House passes major Medicare payment reform; what will the Senate do?

Washington -- Passage of a major Medicare physician pay overhaul in the House on Nov. 19 means attention on the issue turns back to the Senate, which in October rejected a similar measure due to its projected cost.

The House bill, the Medicare Physician Payment Reform Act of 2009, passed by a vote of 243-183. The measure would repeal a 21.2% fee reduction scheduled for Jan. 1, 2010, and replace the sustainable growth rate formula with a new system designed to end the cycle of increasingly larger annual fee cuts that Congress must keep erasing with short-term patches.

Rep. Michael Burgess, MD (R, Texas)

The Senate still must approve the legislation before it can head to President Obama's desk. With just more than a month to go before the reduction takes effect, organized medicine and other health policy organizations called on the upper chamber to revisit the issue soon.

"The AMA urges the Senate to act quickly before the cut begins on Jan. 1," said American Medical Association President J. James Rohack, MD. "Fixing the Medicare physician payment formula once and for all is an essential element of comprehensive health reform."

The Senate, meanwhile, set the stage for a floor debate on a comprehensive health system reform bill unveiled by Democratic leaders on Nov. 18. That bill contains only a one-year payment patch. On Nov. 21, the Senate voted 60-39 on a motion to consider the bill, the Patient Protection and Affordable Care Act, a procedural move that required 60 votes for approval. Full Senate floor debate will start after a Thanksgiving break, with the goal of passing the bill by Christmas.

Some observers expressed optimism that the Senate also would act on long-term Medicare pay reform before the end of the year.

"Congress has long recognized that the current payment formula is fatally flawed, but in past years has only managed to apply a legislative Band-Aid and avert the pay cut scheduled for the following year," said Joe Baker, president of the Medicare Rights Center, a national, nonprofit consumer service organization. "We are confident that Senate Majority Leader Harry Reid will make good on his pledge and have the Senate again take up a long-term fix to Medicare's formula for paying doctors."

But some said it's more likely that Congress once again will enact only a temporary solution. "It probably won't get done this year, but it's likely that some type of [long-term] legislation will be put through later next year," said Paul Ginsburg, PhD, president of the Center for Studying Health System Change, a nonpartisan policy research organization.

Rep. Phil Gingrey, MD (R, Ga.)

The House might attempt to fold the physician payment bill back into the reform package that it passed Nov. 7, though that is unlikely due to self-imposed cost constraints.

"They can't do that. They have a spending cap in effect," said Henry Aaron, senior fellow of economic studies at the Brookings Institution, a nonprofit public policy organization. "It's hard enough to make the individual mandate inside that spending limit, even without the added cost of fixing this problem. I think it would be self-destructive to feel like they had to cover this in health reform."

Aaron agreed that a one-year patch is the most likely outcome.

House Minority Leader John Boehner (R, Ohio) called the House Medicare pay reform measure "an absolute train wreck" that would add hundreds of billions of dollars to the federal deficit. "This partisan scheme has already been soundly rejected by the Senate, and no evidence exists to suggest it wouldn't meet the same fate in the future."

More help for primary care

The House Medicare pay bill sets a new spending growth rate target for physician services that would be equal to the gross domestic product plus 1%. Preventive care and evaluation and management services would have a separate target of gross domestic product plus 2%, allowing primary care pay to increase at higher rates over time.

This provision has been well-received by the primary care community, which is concerned about a growing work force shortage.

"From the point of view of the predicament of where we are with primary care, having the differential update is certainly warranted," said Richard Trachtman, legislative affairs director for the American College of Physicians.

Under the House bill, physicians would be paid about $195 billion more over 10 years than they would under current law. Another roughly $65 billion in additional costs for physician services would flow to Tricare and Medicare payment plans.

Only one Republican -- Rep. Michael Burgess, MD (Texas) -- voted for the measure, citing a need to show Congress' commitment to physicians and seniors. The move earned him praise from the AMA.

Still, "this bill is not the best way to fix the long-standing physician reimbursement problem," Dr. Burgess said. He added, "I think it is very unlikely that today's bill will ever become law, since the Senate has already soundly rejected a similar plan. Because of this, today's vote is largely symbolic."

House Republicans offered two alternative plans for shorter-term Medicare payment reform that would not raise the federal deficit, both of which were rejected by Democrats. One proposal would have given doctors 2% annual raises over the next four years before the system reverted back to the current formula, a change they said would have been paid for in part by passing comprehensive medical liability reforms. The second would have patched doctor pay for only two years.

Some questioned whether doctors would be better off under the House-passed bill.

"Fixing the Medicare physician payment system is critically important," said Rep. Phil Gingrey, MD (R, Ga.). "But the Democrats' bill does not do that. It simply replaces one system of cuts with another."

Seniors would pay more

AARP supported the House passage of the Medicare payment reform legislation.

"We urge the Senate to act promptly on behalf of older Americans and the physicians who care for them and ensure that an unwarranted physician pay cut does not threaten access to care," said AARP Executive Vice President Nancy LeaMond. "With only weeks to go before the cuts go into effect, the time to act is now."

The organization supported the legislation even though seniors and other Medicare beneficiaries would be expected to pay about $50 billion in higher premiums over the next decade to help offset higher rates to physicians. Because Medicare counts on premiums to cover about 25% of the cost of doctors' services, any boost in physician pay means seniors pay more unless Congress makes special arrangements.

Although the bill would raise the federal deficit, it has been paired with statutory "pay-as-you-go" language that would require most other future federal spending to be offset.