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Finance and Ways and Means Members Unveil New Doc Fix Proposal

By Emily Ethridge, CQ Roll Call

October 31, 2013 -- The Senate Finance Committee and House Ways and Means Committee are releasing a joint draft framework to replace how Medicare pays physicians, hoping to create momentum for fixing a perennial issue this year.

Lawmakers hope the bicameral, bipartisan framework will prompt Congress to act and provide a less expensive alternative to a measure (HR 2810) the House Energy and Commerce Committee approved unanimously in July. An outline of the proposal was explained to reporters in a background briefing last week.

This year, lawmakers of both parties have committed to completely repealing Medicare's current payment formula, known as the Sustainable Growth Rate (SGR). The formula regularly calls for reductions in Medicare physician payments, which Congress has ignored through a series of short-term fixes. If Congress does not act this year, physicians will see their payment rates cut by about 24 percent on Jan. 1, 2014.

Committee aides said the draft proposal builds off the framework of the Energy and Commerce bill, which the Congressional Budget Office (CBO) found would cost $175.5 billion over 10 years. It is likely the new proposal would have a lower score, because it would freeze physician payments for 10 years, while the Energy and Commerce bill included small annual updates.

The CBO has found that repealing the SGR for 10 years would cost $139.1 billion—significantly lower than estimates in previous years, giving lawmakers urgency to act quickly.

Aides said that the draft framework shares many of the same goals as the House bill—repealing the SGR, moving to a system that rewards value over volume, and encouraging physicians to participate in alternative payment models.

Comments on the draft outline are due by Nov. 12, aides said, which is when the House will be back in session. The aides said lawmakers hoped to receive feedback from doctors and to eventually move a bill through the regular legislative process.

Initial reaction to the proposal from lawmakers and provider groups was positive. House Energy and Commerce Committee Chairman Fred Upton, R-Mich., and ranking Democrat Henry A. Waxman of California, issued a joint statement calling the announcement "good news."

"We look forward to working with our colleagues to enact a permanent solution that protects beneficiaries, moves Medicare to paying for value not volume, and incentivizes new models of care in Medicare this year," the lawmakers said.

Ardis Hoeven, president of the American Medical Association, said the proposal was "an encouraging development" and "a pivotal step" to stabilizing Medicare.

"AMA is currently analyzing the recently released summary, and looks forward to continuing the constructive, bipartisan dialogue that has characterized this process as preparations are made for moving legislation forward," Hoeven said in a statement.

The American College of Radiology and the Medical Imaging and Technology Alliance both released statements cheering a provision in the framework that would deny payment to imaging providers who do not consult appropriateness criteria for advanced imaging services.
Under the discussion draft outline, physicians could either stay in Medicare's traditional fee-for-service system or move to alternative payment models.

Providers who stayed in fee-for-service would have their payment rates frozen for 10 years, although they would be able to get incentive payments for participation in a comprehensive, value-based quality program.

That program would consolidate Medicare's three existing quality programs into a single, budget-neutral program that would give higher payments to providers who give high-quality, high-value care. Aides said the performance period for that program would likely begin in 2015, with incentive payments starting in 2017.

The 10-year freeze on payment rates should help keep the framework's cost down, one aide said, adding that a 1 percent annual increase could cost about $180 billion over 10 years. The House Energy and Commerce bill would give physicians automatic payment updates of 0.5 percent over five years, which the CBO said would cost $63.5 billion.

The framework also would create new payment codes for services given to patients with complex chronic care needs, set a target for correcting misvalued services in the physician fee schedule, and introduce physician-developed guidelines to reduce inappropriate care.

Under the framework, physicians who receive a significant portion of their revenue from alternative payment models in which they assumed some financial risk would also be eligible for bonus payments. The alternative payment models could include patient-centered medical homes, accountable care organizations, and bundled payment models.

In 2016 and 2017, providers would need to receive at least 25 percent of their Medicare revenue through the alternative payment model to receive a 5 percent bonus. That threshold would increase over time.

In addition, those physicians would be exempt from having their performance judged under the value-based quality program.

The framework also would expand data available for quality improvement activities and the information on quality, utilization, and transparency on the Physician Compare site for Medicare beneficiaries.

West Virginia Democrat Jay Rockefeller, chairman of the Finance panel's Health Care Subcommittee, proposed as an offset his legislation (S 740) that would require drug companies to provide rebates to the federal government on drugs used by beneficiaries eligible for both Medicare and Medicaid. The CBO found that measure would save $141.2 billion over 10 years.

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