The American Geriatrics Society - Public Policy

Public Policy News
Medicare Reimbursement

Calling AGS Physician Members: Please Respond to dmrkynetec Practice Information Survey Update (5/12/08)
MedPAC Recommends Changes to Medicare Reimbursements for Primary-Care and Nursing Facilities; Also Considering a Pilot 'Medical Home' Program (4/14/08)
Senate Finance Chair Baucus Looks to Delay Medicare Physician Payment Cuts for 18 months (4/14/08)
New MedPAC Report Recommends 1.1% Medicare Fee Hike for Physicians Next Year, Suggests Equalizing Traditional and Private Medicare Plan Payments (3/25/08)
Doctors Seeing Fewer Medicare Patients Due to Payment Insecurities (3/06/08)
In State of Union Message, President Calls on Congress to Propose Solutions to “Vital Problems” With Medicare, Other Entitlements (1/29/08)
President Bush Likely to Propose Medicare Physician Fee Formula Change During Monday’s State of the Union Address (1/24/08)
CMS Reopens Medicare Participation Decision Period for Additional 45 Days (1/18/08)
Medicare Legislation Could Delay Physician Fee Cut For 18 Months, Giving Lawmakers Breathing Room to Draft Wider Reforms (1/17/08)
Lawmakers Plan to Address Medicare Changes, including the Physician Fee Cut, in 2008 (1/14/08)
Senate Finance Committee Finalizes Medicare Bill that Would Block the Pending 10% Physician Fee Cut; Senate Expected to Approve the Measure Today and House Likely to Follow Suit (12/18/07)
Second National Provider Conference Call on 2008 Physician Quality Reporting Initiative Scheduled for December 19; Registration Deadline is December 18 (12/10/07)
First National Provider Conference Call on 2008 Physician Quality Reporting Initiative Scheduled for November 28 (11/20/07)
Primary Provider Fields on Participant Claims Missing NPI, CMS Warns (11/09/07)
CMS Issues Rule Calling for 10.1% Cut in Physician Payments Effective January 1, 2008; Please Join AGS in Calling On Congress to Block the Cut (11/05/07)
Offering Alternative to Plan to Defer Medicare Payment Cuts for Two Years, Sen. Grassley Proposes One-Year Halt (10/29/07)
President Bush Signs Law Restoring $7 Billion for Inpatient Reimbursement, Extending Part B Subsidy, Boosting Funds for Quality Reporting, and Delaying Rule Requiring Tamper-Proof Prescriptions (10/11/07)
Senate Working on Package to Block the Pending Medicare Payment Cut (9/27/07)
CMS Releases Proposed Changes to Medicare Payment Rates, Calls for 9.9% Fee Cut; AGS Members Encouraged to Contact Congress (7/09/07)
Higher Medicare Spending For Physician Services Mainly the Result of Increased Volume and Intensity of Services, Rather than Reimbursement Rates, CBO Report Finds (6/20/07)
AMA Launches Campaign to Block Cut in Medicare Payments to Providers, Releases Survey Finding that Many Docs Will See Fewer Medicare Beneficiaries Should Cut Go Through (6/11/07)
AMA, AGS, Other Medical Organizations Send Medicare Payment Reform Proposal to Congress (5/31/07)
MedPAC Report Outlines Alternatives to the Sustainable Growth Rate But Stops Short of Recommending a Single Solution (3/5/07)
Revamping System for Paying Physicians Who Treat Medicare Beneficiaries Will be Costly, Analysts Predict (2/15/07)

Calling AGS Physician Members: Please Respond to dmrkynetec Practice Information Survey Update
For the first time in nearly a decade, the American Geriatrics Society (AGS), the American Medical Association (AMA), and more than 70 other health care professional organizations, have worked together to coordinate a comprehensive multi-specialty survey of America's physician practices. To date, 30% of the randomly selected AGS physician members have completed the survey - we are hoping for 100% participation in this important effort.

Of particular importance to geriatricians is the section of the study pertaining to practice expenses and the amounts that are attributable to you. The Centers for Medicare & Medicaid Services has indicated it will use the results of this study to help determine physician payment. The survey firm, dmrkynetec, is contacting randomly selected physicians and practice managers to collect responses. All responses will remain confidential. If you received this survey, please complete it thoroughly and accurately. Your response will help us to represent you when advocating for appropriate reimbursement for the care that you provide.

Physician Practice Information Survey Frequently Asked Questions

MedPAC Recommends Changes to Medicare Reimbursements for Primary-Care and Nursing Facilities; Also Considering a Pilot 'Medical Home' Program
The Medicare Payment Advisory Commission (MedPAC) recently voted to approve several recommendations to Congress focused on Medicare reimbursements for primary care and skilled nursing facilities and is considering a recommendation for a pilot 'Medical Home' program, according to CQ HeathBeat.

The commission recommended an increase in payments to primary care-focused physicians in an effort to address the growing shortage. Secretary of Health and Human Services, Mike Leavitt, will determine which physicians constitute primary care-focused practitioners.

