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Developing a Viable Alternative to Medicare's Physician Payment Strategy

Medicare has a two-part system for reimbursing physicians on a fee-for-service basis: the resource-based relative value scale, which estimates the effort and expenses required to treat patients, and a spending limit known as the sustainable growth rate (SGR) formula, which ties the growth of physicians’ payments to growth in the economy. Neither appears to be working as intended. Two recent Commonwealth Fund–supported studies by Gail Wilensky, Ph.D., senior fellow at Project HOPE, examine the current congressional proposals for reforming provider payment in Medicare, which have bipartisan majority support.

In Health Affairs (Dec. 11 2013), Wilensky calls the proposals, which would tie payment to performance as well as to participation in alternative payment models, "promising," but notes that the Centers for Medicare and Medicaid Services should continue to test and develop new payment models. And in the New England Journal of Medicine (Dec. 11, 2013), she notes that the "devil is in the details" of the proposals: still to be determined are how to pay for the costs of removing the SGR (estimated to be $140 billion over 10 years), and which alternative health care payment or delivery models—accountable care organizations, medical homes, or something else—show evidence of consistent costs savings and thus warrant increased reimbursement.

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