M.D.s Give Mixed Reviews to Medicare Reform Proposals

The largest obstacle to eliminating the SGR formula is the steep cost. Eliminating the formula would cost the federal government $262 billion over 10 years and increase beneficiaries' out-of-pocket costs by $70 billion, according to Peter Orszag, director of the Congressional Budget Office.

Under that formula, physicians are overdue for a reimbursement-rate reduction. It would require a 10 percent physician payment cut next year and further cuts of 40 percent over the next eight years.

APA and other physician groups successfully lobbied Congress last year to remove a planned cut to their overall reimbursements. “We were successful in getting the SGR cut removed, but unfortunately, because of the design of the physician-payment system, our members still saw real dollar cuts,” said Nicholas Meyers, director of APA's Department of Government Relations. In general, psychiatrists' reimbursments were reduced by about 8 percent.

The commission was split between recommendations that would either keep the SGR and implement measures to obtain higher quality care from providers at a lower cost or replace the SGR with a new expenditure-target system.

“Regardless of the path chosen, Medicare should develop measures of practice styles and report the information to individual physicians,” said Glenn Hackbarth, J.D., chair of MedPAC, in his testimony before House and Senate panels.

APA does not prefer one specific option but generally supports replacing the SGR with a different method of payment.

The commissioners agreed that Medicare should adopt a pay-for-performance system, which links physician payments to the quality of care they provide beneficiaries. Medicare also should collect and distribute information on physicians' comparative “practice styles” and use of resources, recommended the commission. Additionally, they commended efforts to fight fraud and abuse among Medicare providers and verify that billing is accurate and appropriate.

AMA officials applauded the MedPAC option that would repeal the SGR. They were critical of the alternative approach, which would keep the SGR and expand the Medicare spending limit currently applied only to physicians, hospitals, and others who treat Medicare patients.

“Instead of expanding a defective system to other providers, Congress should ensure that physicians are reimbursed like every other provider, based on practice costs,” Wilson said.

The American College of Physicians (ACP) also was critical of MedPAC's proposal for an SGR modification that would use regional Medicare spending targets instead of the national one. Regional targets would not differentiate between efficient and inefficient providers, and they would produce administrative and political problems, wrote ACP President Lynne Kirk, M.D., in a letter to congressional leaders. Regional updates would further politicize the process, she said, by creating a system that would galvanize elected officials of a region set for a reimbursement cut to push for an increase.

The commission also recommended a 1 percent rise in payment rates for inpatient hospital service, but a decrease in Medicare payments for so-called indirect education to teaching hospitals. MedPAC said its overall recommendations, if its suggested money-saving steps are enacted, would not affect projected spending.

The commission saw a chance to save Medicare funds through cuts in reimbursements to managed care plans participating in the Medicare Advantage program. Reducing payments to physicians in Medicare Advantage plans, which are about 12 percent higher than for physicians in traditional fee-for-service plans, would save about $160 billion over 10 years, according to the panel.

Insurers strongly opposed this approach to cost savings. The estimated saving described by MedPAC do not take into account the “extra value” provided to Medicare Advantage beneficiaries that allows them to reduce their out-of-pocket costs and have easier access to health care, including mental health, that are not offered under the basic Medicare program, said Karen Ignagni, president and CEO of America's Health Insurance Plans, a trade group representing health insurers.

Medicare spending on all mental health services was $7.2 billion, or 3 percent of all Medicare spending, in 2001, the last year studied. Medicare spending on mental health care is expected to have at least doubled from the 2001 level because of the addition of the Part D prescription drug program, which added the $6.3 billion spent annually on psychotropic medications for dually eligible beneficiaries, according to a report by the National Health Policy Forum of George Washington University.

The MedPAC report and congressional testimony are posted at<www.medpac.gov/>.▪