The commission also recommended modifications to the Medicare payment system for skilled nursing facilities. These include adding a "separate nontherapy ancillary component" that includes prescription drugs and intravenous therapy, revisions to the therapy piece of the system to base reimbursements on "predicted patient care needs," and implementing a provision for "outlier payments" for unusual financial losses.

The commission also suggested a proposal under which Leavitt would require skilled nursing facilities to report diagnostic information, dates of services on claims filed and "services they furnish separately" on patient assessments.

Lastly, MedPAC is considering a recommendation that would establish a pilot program to provide Medicare beneficiaries with a 'medical home' to direct their care. The proposal would require physicians to competently provide primary care; coordinate services, utilize health care information technology; conduct care management; provide access and communication to patients; and maintain updated records of patients' advance directives, including the care they should receive if they should become incapacitated. The estimated three-year cost for the program is $400 million.

Senate Finance Chair Baucus Looks to Delay Medicare Physician Payment Cuts for 18 months
Senator Baucus (D-MT), Chairman of the Senate Finance Committee, recently met with representatives from several physicians’ groups to seek their support for a “modest” plan that would delay the pending Medicare physician pay cut to doctors.

Baucus is proposing to block the pending July 1 cut for 18 months and provide a 1.1% increase in doctor payments. First, lawmakers must agree on a way to offset that cost, Baucus told the group.

New MedPAC Report Recommends 1.1% Medicare Fee Hike for Physicians Next Year, Suggests Equalizing Traditional and Private Medicare Plan Payments
Congress should boost Medicare physician reimbursement 1.1% next year, the Medicare Payment Advisory Commission (MedPAC) advises in its March report to legislators. Legislators should also reduce payments to private Medicare health plans so they're aligned with those to traditional Medicare, the report urges.

Congress needs to act to prevent physician pay cuts triggered by Medicare's Sustainable Growth Rate (SGR) formula. The SGR, which mandates physician fee cuts whenever growth in outlays for these services exceeds growth in Gross Domestic Product, called for a 10.1% cut January 1. In December, Congress delayed the cut through June 30, substituting a 0.5% pay raise -- and setting the stage for a 10.6% reduction slated to take effect July 1.

The American Geriatrics Society and other organizations have campaigned successfully against SGR-mandated cuts for the last few years, and AGS continues to urge Congress to block the cut scheduled to kick in on the first of July.

AGS and other advocates of quality healthcare have also called on Congress to come up with an alternative to the SGR. This year, as last, however, MedPAC was unable to reach consensus on an alternative to the controversial formula.

In other news, legislation that Rep. Tom Price, MD (R - GA) introduced in the House last month would increase physician fees 1% for the last six months of 2008 and offer a 1.8% increase for 2009.

In its March report, MedPAC also calls for equalizing private payments to Medicare Advantage plans so they're aligned with average spending for traditional fee-for-service patients. Spending for Medicare beneficiaries in the private plans averages about 13% more than spending for patients in traditional fee-for-service Medicare plans, the report concludes.

MedPAC's new report also urges Congress to require the Department of Health and Human Services to make a confidential report to physicians comparing the services they and their peers provide to Medicare beneficiaries. The effort would go beyond the current Physician Quality Reporting Initiative.

In 2009, MedPAC's report also calls on Congress to:

Boost hospital inpatient and outpatient services payments in keeping with estimated market price increases of 3% -- but use 1% to 2% of the hike for a hospital pay-for-performance program.
Cut the indirect medical education adjustment -- payments to help teaching hospitals cover related costs - from 5.5% to 4.5%, and use the savings to fund a quality incentive payment program for these hospitals.
Provide no payment updates for skilled nursing, home health care and inpatient rehabilitation services.

Doctors Seeing Fewer Medicare Patients Due to Payment Insecurities
Close to 25% of medical group practices responding to a recent national survey said they had either begun to limit the number of Medicare patients they treat or are not accepting any new Medicare patients due to uncertainty surrounding Medicare payment rates, according to Congressional Quarterly's HealthBeat.

Nearly half of the more than 1,000 practices responding to the Medical Group Management Association (MGMA) survey reported that a 10.6% cut in Medicare physician payments scheduled to take effect July 1 has lead them to stop accepting or limit the number of beneficiaries they accept. Half of the practices said they were considering reducing administrative and clinical staff and more than two-thirds indicated they would forgo or postpone investments in health information technology.

"The six-month adjustment to payments only served to create further uncertainty and administrative burden to practices already scrambling to shield themselves from additional payment cuts looming in 2009," said William F. Jessee, MGMA's president and CEO.

Congress voted in December to delay, for six months, a mandated 10.1% Medicare physician pay cut scheduled to take effect January 1 and to substitute a 0.5% increase -- setting the stage for the larger, 10.6%, cut slated to kick in July 1. Medicare's controversial Sustainable Growth Rate formula mandates cuts in Medicare payments to physicians when increases in these outlays exceed growth in Gross Domestic Product.

