cuts creates an unstable program for doctors and patients. We urge you to recommend a five-year Medicare schedule that narrows the payment differential between primary care and other physicians in order to provide a degree of this much-needed stability."

Congress should use this time to boost the primary care incentive payment to 20 percent and to continue federal support for the Medicaid requirement that payments to primary care physicians for primary care and preventive health services be at least equal to Medicare's payments, she said.

Heim also called for a strong commitment to programs administered by the Health Resources and Services Administration, the Agency for Healthcare Research and Quality, and other agencies "that are essential to training the nation's physician workforce, recruiting physicians to practice in underserved areas and supporting them with research into evidence-based medical practice." The AAFP, in particular, supports federal programs to improve the health of patients, families and communities by promoting primary care medicine training programs and the National Health Service Corps, which fosters innovations that improve quality and support efforts to provide health care access to underserved Americans, she said.

In addition, Heim reaffirmed the Academy's support for several critical investments made by the Affordable Care Act, urging Congress specifically to protect funding for the Center for Medicare and Medicaid Innovation, which was established to identify, validate and diffuse new care models aimed at delivering better health care and reducing costs through continuous improvement.

"The physician community believes strongly in the value of evidence, and it is the responsibility of the innovation center to provide credible, reliable and usable evidence for health system delivery reform," Heim said.