Organized medicine delivers plan to Congress on Medicare pay reform

Washington -- Organized medicine wants a permanent end to the current Medicare payment formula for physicians, but it is willing to give Congress some time to move to an alternative system.

Nearly 80 organizations representing a wide range of medical specialties and nonphysician health care professionals signed a May 17 letter to every lawmaker outlining recommendations for overhauling the Medicare reimbursement system. The first recommendation calls for a full, immediate repeal of the payment formula that has doctors lined up for a decade of annual cuts. The American Medical Association and many of the other organizations have been pushing this move for years.

But the signatories acknowledge that immediate abolishment of the sustainable growth rate formula might not be possible. If lawmakers cannot enact permanent reform right away, they should establish 2016 as the "date certain" to complete the transition to a new system that would update physician pay based on increases in the cost of providing care, the organizations write.

In the meantime, Congress should make sure doctors get annual pay raises that reflect the growth in their practice costs. Lawmakers should start by approving, at a minimum, positive updates for 2008 and 2009, the physician associations recommend.

Although immediate and total repeal is still the primary goal, physicians are backing this new incremental option because it could help Congress with the difficult task of finding the money to pay for the overhaul, said AMA Board of Trustees Chair Cecil B. Wilson, MD.

"One of the problems Congress has with getting rid of the [sustainable growth rate] is that under their accounting mechanism, there is an awful lot of cost associated with that," he said. "If they commit themselves to these increases in this way, then the cost per year is not that great, and it might be doable."

By combining the shorter-term updates with the longer-term "date certain" for a system overhaul, physicians would be getting exactly the same yearly updates as they would if Congress were to scrap the formula all at once, Dr. Wilson said.

The desired end result from 2016 on would be a permanent payment system similar to the one used for hospitals and others. The Medicare Payment Advisory Commission would consult the cost-based formula each year, adjust the figure for physician productivity or other factors, and recommend a final update to Congress.

Whether lawmakers adopt the immediate reform option or the incremental one, they still would need to find a way to fund the tens of billions of dollars needed to turn the next decade of Medicare cuts into increases.

The physician organizations suggest ways Congress and the White House could make this job easier. Lawmakers could pressure the administration, for example, to use the $1.35 billion they set aside in a Medicare reserve fund to help prevent the 9.9% cut expected in 2008. Pressure on Medicare officials to remove spending on office-administered drugs from the pay formula would free up billions more, though the Bush administration still insists that it does not have the authority to do so.

Improving the quality of care also could produce savings that could be directed toward physician pay. Comparing physician practice patterns, applying utilization management, promoting health information technology and implementing care coordination could save money for the whole program that could be shared with the doctors who help make it happen, the organizations said.

The upcoming six-month run of the Medicare Physician Quality Reporting Initiative, however, "should be re-examined before being expanded into future years," the outline states. Some federal officials and lawmakers hope the project one day might serve as the backbone of a full-fledged Medicare pay-for-performance program.

Target: Managed care

Medicare Advantage is another potential source of savings that could be used to boost physician pay.

Lawmakers and doctors have increasingly focused on what many perceive to be overpayments in Medicare's private health plan component. MedPAC estimated that average per-beneficiary Medicare Advantage payments in 2006 were 12% higher than what Medicare spent on fee-for-service patients. The Congressional Budget Office estimated that lowering plan payments to the fee-for-service level would free up $65 billion over five years.

Recent complaints from physicians, patients and others about private fee-for-service plans under Medicare Advantage have shined the spotlight even more brightly on insurers. Congress is investigating charges that these plans, which Medicare paid on average 19% more last year than it spent on traditional fee-for-service patients, have engaged in abusive marketing practices and have provided insufficient reimbursements to doctors.

An AMA Member Connect survey of 2,200 physicians echoes some of the concerns. More than half of responding doctors with Medicare Advantage patients reported that they received payments from the plans that were lower than the traditional Medicare rate. A similar number said plans denied coverage that was typically covered under regular fee-for-service.

"It's shameful that under current law, Medicare will slash payments to doctors well below the cost of caring for seniors while increasing payments to highly profitable managed care companies," Dr. Wilson said in a statement to the House Ways and Means health subcommittee. "Congress has to make a choice -- preserve access to care for all seniors by stopping next year's Medicare cut to doctors or continue to help insurance companies line investors' pockets."

America's Health Insurance Plans warned that cutting Medicare Advantage payments would hurt benefits for some needy beneficiaries. The trade group noted the results of its recent survey of physicians regarding the program. Only 7% of the 400 doctors responding to the AHIP survey said Medicare Advantage should be cut to pay for higher reimbursements.