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Johnson: P4P Minus SGR Revisions No Answer at All on Doctor Payment

JULY 21, 2005 — Converting Medicare physician payment to a system that pays more for higher-quality care—dubbed by insiders as "P4P" or "payment for performance"—won't protect doctors against major payment cuts if the current "Sustainable Growth Rate" (SGR) formula stays in place, Rep. Nancy L. Johnson, R-Conn., said Thursday.

During a hearing before the House Ways and Means Health Subcommittee, Medicare administrator Mark B. McClellan expressed solid support for payment for performance and agreed the current doctor payment system is not sustainable. But he said nothing in his testimony that gave any encouragement to those hoping for administrative action by Medicare that would greatly reduce the legislative cost of repealing the SGR formula.

Under the current system, doctors are projected to see payment cuts of about 5 percent annually in each of the next seven years.

Johnson has floated legislation that would repeal the SGR formula, which produces payment cuts if total Medicare physician spending exceeds a certain growth rate. Instead, she would increase doctor payment each year based on changes in the Medicare Economic Index (MEI), which tracks changes in the costs of physician care.

But McClellan's written testimony noted that, according to a new administration estimate, the 10-year cost of MEI-based increases would be $183 billion over 10 years, up from its previous estimate of $163 billion.

Moreover, McClellan noted that an administrative change sought by Johnson—a technical change that involves removing physician drug spending from both past and future calculations of the SGR—raises "difficult issues" of statutory authority.

And even if both past and future calculations are removed, the administration's new estimate, unlike its original forecast, says that payment increases may not occur in 2006 "or the succeeding few years."

Another problem is that "prospective or retrospective removal of drugs would increase beneficiary premiums," McClellan said. But he did not rule out the possibility that Medicare's lawyers might ultimately decide drugs could be removed from some or all of the calculations and that his agency would invite comments on the issue in a rulemaking proposal to be issued shortly.

McClellan also voiced optimism that with continued steady effort, Congress and the administration could make significant progress in changing a payment system that he agreed could not stay as is.

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