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CMS Backs Two-Year Doc Pay Fix—If Congress Springs For It

NOVEMBER 17, 2005 -- Centers for Medicare and Medicaid Services (CMS) Administrator Mark B. McClellan on Thursday uttered the words physician lobbyists have been laboring for weeks to get him to say—that the Bush administration will support legislation replacing scheduled cuts to Medicare physician payments with increases in 2006 and 2007.

But now Congress will have to scramble over the next few weeks to find the bucks to pay for it—up to $20 billion—because CMS won't help pay for the increases administratively. And in the process, lawmakers will have to fend off other lobbyists for hospitals, home healthcare agencies, and other healthcare sectors who don't want the money to come out of the hides of their clients.

McClellan's exact words, spoken in testimony before the House Ways and Means Health Subcommittee, tied support for a two-year payment boost to the adoption of a quality-based payment system. "As the budget reconciliation process moves forward, the administration will work with the Congress on a fully offset provision to address the negative physician update for 2006 and 2007 with differential updates for physicians who report valid consensus-based quality measures," he said.

Every bit of McClellan's jargon-laden statement carried meaning, and not just for doctors, but for health care broadly. Including the fix in the budget reconciliation bill means it would not be subject to a filibuster in the Senate.

"Fully offset" means the costs will have to be balanced with cuts elsewhere in Medicare or Medicaid, with hospitals and home health agency payments seen as particularly vulnerable. The term also means that, in the administration's view, the physician payment fix should not hike overall Medicare spending, which in turn can drive up the Part B premiums seniors have deducted from their Social Security checks.

"Negative physician update" refers to a scheduled 4.4 percent cut in 2006 to doctor payments, with similarly large cuts also scheduled for 2007 and several years thereafter unless Congress intervenes.

"Differential updates" means doctors will get a bigger increase if they report data on the quality of their care, a smaller one if they don't—another big step toward shifting Medicare to a system that pays providers more if they deliver higher quality care. That part of the McClellan statement likely grated on the ears of doctors, however, because they oppose a switch to "pay-for-performance" unless the Sustainable Growth Rate (SGR) formula generating payment cuts over the next seven years is scrapped entirely. And the two-year plan endorsed by the administration would not get rid of the SGR formula. Rather, it would merely prevent it from taking effect for two years. Doctors insist they should not have to incur the expense of information technology to gather and report data on the quality of their care as long as big cuts are still hanging over their heads for the 2008–2012 period under the SGR.

"Valid consensus-based quality measures" means a permanent government-directed process goes into effect in which an ever growing number of "performance measures" dictate how much providers are paid.

To supporters, that means more efficient care and healthier beneficiaries, but to some doctors at least, it means more administrative data-gathering burdens and more government meddling, even though measures are supposed to come out of a process of building consensus with physicians.

Subcommittee members greeted McClellan's words with predictions that Congress would likely go along with a short-term fix, despite their exasperation with its high cost and the failure it would represent to tackle the underlying cause of the multiyear cuts, the SGR formula.

Energy and Commerce Committee Chairman Joe L. Barton, R-Texas, complained that "we've dumped money into short-term fixes, which only exacerbated the problem. This only increased the total costs of reform and delayed the inevitable day of reckoning."

Under the formula, Medicare sets a target every year for its spending on physician care, and cuts payments the following year if actual spending exceeds the target, as a way to keep doctors from ordering too many tests, office visits, and procedures.

Because spending volume is growing by leaps and bounds every year, doctors are lined up for a series of cuts—unfair, they say, because their costs are rising and the care they provide has value.

Physicians urged CMS to make technical changes to the SGR formula that would sharply reduce the cost of legislation to scrap it. But CMS recently stated after months of reviewing the matter that it does not have the statutory authority.

The decision means Congress has to pay up for changing physician payment, even if it only delays the impact of the SGR. Subcommittee Democrats on Thursday faulted CMS for failing to make the technical formula changes, suggesting that the failure do so sets up doctors in the traditional fee-for-service side of Medicare for chronic underpayment, while HMOs, in the view of Democrats, are overpaid by Medicare.

Rep. John D. Dingell, D-Mich., said the administration is pursuing a strategy of ending traditional Medicare in order to benefit the insurance industry.

"A continued cut in payments to doctors in the fee-for-service program will only gladden those who wish to turn seniors over to private insurance companies," he said.

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