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Bipartisan Policy Center Health Care Cost Containment Plan Includes GME and HOPD Cuts

April 19, 2013—The Bipartisan Policy Center, a Washington, DC-based think tank led by former Senate Majority Leaders Tom Daschle (D-S.D.) and Bill Frist (R-Tenn.), former Senate Budget Committee Chair Pete Domenici (R-N.M.), and former White House and Congressional Budget Office Director Alice Rivlin, Ph.D., April 18 released a plan to address rising health care spending.  At the press conference releasing the report, Sen. Domenici praised the high quality of America’s medical schools, teaching hospitals, and physicians. 

A Bipartisan Rx for Patient-Centered Care and System-wide Cost Containment” proposes four fundamental recommendations to “improve how health care is delivered and financed in both the public and private sectors,” including:

  • Improve and enhance Medicare to incent quality and care coordination;
  • Reform tax policy and clarify consolidation rules to encourage greater efficiency and competition;
  • Prioritize quality, prevention, and wellness; and
  • Incent and empower states to improve care and constrain costs through delivery, payment, workforce, and liability reform.

The report also includes specific proposals to “correct distortions in Medicare payments and generate savings for beneficiaries and taxpayers by promoting high-value care,” including recommendations to enhance graduate medical education (GME).  While the BPC does not recommend reductions in overall Medicare Indirect Medical Education (IME) spending, it does endorse reducing the IME add-on percentage from 5.5 to 3.5, a reduction of more than 36 percent.  Half of the reduction would be repurposed as “performance based incentive payments.”  The incentive payments would ensure that recipients are “held accountable for reaching specified educational goals and outcomes,” and that “[o]nly institutions that meet these standards should be eligible.” 

The remaining half of the proposed IME reduction would fund an expansion of residency positions.  One-third of the positions would be available only to hospitals training over their residency cap. The remaining positions would “be allocated to programs that train primary care physicians and other providers for which there are identified specialty shortages.”

Additionally, the BPC recommends reducing variation in Medicare Direct Graduate Medical Education (DGME) payments by limiting “the PRA [per-resident amount] to 120 percent of the locality-adjusted national average.”

The specific GME recommendations include:

  • Better align IME payments with actual costs associated with teaching;
  • Reward high-performing institutions with incentive payments;
  • Increase residency slots to meet anticipated demand;
  • Reduce variation in DGME payments; and
  • Explore allocation of resources to train non-physician professionals.

The report also recommends equalizing evaluation and management (E/M) payment rates across provider settings saving $8.7 billion.  The BPC references a March 2012 MedPAC recommendation [see Washington Highlights March 23, 2012] pointing to the “strong existing trend toward consolidation in the health care system, and hospitals are increasingly acquiring physician practices.”  

The BPC argues the difference in payment between payment rates in hospitals and physician offices “illustrates the real cost impact of this payment distortion for beneficiaries, which also affects taxpayers in the form of higher Medicare spending.  Equalization could immediately rectify this issue.  Eliminating arbitrary and unjustified differentials in reimbursement would reduce incentives for hospitals to purchase practices simply to arbitrage distorted payment rules.”


Len Marquez
Director, Government Relations
Telephone: 202-862-6281


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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806