The Medicare man: Answers for the future

Congress this year is debating several Medicare issues that could have a major impact on physicians -- from reimbursement cuts to pay-for-performance.

When Congress needs help tackling such matters, it turns to the Medicare Payment Advisory Commission, an independent panel of health experts that makes recommendations to lawmakers.

Given the importance of Medicare topics in the legislative spotlight this year, the commission's work is of particular interest to medicine. AMNews recently spoke about some of these issues with MedPAC Chair Glenn M. Hackbarth.

Question: The commission is calling for a Medicare rate increase for physicians next year. If Congress follows your advice, doctors will see a roughly 2.7% boost. Why does the panel feel that physicians need this update?

Answer: We see two basic flaws in the current system. One is that it disconnects the prices paid to physicians from changes in their costs for providing the services. And the second, while billed as a volume-control system, it logically cannot have any positive effects on decisions of individual physicians about volume. Because the cuts are applied across the board, every physician is treated the same regardless of whether he or she controls volume or inappropriately increases volume.

Since there's no reward for good performance, the system can't alter behavior in a constructive way. For those two basic reasons, we think the system is fundamentally flawed, and we ought to have a basic mechanism that looks at the appropriate price increase each year based on available data.

Q: MedPAC found that, for the most part, Medicare beneficiaries are not encountering physician access problems right now. How much longer can this last if Congress does not step in and prevent consecutive years of cuts?

A: It is our view that if there were multiple years of cuts, there would likely be an effect on access, but exactly when it would occur and where it would occur first is really beyond our ability to predict. Undoubtedly, access problems will begin to crop up in particular markets. It won't happen uniformly across the country. Among the reasons for that is that the relationship between Medicare fees and fees that doctors get for treating private patients is highly variable. Medicare is a relatively good payer in some markets; in other cases it's a relatively poor payer.

Q: So a physician might say, "Medicare is an insufficient payer right now, so I'll make it up on the private side," or vice versa?

A: Or alternatively, a physician would say, "private payers pay better, and I'll try to increase the volume of private patients and decrease the volume of Medicare patients." I don't think it's necessarily a cost-shifting mechanism. But that is only one of a number of different variables that will come into play in each market. It will vary even by specialty, so it's a very complicated dynamic.

Q: How does the panel think the current payment system should be replaced? Some specialty physicians groups have criticized MedPAC for not weighing in on whether the Bush administration can make changes to the reimbursement formula instead of leaving it all up to lawmakers.

A: We've recommended that each year, the update be determined anew based on available information about access, expected increases in costs, etc. Some physician organizations have wanted us to endorse various proposals for reducing the cost of repeal of the [Medicare payment formula], and we have not done that.

People in Congress would like the administration to do it without legislation, because then it's not [counted] as a cost-increasing item in the congressional budget process, and obviously it makes it easier for them to do. But it has no effect on the number of dollars flowing out of the Treasury; it has no effect on real Medicare expenditures. It is simply [an accounting] issue -- and a highly charged political issue at that -- and we've declined to become part of that debate.

Q: One of the changes that you did suggest involves a pay-for-performance program for doctors that would not involve any new Medicare money. Since up to 2% of payments would be reserved only for the top performers, would this amount to a de facto cut for many of the practitioners out there?

A: For providers that don't perform well on the quality measures, yes. The problem is not a shortage of dollars in American health care. The problem is that we're not properly rewarding excellent performance. Many physicians perform very well indeed, but the fact is that not all of them do. We think that it's time for Medicare, as well as private payers, to begin rewarding the truly excellent ones who have been underpaid and under-rewarded in the past.

Since we think there's plenty of money in the system, that means taking some away from those that aren't performing as well. If the solution to every problem is more money, this burden, which is already incredible, the financial burden on taxpayers and private payers, it's going to reach the breaking point.

Q: There is some concern in the physician community that MedPAC's pay-for-performance plan would punish small practices that cannot afford to invest in the necessary information technology.

A: There are options available to physicians, from becoming a part of practice groups to potentially forming different types of alliances for purchasing information technology without fully merging. There are things that people can do if they are given an appropriate reward for it. To say, "no, it just can't be done" all the time or "I've got to change the way I work or organize; I can't do it" is not a sufficient response. We've got pressing problems with quality of care in the United States. Again, many physicians are outstanding. Not all are. We can't accept as an excuse that "it's uncomfortable for me to change."

Q: The commission wants Congress and the Dept. of Health and Human Services to establish national standards for physicians who bill Medicare for interpreting imaging tests. Why?

A: We see evidence of uneven quality. Basically, the system at this point relies simply on state licensing. If you have a license, you can do anything within the scope of your license -- which basically means anything at all -- and Medicare will pay for it. Historically, when most of the imaging was done in an institutional environment, there was an overlay of private institutional controls. Hospital quality control mechanisms, spawned in part by the accreditation process, helped assure a measure of quality. Now, with so much of the imaging technology migrating out of the institutional settings and into office settings, we're basically left without any oversight of quality or safety.

Q: Your group recommends that a ban, created by the 2003 Medicare reform law, on physician referrals to specialty hospitals in which they have an ownership interest should be extended through the end of 2006. How do you answer critics who say that this policy interferes with legitimate and healthy competition among hospitals?

A: Our proposal is for an extension of the moratorium that would allow us to gain some time to better assess the impact of physician-owned specialty hospitals and whether it is in fact constructive competition or not. When we did our analysis, just by virtue of the timing, we could only look at one year of data and a very small sample of hospitals. What we found was that the specialty hospitals had higher costs, though the difference was not statistically significant in large part because of the very small sample. We had no evidence on quality, and HHS has not yet produced its report, which is to look at quality information.

Q: If the moratorium is not continued, will there be a risk that specialty hospitals will cherry-pick healthier patients away from community facilities?

A: The evidence on that is pretty clear. Based on the 2002 data, there were strong indications of selection of patients that were healthier than average and less severely ill than average. This applied for all types -- heart hospitals, orthopedic hospitals and surgical hospitals. One of our recommendations, not just for specialty hospitals but for all hospitals, is that there ought to be a severity adjustment added to the diagnosis related group system.

Q: The commission has faced criticism in the past for not being adequately attuned to the needs of rural physicians and other health professionals who treat Medicare beneficiaries in underserved areas. What have you done to address those concerns?

A: In June 2001, we published a report devoted entirely to rural health issues. That report led to a long series of legislative actions to improve payment for rural providers. Most of the rural provisions, for example, in the Medicare Modernization Act [of 2003] were based on MedPAC analysis and recommendations.

Q: How can physicians get involved in the work that the commission undertakes? Are there good ways for individual doctors to weigh in on issues that are important to them?

A: It's always a challenge for individual physicians or practices. We work extensively with the many associations that represent physicians, from the AMA through all the specialty societies and the like. That's the best way for physicians to have their voice heard, through their professional associations. We never turn away a phone call or a good idea from anybody, but through groups is obviously the most efficient way for physicians to do it.