House Committee weighs options for permanent overhaul of Medicare physician payment system

Witnesses at a House Ways and Means Health Subcommittee hearing on Thursday discussed potential methods for overhauling the Medicare physician payment system, CQ HealthBeat reports.

American Medical Association President Nancy Nielsen said that if the 20% payment reduction scheduled for Jan. 1, 2010, takes effect, many doctors will stop seeing Medicare patients. Former CMS Administrator Gail Wilensky said, "I am very worried about what is going to happen to physician participation" under the current "sustainable growth rate" system. The SGR aims to minimize incentives for physicians to order excessive care for the purpose of increasing their income.

Wilensky said the current system is flawed because individual doctors who act responsibly cannot influence the system enough to avoid cuts. She added that by setting 100,000 individually-tailored SGRs, CMS could give doctors incentives to order only appropriate services, thus lowering Medicare costs. According to Wilensky, another option could be to bundle payments to health care providers by paying a set amount per patient during a period of time to discourage use of excessive services.

Donald Crane, CEO of the California Association of Physician Groups, suggested a "capitated" physician payment system, which he said would place a greater emphasis on prevention and early treatment to keep costs down. Crane pointed to the experience of medical groups that currently are receiving capitated payments and said, "Capitation incents frugality. That is its chief virtue."

Bruce Vladeck, head of Medicare and Medicaid under former President Clinton, said strengthening primary care by increasing payments to primary care doctors and encouraging more medical students to choose primary care as a career path would reduce costs. Advocates said that a stronger primary care system would lead to more attention to the overall health of patients, better preventive care and better coordinated care. He also defended the current fee-for-service payment system.

Rep. Dave Camp (R-Mich.), the subcommittee's ranking member, said private Medicare Advantage plans are an important way of dealing with the costs associated with the influx of baby boomers into the Medicare system. The more recent payment patch included enrollment reductions of two million beneficiaries from MA plans. According to CQ HealthBeat, subcommittee Chair Pete Stark (D-Calif.) "didn't say much about where he wants to head on the [SGR] issue, but it's clear he wants to get an early start with 20% cuts looming just 16 months from now" (Reichard, CQ HealthBeat, 9/12).