Medicare Physician Payment Update
Legislation
Current Status
The AAMC continues to work closely with other physician organizations
to pursue workable legislative and regulatory solutions to the problematic
Sustainable Growth Rate (SGR) formula. Without congressional or
administrative action, the Medicare physician payment update is
projected to fall 4.3 percent in CY 2006 and 25 percent over the
next five years according to the Centers for Medicare and Medicaid
(CMS) estimates.
Addressing the Problematic SGR: On May 12, 2005, Reps. Clay
Shaw (R-Fla.) and Ben Cardin (D-Md.) introduced the "Preserving
Patient Access to Physicians Act of 2005" (H.R.
2356), which would set the CY 2006 conversion factor update
at "not less than 2.7 percent." It also would replace
the SGR Methodology with a new formula that reflects the projected
change in input prices, less a productivity adjustment. The bill
is based on the Medicare Payment Advisory Commission (MedPAC)'s
March 2005 Report to Congress, which recommends such payment
changes. The Congressional Budget Office (CBO) estimates the MedPAC
recommendations to cost $49.7 billion over 5 years, and $154.5 billion
over 10 years.
A second bill, also called the "Preserving Patient Access
to Physicians Act of 2005" (S.
1081) was introduced on May 19, 2005 by Sens. Jon Kyl (R-Ariz.)
and Debbie Stabenow (D-Mich.). Like H.R. 2356, the Senate bill sets
the CY 2006 update at "not less than 2.7 percent." However,
S. 1081 replaces the SGR with the new formula for one year only
(CY 2007). Without additional action by Congress or the Administration,
the conversion factor calculation would revert to the SGR methodology
in CY 2008.
The AAMC, along with the AMA and numerous specialty societies,
also continues to advocate that CMS remove Part B drug costs (as
well as expenditures related to national coverage decisions, changes
in law, and new regulations) from the SGR calculations. CMS Administrator
Mark McClellan, M.D., Ph.D., is determining whether there are any
ways to make such administrative changes to the formula.
Linking Physician Payments to Quality: At the May 23, 2005
quarterly meeting of the Practicing Physician's Advisory Council
(PPAC), Albert Bothe Jr., MD, Chairman of the Subcommittee on Legislative
and Regulatory Issues for the AAMC Group on Faculty Practice (GFP),
testified on the issue of
performance-based payment initiatives. Dr. Bothe is associate dean
and executive director of the University of Chicago Practice Plan
and is also past-chair of the GFP Steering Committee.
Speaking on behalf of the AAMC, Bothe expressed support for CMS
initiatives to improve quality, but urged caution as the agency
moved ahead. He advised that such initiatives be based on "clear
design principles and goals for which there is broad agreement."
Among the key principles identified by Bothe:
- Such initiatives should strive to improve quality of care
and safety;
- Data must be fully adjusted for case-mix, sample size, age/sex
distribution, severity of illness, number of co-morbidities,
and patient population characteristics that may influence results;
and
- Initiatives need to be flexible enough to assess performance
at both the individual or group level, as appropriate.
In its March
2005 report, MedPAC proposed a broad array of "pay for
performance" recommendations that would integrate quality and
efficiency measures within Medicare's physician payment methodology.
Congress also is considering the issue of performance-based physician
payments. During a March 15 hearing before the House Ways and Means
Health Subcommittee, Herb Kuhn, director of the CMS Center for Medicare
Management, argued that "even small financial incentives can
spur provider interest in quality of care projects." Peter
Lee, President and CEO of the Pacific Business Group on Health,
also testified at the hearing, suggesting that performance-based
payments be "a substantial portion of our payments to physicians
and hospitals."
CMS is conducting several demonstration projects to explore potential
links between quality and physician payments, including the 3-year
Physician
Group Practice (PGP) demonstration, which has several academic
medical centers among its participants. Under the PGP demonstration
project, CMS will reward physician groups that improve patient outcomes
among chronically ill and high cost beneficiaries in an efficient
manner.
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