BB&T Washington Editor
WASHINGTON — The Medicare Payment Advisory Commission (MedPAC) labored hard last month to come up with policy recommendations for containing Medicare costs. MedPAC was tasked with writing a final report for proposed alternatives to the sustainable growth rate (SGR) mechanism at the commission’s early January meeting, one that would, hopefully, include a recommendation concerning how to deal with the SGR, the protocol that the Centers for Medicare & Medicaid Services uses to hold down Medicare expenditures. However, a report is all that the U.S. Congress will get as the members opted not to vote on either of the proposed alternatives to SGR.
Dana Kelley, a MedPAC staff member, reported that the current “payment system encourages volume growth.” She said that Congress “has repeatedly overridden the SGR system,” prolonging the timeline for negative updates. Given all that, the “fundamental question for Congress is whether it [still] wants an overall limit on Medicare spending,” she said.
Two main pathways
The commission discussed two paths to deal with the SGR, which Kelley said is best described as a sort of conundrum.
One would be to simply junk SGR altogether and replace it with a different approach for “improving value,” Kelley said. The second alternative consists of a group of programs, including a “geographic” cap, that is based on regions. This second proposal drew the only support expressed for either concept.
Kelley noted that capping outlays by region might “help reduce geographic variations over time,” but should account for regional variances that result in legitimate cost differences. However, such an approach might also “create wide disparities in payment rates by area border crossing,” and in any case, “would not entirely address the inequalities of the current system.”
Another feature of the second alternative to SGR would set payment by service type, which may allow CMS to use a comparative return-on-investment to determine where the taxpayer gets the greatest bang for the buck. Service type funding might also allow CMS to tweak incentives to drive physicians into primary care, but Kelley pointed out that such an approach puts policymakers in the position of “determining what represents good care.”
A third feature, using payment to favor group practices, might boost the degree to which medical services are provided under a total care management paradigm and would also put more patient medical records into electronic format. But this would leave out single-practice and small-group physicians who are effective and efficient.
A fourth feature in this second alternative to SGR would employ statistical analysis to find the physicians who are outliers in terms of resource use, which could drive up accountability. To make this happen, CMS would have to sell doctors on the idea, and Kelley understated the case by commenting that such a move “could generate controversy around initial physician scores.”
Too abstract for a vote
Commission chairman Glenn Hackbarth, an independent consultant from Bend, Oregon, informed the audience that the commission would not take a vote on which of the alternatives to recommend to Congress. “Instead of a vote, we’re saying, ‘Here are a couple of alternative paths’ that Congress might pursue,” he said, adding that “a lot of these ideas are still too abstract to be sure what we’re voting for.”
Hackbarth told the audience that the commission has “reached a couple of conclusions. One is that expenditure targets like the SGR do not create the appropriate incentives to providers to improve quality. SGR has probably created as many perverse incentives as positive incentives,” including a focus on physician fees to the exclusion of efficiency, and encouraging practice expansion with imaging services. “Expenditure targets per se are not going to do the job.
“To change the behavior of healthcare providers, there is no alternative but to change the payment system,” boost measures of performance and bundle payments to encourage appropriate use of resources, Hackenbarth said.
In order to do this, “we need a much larger investment in resources in CMS.” CMS has made progress in payment system improvements, he said, but “the cycle time for improvement is dreadfully slow.”
Ralph Muller, MD, CEO of the University of Pennsylvania Health System (Philadelphia) said that he preferred to “keep looking at the utilization problem,” which he insisted is not managed by rate cuts. “By hammering at payment rates, we may in fact be exacerbating the utilization problem.”
Nicholas Wolter, MD, of the Billings Clinic (Billings, Montana), admitted that “I’m not a fan of continuing the SGR in any fashion,” but he said that would not be opposed “to something that is fairly painful, which is no updates for hospitals and doctors” who fail to make some effort to improve outcomes. Wolter further suggested that MedPAC should address self-referral and other conflicts of interest, including physician investment in hospitals.
Cost and control ‘imperative’
Douglas Holtz-Eakin, PhD, former director of the Congressional Budget Office, insisted that due to the difficulty of keeping a lid on costs even with SGR, “it is imperative” to maintain some sort of cost control in the system. “Many problems attributed to SGR are not the fault of SGR,” he insisted, arguiing that if congress waived SGR, “we would spend more. That’s not a fantasy.” Eakin further observed that the problem with holding to SGR reductions “is a Congressional behavior problem.”
