Plan would tie payouts, care

A senior member of the House Ways and Means Committee is seeking support among physicians for legislation that would make long-sought changes to the way doctors are paid by Medicare but also link higher payments to improvements in care quality.

Rep. Nancy Johnson (R-Conn.), who chairs the Health Subcommittee, planned to meet representatives of national medical societies yesterday afternoon to give them an early look at her plans to make potentially radical changes to the Medicare physician payment formula. A bill could be introduced before Congress leaves for its August recess.

Medical societies generally say they are supportive of so-called “pay-for-performance” systems but have grave reservations about the impact they could have on physicians’ income.

Although a number of the groups have pledged to work with Congress to improve the quality of healthcare, they will jealously guard their Medicare payments against reductions. Advocates of pay-for-performance argue that better quality will mean lower costs, leading some observers to conclude that budgetary considerations are behind recent attention to quality.

In March, the Congressional Budget Office estimated that eliminating the current formula and replacing it with automatic updates based on the cost of physician services would increase Medicare spending by $154.5 billion over 10 years. Freezing payments at this year’s level would cost $48.6 billion over 10 years, the CBO found.

But the American Medical Association (AMA) and other groups have been clamoring for reforms for years, maintaining that flaws in the system vastly underestimate the cost of providing care to Medicare beneficiaries. Doctors dread a scheduled cut next year that would reduce their payments by an estimated 4.3 percent under the “sustainable growth rate” formula used to calculate annual increases or decreases.

Linking pay-for-performance to reforms of the payment system could be a way for Congress to pressure the doctors to get behind legislation despite the misgivings physicians have expressed about quality-based payments.

Ways and Means Committee Chairman Bill Thomas (R-Calif.), along with Johnson, is appealing to the Bush administration’s stated support for pay-for-performance as they seek to slash the price tag for physician payment reform.

“A permanent legislative fix to the sustainable growth rate formula would be prohibitively expensive,” Thomas and Johnson wrote to Centers for Medicare and Medicaid Services (CMS) Administrator Mark McClellan on Tuesday. A policy change, however, “could proceed through our joint efforts combining administrative and legislative actions,” the letter says.