Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Other Publication


Improving Medicare's Value

J James Rohack

Commentary on The Commonwealth Fund/Modern Healthcare Health Care Opinion Leaders Survey on Payment Reform by J. James Rohack, M.D., President-elect, American Medical Association

Since Medicare was founded in 1965, advances in medical research, education, and training have helped increase the average American's life expectancy by eight years—to age 78. Yet while the practice of medicine has evolved, Medicare's payment system remains stuck in the past. In order to provide high-quality care to the baby boomers soon to enter the program, ensure access to care for the senior and disabled patients who currently rely on the program, and help the nation get the most value for its health care dollars, we must improve the payment system.

The American Medical Association (AMA) is working to create solutions that keep physicians caring for Medicare patients and increase the value of medical care delivered.

One area we must focus on is looming physician shortages. Primary care is in peril, and the government projects an overall shortage of 85,000 physicians by 2020. More than one-third of practicing physicians are over age 55. Shortages will impact many medical specialties, including family physicians, internists, geriatricians, cardiologists, oncologists, and general surgeons—all specialties that an aging population will increasingly depend on for care. Improving Medicare payments will help make medical careers more attractive to the best and brightest students so that we can start to control the shortage problem and prevent an exodus of practicing physicians.

Replace the Payment Formula

More immediately, Congress must, once and for all, replace Medicare's payment update formula, the sustainable growth rate (SGR). Physicians are only being reimbursed for two-thirds of the labor, supply, and equipment costs that go into each service, according to Centers for Medicare and Medicaid Services (CMS) data. Without permanent reform by Congress next year, physicians will face a Medicare cut of 21 percent in 2010, and over seven years the cuts will total 40 percent. If Medicare physician payments do not begin to accurately reflect increasing medical practice costs, discussions on value will take a back seat to the urgent need to find physicians to care for Medicare patients.

That type of doomsday scenario is the last thing physicians want for their patients. Congress and the new Administration must follow the first rule of leadership: When you are in a hole, stop digging. They can start to get us out of the hole by eliminating the SGR, so we can start dealing in reality.

No Quick-Fix Answers

To help with payment reform, the AMA is analyzing specific proposals such as quality incentives, bundling payments, and demonstration projects that test new payment models. We support rewards for care coordination and medical homes. Congress has already mandated Medicare to provide confidential feedback reports to physicians, which we believe could be helpful. The nation must also invest in comparative effectiveness research to ensure the promise of high-quality, cost-effective health care.

These proposals suggest that there is no quick-fix answer to the problem—some or all of the proposals may be used in a future payment model to get the most value from health care dollars.

Paying for care coordination activities and implementing a medical home model can reduce fragmentation and improve treatment for millions of Americans with multiple chronic illnesses. Applying evidence-based medicine through quality measures can also make a difference. To that end, the AMA-convened Physician Consortium for Performance Improvement (PCPI) has already developed 261 clinical measures, and measures on avoiding overuse are in development.

The American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC) is also working to better value health care services in Medicare. It recently gave CMS recommendations on how services in its upcoming medical home demonstration should be valued. The RUC has reviewed misvalued services and recommended lower payments for some services that have had high-volume growth.

It's important to note, though, that per-beneficiary growth in physician services fell for the third year in a row to 3 percent in 2007, and the growth rate for imaging services has also slowed significantly.

As we work to ensure that evidence-based appropriate medical care is provided, health information technology (HIT) can help eliminate waste and duplication in the system—but physicians must have the resources to invest in new technology. HIT can be used to help medical practices participate in quality improvement initiatives and can provide more information at the point of care to help with clinical decision-making. But the fact that savings from HIT purchases accrue to third-party payers, not physicians, may deter physicians from making these expensive purchases.

Greater parity between insurers and physicians is also needed if we aim to improve the system. Payments to Medicare private plans need to be more equitable. While this year's Medicare legislation began to address the issue, more must be done by Congress to level the playing field between Medicare payments to insurers and to physicians. This year alone, private Medicare Advantage (MA) plans will be paid an average of $986 more per enrollee than traditional fee-for-service Medicare.

Congress and the new Administration will have a full plate when they return to Washington in 2009, but it's vital that Medicare reform stay on the agenda. Lawmakers are presented with a unique window of time to affect real change, and they must grab it. Physicians are eager to be a part of the solution, and through the AMA, we will be working to create a sustainable Medicare for current and future generations of seniors.

The views presented in this commentary are those of the author and should not be attributed to The Commonwealth Fund or its directors, officers, or staff.

Publication Details



J. J. Rohack, Improving Medicare's Value, Modern Healthcare and The Commonwealth Fund, November 2008.