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MedPAC Chief Aiming for Final Recommendations in October for 'Doc Pay' Overhaul

By John Reichard, CQ HealthBeat Editor

March 15, 2011 -- Warning that access to doctors in Medicare may become imperiled, the head of a key Medicare advisory panel said that he's hoping to have final recommendations ready for Congress by October on overhauling the program's troubled doctor payment system.

But given the enormous price tag of a complete overhaul—several hundred billion dollars over a decade—Congress will likely put off a permanent solution once again at the end of the year in favor of a less costly, short-term fix.

Although it appeared a few years ago that both Democrats and Republicans were ready to shove the costs of a comprehensive overhaul onto the deficit, the rise of tea party activists makes that unlikely any time soon. The excuse at the end of this year for another short-term fix may be that the issue will be handled as part of eventual legislation overhauling the Medicare entitlement.

Legislation blocking cuts under the current "Sustainable Growth Rate" (SGR) doctor payment formula expires at the end of this year. Without new legislation to block the impact of the SGR, physicians face a 29.5 percent cut in payments on January 1, 2012. The formula sets a yearly spending growth target for Medicare spending on doctor care, but the actual outlays routinely exceed the target. That forces cuts in doctor payment rates in future years to recoup amounts exceeding the target.

Glenn Hackbarth, chairman of the Medicare Payment Advisory Commission (MedPAC), told the House Ways and Means Health Subcommittee that the situation is becoming dire.
"For a long time I've been able to sit before the subcommittee and say, 'Yes, SGR is a problem but we don't see an imminent threat to access.' We think we're getting closer to that tipping point. And so we are looking at options for potentially addressing that."

Hackbarth emphasized that the commission does not see widespread evidence of an access problem right now. "But our concern is that the repeated difficult process of trying to avert large-scale cuts in physician payments, and of doing that over and over, sometimes multiple times in the same year . . . is undermining both physician and beneficiary confidence in the Medicare program," he said.

This won't be the first crack at a MedPAC solution to the SGR. In 2007 it released a report on the issue but could not achieve consensus on a solution.

"Whether I can get the consensus within MedPAC I won't know until we're further into the process, " Hackbarth told Subcommittee Chairman Wally Herger, R-Calif. "But that's the mind-set I have."

Hackbarth said in so many words that a complete overhaul of the formula is going to have a big price tag. " I don't think there is a rational policy option that is going to make that number go away," he said. "Everybody in this room, the CMS actuary, the Medicare trustees—everybody—knows that we're going to spend more than the SGR says we will. The only question now is whether we are going to spend more by making last-minute adjustments, more money on the existing payment system, or whether we're going to spend more strategically to achieve important goals for the Medicare program."

"I'm sure you know this is a bipartisan, major concern," Herger told Hackbarth. Herger said after the hearing that the goal is to move legislation modifying the SGR through Congress this year. Hackbarth said that a panel report due in June may give hints as to the nature of upcoming doctor payment recommendations.

The formal purpose of the hearing was to receive MedPAC's annual March report on payment recommendations for fiscal 2012. The report recommends payment hikes of 1 percent or none at all as lawmakers confront tough budgetary times.

MedPAC suggested 1 percent increases for inpatient and outpatient hospital care, doctors, dialysis facilities and hospice programs. And it said there should be no payment increase in basic rates paid to long-term care hospitals, home health agencies, skilled nursing facilities and inpatient rehabilitation facilities.

Fraud was also on the mind of commissioners. They recommended a closer review of home health care in counties with high use rates, as well as an HHS inspector general investigation of financial relationships between long-term care facilities and hospice programs to determine if there are inappropriate incentives to admit patients to hospice programs.

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