Senators plan move on performance bill

Finance Committee leaders pledge action on pay-for-performance under Medicare as a House lawmaker introduces her own version.

By David Glendinning — Posted Aug. 15, 2005

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Washington -- Senate sponsors of a Medicare pay-for-performance bill are committed to moving on the issue before year's end despite concerns that budgetary squabbling could keep Congress from addressing upcoming reductions in physician pay.

Senate Finance Committee Chair Charles Grassley (R, Iowa) told witnesses at a recent hearing that pay-for-performance legislation he wrote with Ranking Member Max Baucus (D, Mont.) will move through the committee in the months after the August congressional recess. "We expect that to be part of our final package this fall," Grassley said.

But whether the final package will include a measure to halt an estimated 4.3% cut in Medicare payments coming in January 2006 remains unclear. Grassley and Baucus made the decision to omit any reimbursement fix from their pay-for-performance bill, deferring instead to separate legislation authored by Sens. Jon Kyl (R, Ariz.) and Debbie Stabenow (D, Mich.) that would turn cuts in 2006 and 2007 into increases of at least 2.6%.

Both Finance leaders have expressed their support for moving the physician update bill as well, but the separation of the two issues heightens the chances that Congress will consider paying doctors based on how well they perform without linking the initiative to a repaired payment system.

Physicians warn that this cannot happen.

The formula that determines how much Medicare pays doctors is on a "collision course" with the concept of pay-for-performance, also known as value-based purchasing, said Nancy H. Nielsen, MD, PhD, speaker of the American Medical Association's House of Delegates. Implementing one without addressing the other would ignore the fact that doctors would need to exceed the formula's spending limits to improve patient care, she said.

"If the [physician payment formula] is retained, the so-called reward for physicians will be additional pay cuts -- on top of the projected 26% in cuts over the next six years beginning Jan. 1, 2006," she said at the Finance hearing. "This is antithetical to the desired outcome of value-based purchasing and would only compound an ongoing serious problem."

Congress and the Bush administration also remain at an impasse over who should be responsible for the tens of billions of dollars that it would take to revamp the current payment system. But the number of lawmakers who want the White House to act on its own continues to rise.

Eighty-nine senators signed on to a letter to Joshua Bolten, the White House Office of Management and Budget director, urging him to green-light administrative action that would take some of the budgetary burden of a rate fix off Congress' shoulders. The missive, which Grassley and Baucus circulated to colleagues for signatures, calls on the administration to retroactively remove Medicare outpatient drug costs from the payment formula, a move that would free up more than $100 billion over the next decade to fund reimbursement increases.

"Administrative changes to the physician payment formula will allow Congress to concentrate on a long-term solution that will stabilize physician payments in the future," the senators stated. "It is imperative that we end the practice of enacting short-term solutions that result in deeper automatic physician payment reductions in future years."

More than 70 senators signed a similar letter last year to the Centers for Medicare & Medicaid Services, which would be expected to carry out the regulatory change. CMS continues to speak with legal counsel to determine whether the Medicare statute allows the agency to act in this way.

The AMA has supported removing outpatient drugs from the formula.

The House now has its own measure to consider. House Ways and Means health subcommittee Chair Nancy Johnson (R, Conn.) officially introduced the Medicare Value-Based Purchasing for Physicians' Services Act of 2005 before Congress recessed for its August break.

Although the basic structure of Johnson's legislation became available when staffers circulated drafts last month, the number of Medicare dollars at stake had remained tentative before its introduction.

If the bill becomes law, all physicians would receive yearly rate updates based on the Medicare Economic Index, which tracks the costs of providing medical services. Doctors who did not submit data on yet-to-be determined quality and efficiency measures in 2007 and 2008 would receive a 1% reduction in their reimbursements. Starting in 2009, physicians would see a 1% reduction if they did not exceed certain performance thresholds or show sufficient improvement over the year.

Johnson's decision to reject the Senate strategy of splitting the two issues and to instead include a payment formula overhaul in her pay-for-performance bill prompted representatives from several physician groups, including the AMA, to stand by her side at a press conference announcing the measure's introduction.

Physicians will be able to embrace a pay-for-performance model that initially links payments to the costs of providing care, said American College of Physicians President C. Anderson Hedberg, MD.

Dr. Hedberg said of Johnson's bill: "It recognizes that quality improvement cannot take place in an environment where physicians' fees are being cut."

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