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Supreme Court Ruling Should Not Change Effort on Medicare Payments, Insurers Say

By Emily Ethridge, CQ Staff

June 14, 2012 -- No matter how the Supreme Court rules on the health care law, Medicare still must continue to move toward better payment models for physicians, a panel of private health insurance representatives recently told a group of senators.

Senate Finance Chairman Max Baucus, D-Mont., asked the witnesses, from private insurers and independent physician associations, if a court decision to strike down the health care law would disrupt progress. The law (PL 111-148, PL 111-152) contains several provisions meant to test new Medicare payment models to reduce costs while improving quality of care.

The Supreme Court is expected to rule on the law's constitutionality this month.

"I think the changes that are under way are unstoppable, regardless of what the court decides," said Chet Burrell, president and CEO of CareFirst BlueCross BlueShield.

All five witnesses agreed that groups would continue progress away from the fee-for-service system and toward the new models. They said fee-for-service rewards physicians who perform more services and tests, even when those services are unnecessary, and not those who get the best patient outcomes.

A decision to strike down the entire health care law "will only affect pace, not direction," of new payment models, said Darryl Cardoza, president and CEO of the independent provider group Hill Physicians Medical Group.

He emphasized that the current fee-for-service reimbursement system is unsustainable. "We can't stay on this platform—it's on fire," Cardoza said.

Repealing SGR

Speaking at a committee round table on how to move away from the current way Medicare reimburses physicians who see beneficiaries, the witnesses shared their experiences with developing new physician payment models.

Lawmakers on both sides, including Baucus and ranking Republican Orrin G. Hatch of Utah, agree that they want to repeal the current payment system, based on a formula known as the sustainable growth rate (SGR).

Last week's meeting was the Finance panel's second round table with stakeholders to discuss what elements a new payment system should contain. So far, the committee has not discussed how to pay for the estimated $316 billion cost of repealing the SGR.

"We must repeal the flawed SGR system, in my opinion, an albatross around the Congress' neck that must be addressed at the end of every year," said Hatch.

For years, Congress has avoided the payment cuts for physicians called for under the SGR, instead enacting a series of temporary patches to keep payment rates steady or provide for small increases. Providers say that uncertainty can lead them to stop accepting new Medicare patients, or to drop out of the program.

Witnesses at the hearing said a new system should allow for providers to join in smaller groups, where they would get incentives based on the group's performance.

Currently, Medicare payment targets are set based on the population of physicians across the country, so an individual provider cannot do much to affect the payment rates.

"The individual actor has no real incentive around efficiency, quality, no real ability to control anything," said Dana Safran, senior vice president of Blue Cross Blue Shield of Massachusetts.

In a smaller group, physicians can work together but also influence the outcome and help reach certain cost and quality targets to help get the incentives, she added.

In addition, the witnesses said any financial incentives should be based on quality and outcomes, rather than on the number of services provided.

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