Lawmakers offer new Medicare plan for paying doctors, with focus on quality, not quantity

October 31, 2013

Republican and Democratic lawmakers have agreed on a framework to replace the problematic Medicare payment formula for doctors with a plan that would link reimbursements to the quality of care provided.

If successful, the plan could end the annual “doc fix” debate.

The draft released Thursday by the Senate Finance and House Ways and Means committees would eliminate the sustainable growth rate, or SGR, formula. That formula will reduce Medicare doctor payments by nearly 25 percent Jan. 1 unless Congress intervenes.

Stopping SGR-related cuts has become a yearly ritual on Capitol Hill, leading to a growing budget problem because each deferral raises the price tag of the next.

For doctors, the prospect of facing big payment cuts is a source of mounting frustration. Some say the uncertainty has caused them to quit the health-care program for senior citizens and people with disabilities, and others are threatening to do so. As a result, some beneficiaries fear that they may lose access to doctors who have treated them for years.

Defections so far haven’t been significant, according to the Medicare Payment Advisory Commission, which reports to Congress about Medicare issues. But the commission has said that the SGR is “fundamentally flawed” and that it is creating instability for providers and beneficiaries. It has called for the repeal of the policy.

“For years, Medicare payments to doctors have been at risk of getting slashed, limiting seniors’ access to high-quality care,” said Senate Finance Committee Chairman Max Baucus (D-Mont.) “Enough with the quick fixes. Our proposal is for a new physician payment system that rewards value over volume.”

Providing a permanent solution “is vital to ensuring that seniors continue to have access to high-quality care,” said House Ways and Means Committee Chairman Dave Camp (R-Mich.).

The proposal would shift payment criteria away from an emphasis on volume and toward pay models that focus on quality care.

The proposed framework would repeal the SGR and hold doctors’ pay at current levels as alternative payment models are developed. It would combine some existing Medicare quality programs into an initiative, starting in 2017, that would offer doctors additional pay based on new metrics. For example, rewards might go to doctors who make more same-day appointments available for patients in urgent need of care or who increase use of electronic medical records.

Providers who receive a significant portion of annual revenue from an alternative payment model would receive a 5 percent bonus through 2021. One example might be an “accountable care organization,” in which doctors and hospitals collaborate on reducing the cost of care and share the savings. Another might be a “patient-centered medical home,” in which a primary-care practice oversees the medical needs of patients and monitors the use of specialists.

Linking doctor payment to quality of service is also a goal of the Affordable Care Act. The Finance and Ways and Means committees’ plan is intended to encourage doctors to move faster to new payment models.

Finance Committee staff said Baucus wants to move the SGR legislation by the end of the year, but the timing may be difficult because of Congress’s tight calendar. Also, there may be difficulty in financing the legislation.

Still, the Congressional Budget Office has reduced its estimated cost of repealing the SGR to $139 billion over the next decade, and lawmakers in both parties are eager to take advantage of the opportunity. Previous estimates to scrap the SGR were as high as $316 billion over 10 years.

The American Medical Association praised the draft proposal.

“Congress is demonstrating that they understand that ending the failed SGR this year is fiscally responsible, and that the current Medicare payment system is a barrier to adoption of health care delivery and payment reforms that will improve health care for America’s seniors and rein in overall costs,” AMA President Ardis D. Hoven said in a statement.

The committees are taking comments on the proposal through Nov. 12.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

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