Bill would scrap Medicare formula, raise physician reimbursement

Washington -- Lawmakers hoping to negotiate long-term physician payment reform that more closely aligns Medicare rates with the costs of administering care have a new piece of legislation with which to work.

Rep. Michael Burgess, MD (R, Texas), late last month introduced the Medicare Physician Payment Reform and Quality Improvement Act of 2006, which, starting in 2007, would scrap the sustainable growth rate formula that helps determine doctor pay. Instead, the Burgess bill would ensure positive annual updates by tying rates to the Medicare Economic Index. The MEI is an indicator of how much doctors' cost of caring for patients is increasing.

If lawmakers and the White House can approve the measure before Congress adjourns for the year, physicians would start receiving yearly updates equal to the MEI percentage minus 1%. Instead of a projected 4.7% cut in January 2007, doctors would receive an estimated 1.5% increase in their Medicare rates.

Dr. Burgess said that the changes would stop physicians from being punished when they exceed pre-determined Medicare spending limits that have nothing to do with medical need.

"This eliminates the negative feedback loop that constantly creates a deficit in health care funding and introduces a more market-sensitive system," the obstetrician-gynecologist said on the House floor.

The introduction of the bill drew praise from physician groups, including the AMA. "This bill is a major step toward ensuring health care access for seniors," said AMA Chair Cecil B. Wilson, MD. "We are encouraged by the introduction of this legislation that would replace the current flawed Medicare formula with one that better ensures that payment rates keep up with the increasing costs of practicing medicine."

The bill drew an endorsement from the American College of Obstetricians and Gynecologists, one of the specialties that consulted with Dr. Burgess on the measure. "We applaud your leadership to jettison the unworkable sustainable growth rate formula and put in place a system that adequately accounts for physician costs and helps ensure access to high-quality care for our patients," ACOG President Douglas W. Laube, MD, wrote to Dr. Burgess.

Prospects for quick action

During one of a pair of recent House Energy and Commerce health subcommittee hearings on Medicare physician payment, Dr. Burgess expressed optimism that Congress could act on a long-term fix before the session ends. His sentiment was backed up by several other panel members. "It's possible to fix the system, and I think it's possible to fix it in this Congress, which means in the next two months," said Energy and Commerce Chair Joe Barton (R, Texas).

But Dr. Burgess and others also acknowledged that Congress is dealing with an extremely complex issue that might not be resolved before it adjourns for the November elections. Lawmakers may need once again to revert to a short-term fix giving them more time to hammer out a permanent solution, he said.

The AMA's Dr. Wilson testified at one of the hearings that the Association would like to see lawmakers take another look at the House bill's centerpiece formula that would subtract 1% from MEI to determine physician pay for the year.

"We would hope it's Medicare Economic Index, period, and we would want to talk about that," he said.

Cost is likely to dominate much of the discussion in the coming weeks and months over the legislation and any competing bills. The price tag for the Burgess bill has not yet been determined, though the lawmaker hopes to keep the cost down by eliminating a $10 billion Medicare Advantage stabilization fund deemed no longer necessary and by moving up the date by which higher-income Medicare beneficiaries must pay higher premiums.

Congressional Budget Office Acting Director Donald B. Marron testified that scrapping the physician payment formula and updating doctor pay according to the full cost of providing care would run the federal government nearly $220 billion over the next decade. Medicare beneficiaries also would pay nearly $60 billion in additional premiums over the 10 years as a result of the increased reimbursement for physician services.

"We gotta do better than that," said Centers for Medicare & Medicaid Services Administrator Mark McClellan, MD, PhD. The agency is calling for linking increases in physician rates to the quality of care that physicians provide, rather than just the volume.

Balance billing -- for a price

Dr. Burgess does not propose linking federal Medicare payments to physician quality of care, but doctors who demonstrate that they are committed to quality improvement might nevertheless have an opportunity to receive more pay for their services.

The legislation would establish a voluntary quality reporting program that would be in place by January 2009. Each physician specialty organization would submit by January 2008 its own set of quality measures. After the consensus group, the National Quality Forum, approves the final measures, doctors would be given the chance to report their results to CMS.

During the first two years, Medicare would not be able to publicize how doctors rated on the quality measures. Even after that, the public would only be able to learn whether physicians participated and, if so, whether they met the quality targets.

While physicians would not receive extra payment for participating in the voluntary program, those who did so would be able to charge some beneficiaries the difference between what Medicare reimburses for a service and what the care actually costs. Such balance billing, which currently is prohibited for Medicare-participating doctors, could only apply to individual beneficiaries who make more than $80,000 per year and married couples who have more than $160,000 in annual income.

The AMA supports the ability of physicians to balance bill regardless of payer, and Dr. Wilson said that the AMA would back that portion of the legislation. He added, however, that physicians would need additional administrative payments to cover the extra work required for participation in a quality reporting program.

The measure also would implement a one-year delay of Medicare imaging reductions that are set to go into effect in January. The AMA has called for a delay of these cuts if Congress cannot repeal them outright.

Dr. Burgess expressed hope that even if Congress cannot act on his bill this year, lawmakers could use it as a roadmap for future comprehensive payment reform.

"I believe we can solve this problem," he said. "The only thing that stands in our way is political will."