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Tackling the Impossible? Lawmakers Address Physician Payment Overhaul

By John Reichard, CQ HealthBeat Editor

July 25, 2006 -- To get out of a swamp you've got to start walking, and if nothing else, House lawmakers mired in the issue of overhauling Medicare physician payment spent a few hours pickin' 'em up and puttin' 'em down Tuesday.

Getting out of the muck may seem impossible—the Medicare payment formula has cuts of about five percent per year lined up for nine years. But replacing them with a modest yearly payment increase that reflects the rising expense of delivering physician care would cost the federal government $218 billion over 10 years, according to the Congressional Budget Office (CBO).

Nevertheless, Texas Republican Joe Barton, the chairman of the committee, which shares jurisdiction over the issue with the Ways and Means Committee, emphasized at a hearing Tuesday that he does not want to delay dealing with the matter.

"I want to reiterate: I think it is possible to fix the system, and I think it's possible to fix it in this Congress, which means, in the next two months," Barton said at a hearing by the House Energy and Commerce Health Subcommittee.

But Barton and other lawmakers remain perplexed about which direction to go. There's bipartisan agreement that the Sustainable Growth Rate (SGR) formula must be scrapped, but no agreement on how to pay for doing so.

Yet Tuesday's hearing may have marked progress of sorts, not only because lawmakers were at least talking about the seemingly intractable issue, but that they actually offered some ideas for a down payment on a long-term fix.

Offering a road map on the issue—and looking to start making his mark on health policy—was Rep. Michael C. Burgess, R-Texas, an obstetrician-gynecologist elected to Congress from the Forth Worth area in 2002. Burgess introduced legislation (HR 5866) on Monday that would erase the scheduled payment cuts while arming Medicare beneficiaries with more information on the quality of physician care.

The conservative Republican is no booster of government health care, but his proposal is solidly in line with the recommendations of Washington's health policy establishment. The bill would replace the SGR with an increased payment each year based on the change in the Medicare Economic Index (MEI) calculated by the Centers for Medicare and Medicaid Services to track changes in the cost of delivering physician care.

The Burgess bill would lower the MEI by one percentage point, which in 2007 would mean a payment increase of 2.7 percent. The Medicare Payment Advisory Commission (MedPAC) has called for an update based on the MEI, forecast to be 3.7 percent in 2007, minus an adjustment of 0.9 percent to reflect improved productivity in delivering care, for a total increase of 2.8 percent.

The Burgess bill also would enact recommendations by the Institute of Medicine to improve Quality Improvement Organizations (QIOs), which contract with Medicare to improve quality of care under the program. The bill would make the quality improvement activities of QIOs available to all providers, guarantee a minimum of funding for QIOs; and require a review of their resources when the organizations' duties are expanded, among other measures. The bill also would establish a system of quality measures in which doctors would voluntarily report data on the quality of their care.

"Patients could assess the level of quality their prospective doctors are achieving and decide which doctor they would prefer," Burgess said. Burgess said in an interview Tuesday that he is awaiting scoring from the CBO on the cost of his bill and declined to offer his own estimate. The savings on the cost of the bill that could be obtained by subtracting one percentage point from the MEI each year would be "speculation," Burgess said.

Burgess would pay for the measure in part by ending the stabilization fund established by the Medicare overhaul law (PL 108-173) to ensure the availability of regional managed care plans in Medicare. He also would end a system of "double payment" for certain medical education expenses by taking them out of payments to managed care plans.

But those two steps would fall well short of paying for the bill. Rep. Tom Allen, D-Maine, also said he supports trimming payments to managed care plans as a way of paying for revising physician payment. He said that according to a CBO estimate, reducing "overpayments" to managed care plans would save $63 billion over 10 years.

Energy and Commerce Health Subcommittee Chairman Nathan Deal, R-Ga., said in an interview after the hearing that discussion of "pay fors" is a positive step. "These are all things we need to look at," he said. Deal stopped short of endorsing the Burgess bill, however. "I certainly support moving forward" on the physician payment issue, and the proposal "starts the discussion," he said.

The American Medical Association (AMA) called the bill "a major step toward ensuring health care access for seniors." The American Health Quality Association, which represents QIOs, likewise urged enactment of the bill.

"At the heart of the problem is the government's severely flawed Medicare physician payment formula that defies logic and ignores economic reality," said AMA Board Chairman Cecil B. Wilson. Goading Congress to act sooner rather than later is that its recent pattern of enacting one-year "fixes" to prevent cuts that otherwise could occur under the SGR becomes more costly each year.

To control the volume of physician care, the SGR sets a target each year for Medicare spending on doctors' services. If actual spending exceeds the target, "excess spending continues to accumulate until it is recouped by reduced updates," MedPAC noted in its testimony. "To work off this excess, according to Medicare trustees, the SGR will call for cuts of five percent every year for nine years," MedPAC said. But even as the cost of payment fixes rise, it's highly unlikely Congress will muster the will to act sooner than later on a complete overhaul. Most, if not all, analysts are predicting another short-term fix this year. Asked about the possibility of a markup this year of a payment overhaul, Deal smiled and while not ruling out the possibility this year, also suggested that it might have to wait until early next year.

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