Long-Term Fix Is Elusive in Medicare Payments


WASHINGTON — Congress has voted to block a cut in Medicare payments to doctors but has done nothing to solve the fundamental problem that caused the cut, and the issue will come back to haunt the next president and the next Congress, lawmakers and health policy experts say.

Democrats and Republicans agree that the formula for paying doctors is broken, but fixing it would be phenomenally expensive, they say. So Congress provides temporary relief from year to year, the same way it takes care of the Alternative Minimum Tax, which snares more middle-income families every year.

Older Americans are directly affected because they pay higher premiums when Medicare spends more on doctors.

Senator Edward M. Kennedy of Massachusetts made a surprise return to the Senate last week and helped Democrats pass a bill to rescind a 10.6 percent cut in Medicare payments to doctors. The White House says President Bush will veto the bill because it would also reduce subsidies paid to insurance companies that care for some Medicare beneficiaries.

Democratic leaders believe they have the two-thirds majority needed to override a veto. The bill was passed 355 to 59 in the House, and the crucial vote in the Senate was 69 to 30.

The bill would give doctors an 18-month reprieve. But it leaves in place the current system of paying doctors, based on a fee schedule that sets payment rates for 7,000 different services.

“The physician payment mechanism is hands down the most broken part of Medicare,� said Gail R. Wilensky, who was administrator of the Medicare agency under the first President Bush. “We desperately need a new way to reimburse doctors. I fear that the need for fundamental change will be kicked down the road once the latest crisis has passed.�

Senator John D. Rockefeller IV, Democrat of West Virginia, agreed. “We must find a long-term solution,� he said.

Mr. Rockefeller and other lawmakers are pleading with physicians’ groups to come forward with a comprehensive proposal. But that could be difficult because any new formula would almost surely produce winners and losers among doctors.

Dr. Thomas R. Russell, executive director of the American College of Surgeons, said, “We absolutely want to work with Congress to get this fixed in the next 18 months.�

“Doctors who are responsible for the rapid growth in certain areas, like testing and imaging procedures, need to bring those expenses under control,� Dr. Russell said.

But radiologists say it is unfair to hold them accountable for all the growth in imaging services because the services are usually ordered by other doctors, like orthopedic surgeons and internists.

Senator Debbie Stabenow, Democrat of Michigan, called the current formula severely flawed. She said it cut payments to doctors about 5 percent in 2002 and would have caused cuts every year since then if Congress had not intervened.

Senator John Cornyn, Republican of Texas, said, “Congress needs to step up with a permanent solution, not the kind of shameful temporary patches and fixes that require physicians to come hat in hand to Congress every 6 or 12 or 18 months.�

The fee schedule places a limit on payment for each service, from a routine office visit to brain surgery, but does not limit the volume or quantity of services. Medicare officials set payment rates each year, using a complex formula that sets overall goals for spending on doctors’ services.

When actual spending exceeds the goals, payments to doctors are supposed to be reduced. If Congress steps in to block a cut in one year, Medicare recoups the money by making deeper cuts in future years. Under the bill passed by Congress last week, doctors would face a cut of more than 20 percent in 2010.

The purpose of the formula is to control the growth of Medicare spending for doctors’ services. But individual doctors are not rewarded or penalized for their own performance.

Medicare provides the same annual update to doctors, regardless of whether they control costs and keep their patients healthy or provide poor care and perform unnecessary tests.

The Medicare formula, established by Congress in 1997, links spending on doctors to growth of the economy, measured by the gross domestic product. This formula works when the economy is booming, doctors say, but people need their services just as much in a recession.

The formula does not distinguish between appropriate and inappropriate increases in services billed to Medicare. Nor does it reflect the fact that many services can be done with new technology in doctors’ offices, rather than at hospitals.

Dr. Wilensky said that instead of paying for “little bitty units of service,� Medicare should provide a bundled payment to a doctor or group of doctors who care for patients with chronic illnesses like diabetes and congestive heart failure.

Many doctors want to eliminate the payment formula. They say their costs — for malpractice insurance, staff salaries and other expenses — are rising faster than Medicare payment rates.

But the Congressional Budget Office says if Congress repealed the formula and allowed payments to doctors to grow by the rate of medical inflation, the costs could be substantial: $65 billion in the first five years and nearly $200 billion in the next five years.

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