Senate panel passes 1% Medicare doctor pay boost

The physician community gets its foot in the door on Medicare payments. But the Senate proposal also has a pay-for-performance provision.

By David Glendinning — Posted Nov. 7, 2005

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Washington -- The Senate Finance Committee made the first concrete move toward staving off a fast-approaching Medicare physician payment reduction by approving a 1% reimbursement increase, which would go into effect Jan. 1.

Without congressional intervention, physicians would see their rates decrease by 4.4% next year and by similar percentages in several of the following years. At press time, bill handlers were preparing for full Senate consideration of the package of Medicare and Medicaid provisions containing the one-time boost for doctors.

The initial move met with cautious optimism from the American Medical Association, which has lobbied strenuously this year to hold the line against reductions in Medicare pay. AMA President J. Edward Hill, MD, praised the Finance Committee members who first proposed the temporary cut reversal.

"Ensuring Medicare patients' access to physicians by stopping planned Medicare physician payment cuts is vital to the success of the Medicare program," Dr. Hill said.

But the physician community also has pushed Congress to repeal entirely the payment formula that has paved the way for the upcoming cuts -- a move that the Senate measure would not accomplish. The 1% increase, which would cost the government an estimated $10.8 billion over five years, would lag behind the estimated increase in physicians' costs of providing services next year.

Dr. Hill suggested that lawmakers could strengthen the proposal further down the legislative line. Senate negotiators must merge their final bill with whatever budget package the House approves. "We look forward to working with the House to build upon the Senate's progress on this issue of critical importance to our nation's seniors and the physicians who care for them," he said.

Trouble could be brewing

The process has the potential to be a contentious one. While the physician pay issue is the source of relatively little controversy among lawmakers, the proposed reimbursement update is accompanied by a host of other entitlement spending cuts and increases that have caused some heated debates on Capitol Hill.

The measure is part of the budget reconciliation process, under which key committees recommend savings to the rest of Congress for eventual merging into a single bill. Republican lawmakers said GOP support alone should be enough to approve the final package. Finance Committee Chair Charles Grassley (R, Iowa) attached the Medicare physician pay update to his version of the Senate reconciliation measure in part because the bill would not be open to a Democratic filibuster on the floor.

Pay-for-performance hitches a ride

A payment boost also could come with strings attached for doctors. The package that the Senate Finance Committee passed includes Grassley's Medicare pay-for-performance proposal, which would withhold up to 2% of doctors' pay for redistribution to physicians who meet certain quality standards.

The AMA and other physician groups criticized the Grassley plan when it was a stand-alone bill because it would not commit any new money to the payment system. Instead, the proposal would penalize some doctors to fund the bonus pool for others.

These groups gave a warmer reception to a physician payment reform plan from House Ways and Means health subcommittee Chair Nancy Johnson (R, Conn.), which would permanently change reimbursement by basing it on the cost of providing medical care. This plan would commit a little less than $155 billion to bolster reimbursements over the next decade and implement a pay-for-performance system, according to the Congressional Budget Office.

While Grassley's bill would result in a de facto 2% cut for some doctors without any long-term payment reforms, Johnson's measure would guarantee a yearly update, although doctors who didn't meet performance goals would see 1% deducted from that amount to fund the bonus pool.

At press time congressional aides could not say whether any of the more permanent elements of Johnson's bill would make it into the budget negotiation room.

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