Seven Core Principles Could Save Costs, Improve Care, Reform Medicare Physician Payment System

AAFP Offers Health Care Payment Solutions to Finance Committee

August 13, 2012 05:20 pm News Staff

AAFP President Glen Stream, M.D., M.B.I., discusses solutions to Medicare payment with Sen. Ron Wyden, D-Ore., a member of the Senate Finance Committee, during a roundtable discussion on Medicare payment reform held last month.

Acting on a request from the Senate Finance Committee, the AAFP has sent a white paper(8 page PDF) to the committee that urges Congress to adopt several proposals the AAFP believes would save costs and improve the overall quality of care by making primary care the foundation of the nation's health care system.

In the paper, the AAFP called on Congress to adopt seven core proposals:

  • fix the flawed and dysfunctional sustainable growth rate (SGR) formula and resolve the back debt associated with the SGR;
  • provide a positive payment update and institute a differential payment that reimburses primary care physicians at least 2 percent higher than other professionals;
  • institute a risk-adjusted care management payment using data amassed from private sector, Patient Protection and Affordable Care Act and Medicare experience;
  • continue performance enhancement programs (e.g., the Physician Quality Reporting System) for the short term at the current level, but ultimately link pay-for-performance programs to patient management services, population management and reduction in the rate of annual growth of cost of care;
  • make the two-year Medicaid/Medicare payment parity for primary care physicians delivering primary care services permanent;
  • make the five-year Primary Care Incentive Payment permanent; and
  • enact medical liability reforms on the federal level to lower costs related to liability insurance.
story highlights

  • The AAFP has submitted a white paper to the Senate Finance Committee outlining seven specific steps Congress could take to control health care costs, improve quality and reform the Medicare physician payment system.
  • The proposals call for the elimination of the sustainable growth rate formula, medical liability reform and the permanent extension of primary care incentive payments, among other steps.
  • In the white paper, the AAFP cites numerous examples of how patient-centered medical home and other primary care initiatives have delivered on the promise of improved quality, enhanced health care access and lower health care costs.

If implemented, these proposals would greatly enhance the role of primary care in the nation's health care system, which would result in cost savings and improvements in care, according to the Academy.

The white paper is in response to a roundtable discussion on Medicare payment reform held by the Senate Finance Committee last month. AAFP President Glen Stream, M.D., M.B.I., of Spokane, Wash., who participated in the roundtable discussion, outlined various ways of strengthening the nation's primary care infrastructure at that time.

However, Sen. Max Baucus, D-Mont., chair of the Senate Finance Committee, asked Stream and the other panelists to submit their short-term, mid-term and long-term solutions for replacing the SGR formula in writing. The seven proposals offered by the AAFP serve as a "short and mid-term resolution template for the Senate Finance Committee with respect to physician payment and medical liability reform," according to the Academy.

Billions in Savings

As evidence to reinforce its recommendations in the white paper, the AAFP cited specific examples of how primary care has saved costs and improved quality in both the public and private sectors. The white paper also refers to a study published by The Commonwealth Fund and conducted by researchers at the Center for Studying Health System Change and Mathematica Policy Research showing that the Medicare program could save billions of dollars by permanently extending a temporary provision in the health care reform law that provides a five-year, 10 percent Medicare payment boost for primary care services.

This provision, known as the Primary Care Incentive Payment (PCIP), provides a 10 percent Medicare bonus payment to primary care physicians during a five-year period and was passed as part of the Patient Protection and Affordable Care Act. "James Reschovsky, Ph.D., and colleagues, in a study published on March 21, 2012, found that making the primary care bonus permanent would boost the number of primary care visits by 8.8 percent, while also raising the overall cost of primary care visits. But these increases would yield more than a six-fold annual return in lower Medicare costs for other services," said the AAFP.

The Academy also pointed out that if Congress does not extend the Medicare/Medicaid parity provision beyond the two-year test period, it will send a negative message to medical students about the future of primary care. Permanently extending the PCIP and the Medicaid parity provision, "sends a message to medical students that primary care matters for all patients, regardless of their income and health status," said the AAFP.

Practice Transformation

In the white paper, the AAFP also reported on a number of private sector initiatives testing alternative health care delivery and payment models that have been tried successfully. These private sector innovations are demonstrating the ability of primary care to save costs and improve care in a relatively short period of time, according to the AAFP white paper.

"Innovative payment methods for primary care will enable practices to transform how their care is designed and delivered, not only for Medicare patients, but for non-Medicare patients, as well," said the AAFP.

In turn, practice transformation can lead to increased patient and physician satisfaction, which is a benefit ranked nearly as high as income in studies of family physicians. "Thus, through such initiatives, the primary care physician workforce shortage can be addressed."

In the white paper, the AAFP also reiterated its support for a bipartisan House bill, the Medicare Physician Payment Innovation Act H.R. 5707, which would revamp the Medicare payment system by eliminating the SGR and initiate various payment reforms to reward the provision of primary care services, including via a 2.5 percent payment increase for primary care physicians.

The AAFP described the legislation as a "short and mid-range strategy," and said it provides a modest near-term update in physician pay and decreasing updates in subsequent years for those not transforming their practices to conform to recognized alternative delivery systems.

Medical Liability Reform

The AAFP also addressed medical liability reform in the white paper, and noted that the current medical liability system fails patients and physicians both. "It is needlessly subjective and shamelessly costly," said the Academy. "About half of the medical liability lawsuits are frivolous, and only about 5 percent of those injured by medical care actually receive compensation."

According to the AAFP, "excessive damage awards, rising malpractice premiums and defensive medical practices have greatly contributed to increases in health care spending with scant value added. We have long advocated for limits for noneconomic damage awards as well as on awards for total damages, damages for dependent care, wrongful death benefits and limited punitive damage awards," said the AAFP. "In addition, we must limit attorneys' contingency fees and require that awards be reduced by the amount of compensation from collateral sources."