The current Medicare physician payment formula is "fatally flawed" and should be replaced with one that better reflects the reality of practice cost increases, say doctors, congressional advisors, lawmakers and others.
Before a March 1 Senate Finance Committee hearing addressing physician payment issues, American Medical Association Board Chair Cecil Wilson, MD, said the current Medicare physician payment formula is based on the ups and downs of the economy, not the healthcare needs of America's seniors.
Over the next eight years Medicare will cut physician payment by nearly 40 percent, while practice costs will increase by 20 percent, Wilson said.
"Medicare's physician payment system is broken - and it's time to fix the underlying cause," Wilson said. "Congressional intervention is critical."
According to an AMA survey, a cut of only five percent - half of what's prescribed for next year - would force nearly half of physicians surveyed to limit the number of new Medicare patients they will take. The AMA says it will take a 1.7 percent increase in 2008 to prevent this from happening.
The Medicare Payment Advisory Commission (MedPAC), an independent advisory panel to Congress, recommended in its March 1 report that Congress override next year's planned payment cut of 10 percent and instead update payments based on practice cost increases.
MedPAC Chair Glenn Hackbarth, who also testified March 1 before the Senate Finance Committee, said the current payment method based on the Sustainable Growth Rate (SGR) "is fundamentally flawed and doesn't work the way it was intended."
"We need to move ahead with changes in Medicare designed to reward higher quality and more efficient care," Hackbarth said.
According to Hackbarth, the current SGR system:
• rewards overutilization and inefficiency
• doesn't reward physicians who restrain growth in their services and spend less
• doesn't deter physicians who prescribe services that aren't necessary
• often rewards poor quality
Sen. Max Baucus (D-Mont.), chair of the Senate Finance Committee applauded some of the initiatives recommended by MedPAC, such as paying for quality of care rather than volume and comparing the effectiveness of products and services to establish standards of care. But he also called for more substantial reform that will reimburse doctors "fairly and effectively."
"The fact that MedPAC had a hard time determining the best way to move forward shows us just what a challenge reform will be," Baucus said.