Government

MedPAC report adds momentum to push for 2009 Medicare pay hike

The commission also calls for equalizing private health plan payments with average spending on traditional fee-for-service patients.

By Doug Trapp — Posted March 17, 2008

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Congress' Medicare advisers recommended a 1.1% physician reimbursement increase for next year and a reduction in payments to Medicare private health plans.

The Medicare Payment Advisory Commission's annual March report assumes that lawmakers again will act to prevent physician pay cuts triggered by the sustainable growth rate formula. Existing law calls for a 10.6% reduction to take effect July 1 and an additional cut of about 5% in 2009.

Physician organizations, including the American Medical Association, welcomed MedPAC's continued support for a positive update. They called for a permanent replacement for the SGR based on increases in physicians' practice costs. But as was the case last year, MedPAC was unable to reach an internal consensus on an alternative to the current formula. "We are where we were," said Mark Miller, PhD, the commission's executive director.

MedPAC's lack of agreement on an SGR replacement is not helping to advance a solution, said Jim King, MD, president of the American Academy of Family Physicians. "As long as they continue to be so vague in their presentation, all it does is continue to confuse the issue."

AMA President-elect Nancy H. Nielsen, MD, PhD, said an 18-month delay of the Medicare cuts would help payment reform. "This sensible approach will give Congress time to work with physicians to legislate a solution to the long-term Medicare physician payment problem."

Rep. Tom Price, MD (R, Ga.), introduced a bill on Feb. 20 to reverse the cuts. It would provide a 1% physician update for the last six months of 2008 and a 1.8% increase for 2009. Dr. Price, an orthopedic surgeon, said the bill is designed to give Congress enough time to reform the Medicare physician payment system.

"We must find a sustainable, long-term solution that ensures Medicare beneficiaries will not continue to be put at risk each year," he said.

The Congressional Budget Office had not estimated the bill's cost as of press time in early March. MedPAC estimates that a 1.1% update would cost at least $2 billion in 2009, without factoring in the funding needed to prevent this summer's possible 10.6% cut.

In its report, MedPAC also recommended that Congress require the Dept. of Health and Human Services to make a confidential report to physicians comparing the services they and their peers provide to Medicare beneficiaries. The effort would build a foundation for future pay-for-performance programs. Dr. Miller said this would differ from the Physician Quality Reporting Initiative in that it would lead to more than reporting.

"We think the money should move on the basis of your scores, not just that you reported them," he said.

Dr. King said family physicians are concerned that any pay-for-performance effort would increase the administrative burden on doctors who already are pushed to the limit.

MedPAC also called for equalizing private health plan payments under Medicare Advantage with average spending for traditional fee-for-service patients, a move favored by the AMA. The proposal comes amid a flurry of scrutiny of private Medicare plans.

Federal spending on Medicare Advantage is increasingly unsustainable, MedPAC said. The plans originally were supposed to save money compared with traditional Medicare, but the federal government is expected to pay private plans an average of 13% more than it spends on fee-for-service patients in 2008, MedPAC found. Private Medicare fee-for-service plans are expected to receive 17% more than what is spent on beneficiaries in traditional Medicare.

"To the extent that we're encouraging inefficiency here ... this program is headed in the wrong direction," Dr. Miller said.

More ammunition for reforming Medicare Advantage could come soon. Centers for Medicare & Medicaid Services Acting Administrator Kerry Weems on Feb. 28 promised to collect and report plans' spending on benefits -- information that so far has been kept confidential. Weems' pledge came after requests for the information by Rep. Pete Stark (D, Calif.), chair of the House Ways & Means health subcommittee, and the panel's top Republican, Rep. Dave Camp of Michigan.

Meanwhile, the Senate Finance Committee is developing legislation to prevent abusive marketing by Medicare Advantage plans -- particularly private fee-for-service products. Sen. Max Baucus (D, Mont.), the panel's chair, announced on March 4 that the industry trade group America's Health Insurance Plans had agreed to legislative proposals to end unsolicited sales calls and visits.

Baucus said his bill would include several more protections, such as providing states with oversight authority over Medicare plans, banning insurance agents from suggesting sales visits to seniors, and prohibiting the use of meals or gifts to attract beneficiaries to sales presentations. His measure also is expected to address Medicare physician payment.

Last year the House passed a bill that would have reduced Medicare Advantage funding by $165 billion over 10 years and used $65 million of that funding to provide 0.5% pay increases for physicians in 2008 and 2009. But that part was stripped out in negotiations with the Senate.

HHS Secretary Mike Leavitt and many Republicans have rejected cuts to Medicare Advantage spending. They say private health plans in Medicare offer choice and flexibility, especially in rural areas.

Leavitt, though, has said Medicare Advantage could use some changes. Medicare plan payment is determined county by county. He said factoring pay at a regional or state level would allow plans to compete in larger areas and help drive down costs.

MedPAC has discussed this idea, Dr. Miller said, but he's not sure it would translate into savings -- at least in the short term. More important, he said, private plans are paid too much because Medicare's benchmarks -- spending floors for health plans -- are sometimes higher than the amount spent in traditional Medicare, especially in rural areas.

"We think the fundamental problem here is that the benchmarks are set too high." he said. Last year's House bill would have lowered the benchmarks to fee-for-service levels, matching MedPAC's recommendations, Dr. Miller said.

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ADDITIONAL INFORMATION

MedPAC suggestions

The Medicare Payment Advisory Commission recommends in its March annual report that for 2009 Congress should:

  • Provide physicians with a net 1.1% payment boost, reflecting a market price increase of 2.6% less a productivity adjustment of 1.5%.
  • Pass legislation requiring the Dept. of Health and Human Services to report practice resource use data to doctors confidentially for two years. In the future, HHS could use such information in pay-for-performance programs.
  • Equalize payments to private Medicare health plans with average spending on fee-for-service beneficiaries.
  • Update hospital inpatient and outpatient services according to estimated market price increases of 3%, but use 1% to 2% of that increase for a hospital pay-for-performance program.
  • Reduce the indirect medical education adjustment -- a payment to help teaching hospitals cover their additional costs -- by one percentage point, to 4.5%, and use the resulting savings to fund a quality incentive payment program for these hospitals.
  • Provide no payment updates for skilled nursing, home health care and inpatient rehabilitation services.

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External links

Medicare Payment Advisory Commission, "Report to the Congress: Medicare Payment Policy," March, in pdf (link)

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