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Medicare Physician Payment: Are We Getting What We Pay For? Are We Paying for What We Want?

A related op-ed by Stuart Guterman, "In Medicare, let's start paying for what we want," appeared in the Baltimore Sun on February 16, 2007.

I would like to thank Michelle Serber for her assistance in assembling the information contained in this testimony and preparing the testimony itself, and Karen Davis, Stephen Schoenbaum, and Cathy Schoen for their helpful comments and suggestions.

Summary of Major Points

Congress faces a challenging dilemma in considering how much to pay physicians, arising from the fact that the Sustainable Growth Rate (SGR) mechanism offers no control over the volume and intensity provided by the individual physician.

Increasing physician payments would put more burden on Medicare beneficiaries—especially the most vulnerable ones—by raising the Part B premium. While it may be necessary to raise fees in the future to protect beneficiaries' access to care, that does not seem to be a problem at present.

Regardless of what we pay physicians, we must pay more attention to what we get for our money—quality and coordination of care are lacking, both absolutely and in comparison with other countries.

Current pay-for-performance initiatives show promise for improving quality, but system designs and best practices for implementation will require careful thought and analysis. Both cost and quality must be considered, together rather than separately. Efficiency improvements should be encouraged and rewarded.

To encourage better performance and coordination care, cost and quality should be evaluated on a broader basis than individual services or providers.

Potential improvements in payment policy should be evaluated for their long-term impact and not necessarily discarded based on short-term resource requirements or lack of immediate impact.

Other tools, such as information collection and dissemination, can help improve performance by securing better cooperation and coordination among providers. Supporting providers through entities like Medicare's Quality Improvement Organizations can also enhance their ability to improve.

In addition to serving an important role in providing access to care for aged and disabled beneficiaries, Medicare can be a useful and important platform for developing and implementing performance improvements in the health care system.

Sufficient resources should be devoted to research on best practices, development and application of quality standards, and the development of other knowledge and tools to improve the performance of the health care system for Medicare beneficiaries and all Americans.

Publication Details



S. Guterman, Medicare Physician Payment: Are We Getting What We Pay For? Are We Paying for What We Want?, Invited Testimony, Energy and Commerce Committee, Subcommittee on Health Hearing, "Medicare Physician Payment: How to Build a Payment System That Provides Quality, Efficient Care for Medicare Beneficiaries," July 25, 2006