Hackbarth said that commission member Arnold Milstein, MD, the medical director at the Pacific Business Group on Health (San Francisco), would “strongly support the view that we need to maintain an expenditure target” and that “we need a very strong tool to encourage providers to change behaviors.”
He said that Milstein — who was not present at the meeting — “wants the threat of cuts to fees as an inducement to shake up the way care is delivered in the U.S., not just for Medicare, but healthcare in general.” Milstein was also said to be of the opinion that the second option is “not nearly fast enough. It is glacial in its pace and . . . we need to be much more demanding.”
A boost for quality
MedPAC staffer Cristina Boccuti gave the commission a report on the update to the physician payment under Part B for 2008, which was addressed indirectly in the Tax Relief and Healthcare Act of 2006. The main part of that bill, which came out of the end of the 109th Congress, addressed the update for 2007, offset the impending 5% cuts and added a 1.5% boost for doctors who report a specified set of quality measures, to be paid in a lump sum in 2008.
However, as a matter of cumulative impact on the overall trajectory of SGR cuts, the 2007 reduction is technically still in play despite the offset.
Boccuti also reminded the panelists that the Act also provides $1.35 billion for physician payment in 2008, but the language of the bill does not make clear Congress’s intent. One section of the bill states that the sum can be used at “the Secretary’s discretion.” This money would come out of the so-called SMI, the supplementary insurance trust fund, which is set up for physician visits, outpatient services and other services under Part B (the fund for Part A is described as the Federal Hospital Insurance Trust Fund).
Boccuti said that a MedPAC-sponsored survey conducted between July and September, 2006, indicated that 96.7% of physicians who offered Medicare Part B services intended to take at least some new patients, and that about two-thirds would take all they could get. Only 3.3% said they would take no more new Part B patients.
These survey results echo those of several CMS surveys that suggest that despite considerable lobbying by the American Medical Association (Washington) to point out the dangers of letting the cuts go through, physicians seem to be in no hurry to dump Medicare Part B payments, despite their certain awareness of impending cuts.
“Most beneficiaries report small or no problems scheduling appointments and accessing physicians,” Boccuti said, noting that “Medicare beneficiaries report similar access to physicians as privately insured people aged 50 to 64.”
The survey also suggested that the number of physicians who bill for Medicare “has kept pace with enrollment” and that CMS has seen “continued rapid growth in the use of services-per-beneficiary.” She also noted that only one-fourth of Medicare Part B is paid for by premiums and that the balance comes from taxes.
Drawing from claims analysis data from CMS, Boccuti indicated that difference between Medicare and private fees has remained essentially flat and that “beneficiary access is not measurably greater” in areas where Medicare fees are closer to other fee sources than in areas where there is a wider gap between the fees paid by CMS versus those paid by private insurers.
P4P in the way?
The panel wrestled with the disposition of the $1.35 billion that Congress set aside for 2008, with Nicholas Wolter, MD, of the Billings Clinic, stating that he was under the impression that Congress was thinking about pay for performance (P4P) when it set aside the money. However, he warned that a broad focus on any P4P uses of the money “is dangerous” and could derail P4P.
“The mindset is that we need a measure [of quality] for every doctor,” Wolter said, but he recommended that CMS apply any P4P financing toward expensive and widespread chronic conditions and worry about rolling out P4P on lower-frequency disease states later.
However, commission Chair Hackbarth said, “I see including the $1.35 billion in the update [for 2008] as consistent” with Congress’s intent. The bill mentions quality in a passage that reads that the $1.35 billion “shall be available to the Secretary for physician payment and for quality initiatives.” But Hackbarth also pointed out that 2008 is an election year and with the emphasis in Congress on pay-as-you-go, “the path of least resistance is that it be used for a physician update.”
The metrics used to determine how doctors will fare in 2008 include an increase in productivity of 1.3% and an inflation factor for cost inputs of about 3%. A subtraction of increased productivity from the inflation percentage yields an increase of about 1.7%. This calculation formed the basis of the MedPAC calculation, which unanimously voted in favor of a recommendation that “Congress should update payments for physician services by the projected change in input prices, less expected productivity in 2008.”
In a statement, Cecil Wilson, MD, board chair of the AMA, said that suspending the SGR cuts, “while critical to preserving access, would only provide a temporary reprieve.
“What is needed is a new Medicare physician payment formula that reflects practice cost increases, so seniors’ access to care is not placed at risk on a yearly basis.” Wilson argued that the SGR mechanism “is tied to the ups and downs of the economy, not the healthcare needs of seniors.”