Medicare is Flawed and Needs Treatment

The release earlier this month of MedPAC’s report to Congress on the Medicare physician payment morass once again highlighted the inherently flawed Medicare physician payment update formula – the sustainable growth rate (SGR).

Next year, Medicare will cut payments to physicians 10 percent, as the cost of caring for Medicare patients continues to increase. In fact, current Medicare payments are about what they were in 2001. As seniors live longer, healthier lives, they rely on Medicare to pay for the doctor’s care they need to maintain active lifestyles. But as Medicare slashes payments, doctors are put in the unenviable position of making practice changes in order to keep the doors open.

An AMA survey of physicians found that nearly half would be forced to limit the number of new Medicare patients they treat if a 5 percent cut occurred – that’s half of next year’s cut. We are deeply concerned about the impact on a 10 percent cut on seniors’ ability to quickly get in and see the doctor of their choice.

Earlier this month, I had an opportunity to testify to the Senate Finance committee on the need for Congressional action to stop next year’s cut and provide a positive payment update in line with practice cost increases. MedPAC has recommended Congress provide a 1.7 percent payment increase for 2008. I also encouraged Congress to begin taking the necessary steps to replace the SGR with a system that pays doctors based on practice costs. This would put physician payment on the same footing as other Medicare providers and enable Congress to make good on its promise that Medicare will provide seniors with access to health care.

Part of the discussion at the hearing focused on the cost of replacing the formula. We know the costs are high, and we know that Congress must make difficult decisions every year about which programs to fund. But frankly, the costs of doing nothing are even greater, in both social and economic terms. Every year that Congress waits to act, the price tag rises. But, the Administration can help significantly lower the price by taking immediate action to retroactively remove the cost of physician-administered drugs from the Medicare payment formula.

The flawed payment formula also undermines the vision of having physicians use health information technology and quality initiatives to deliver the highest quality care. Doctors are committed to always improving health care for patients, but the threat of steep Medicare pay cuts makes it impossible for physician practices, most of which are small businesses, to make the substantial financial investments needed for health information technology and quality improvement programs.

As the baby boomers age into Medicare in just three short years, we need to make sure there are doctors available to treat this huge influx of American’s into the Medicare program. Congressional action is the key to making sure that happens.