Congress' December vote to delay the pay cut followed sustained advocacy efforts - by the American Geriatrics Society, its members, and others - urging lawmakers to avert the cut. The Society plans further advocacy efforts aimed at blocking the July 1 cut and revamping the method by which Medicare payments to professionals are determined. Legislative aides are working on legislation that could halt the July 1 cut and stabilize Medicare physician payments for 18 months.

The 1,000 group practices responding to the survey represent more than 28,679 physicians.

In State of Union Message, President Calls on Congress to Propose Solutions to “Vital Problems” With Medicare, Other Entitlements
In his final State of the Union address last night, President Bush called on Congress to come up with solutions to “vital problems” with Medicare, Medicaid, and Social Security.

“Every member in this chamber knows that spending on entitlement programs -- like Social Security, Medicare and Medicaid -- is growing faster than we can afford,” the President said. “We all know the painful choices ahead if America stays on this path: massive tax increases, sudden and drastic cuts in benefits, and crippling deficits. I've laid out proposals to reform these programs. Now I ask members of Congress to offer your proposals and come up with a bipartisan solution to save these vital programs for our children and our grandchildren.”

The president had been expected to propose changes in the Medicare physician fee formula during the address. Instead, he called on Congress to take the lead in this area, and focused his address on the war in Iraq and, to a lesser extent, the troubled economy.

President Bush Likely to Propose Medicare Physician Fee Formula Change During Monday’s State of the Union Address
President Bush is expected to unveil a proposal for changing the Medicare physician fee formula during his State of the Union address this coming Monday. Congressional staffers and lobbyists say the plan “could significantly alter Capitol Hill discussion surrounding Medicare and other health-related issues,” CongressDaily reports.

In late December, President Bush signed Medicare legislation that, among other things, postponed for six months a mandated 10.1% cut in Medicare payments to physicians that was slated to take effect January 1. The legislation substituted a 0.5% increase for the cut. Medicare’s controversial Sustainable Growth Rate (SGR) formula, which mandated the 10.1% cut, lowers Medicare physician fees whenever increases in these expenditures outstrip growth in Gross Domestic Product. With the SGR still in place, Medicare physician fees are now slated for a 10.5% cut July 1.

Medicare trustees issued a “Medicare funding warning” in 2007, requiring the President, for the first time, to send a Medicare savings plan to Congress after he releases his fiscal year 2009 budget proposal. The trustees issue such warnings when they predict, for two consecutive years, that federal general fund revenue must be used to pay for 45% or more of total Medicare expenditures within seven years.

According to CongressDaily, legislators working on a Medicare package that would further delay the physician fee cut are awaiting details of the President’s proposal.

CMS Reopens Medicare Participation Decision Period for Additional 45 Days
Physicians who want to change their Medicare participation status in light of recent and potential changes in the Medicare physician fee schedule can do so until February 15, thanks to an extension of the Medicare participation decision period.

Following passage of recent legislation that both delayed the 10.1% Medicare physician fee cut that was slated to take effect January 1 and substituted a 0.5% fee increase through June 30, the Centers for Medicare and Medicaid (CMS) extended the participation decision period 45 days. The new deadline for changing, for example, from “participating” to “non-participating” or vice-versa, is February 15. Participation decisions will be retroactive to January 1.

Because lawmakers delayed the 10.1% cut for six months, Medicare physician fees are slated to drop 10.6% as of July 1. Congress plans to revisit the fee schedule, but it’s unclear what reforms legislators will ultimately approve. See related story.

AGS and other organizations, including the American Medical Association (AMA), will continue to advocate for a long-term solution to ongoing problems with the Medicare physician pay schedule. Medicare’s flawed Sustainable Growth Rate formula mandates cuts in Medicare physician fees when growth in these outlays outstrips growth in Gross Domestic Product. The AMA has posted additional information about the fee schedule and the extended Medicare participation decision period on its Web site.

Medicare Legislation Could Delay Physician Fee Cut For 18 Months, Giving Lawmakers Breathing Room to Draft Wider Reforms
Congressional aides are optimistic that they can draft a Medicare reform package that will delay a pending 10.6% Medicare physician fee cut -- slated to take effect July 1 -- for 18 months, Congressional Quarterly (CQ) reported this week.

Late last month Congress voted to delay a mandated 10.1% Medicare physician pay cut, scheduled to take effect January 1, for six months, and substituted a 0.5% increase -- setting the stage for the larger, 10.6%, cut slated to kick in July 1. Medicare's controversial Sustainable Growth Rate formula mandates cuts in Medicare payments to physicians when increases in these outlays exceed growth in Gross Domestic Product.

The 18-month delay would give legislators time to work on broader healthcare reform and is likely to be the "centerpiece" of a Medicare package that could cost $12 to $15 billion over five years, a Congressional aide told CQ. Lawmakers are concerned that, should Congress fail to block the 10.6% fee cut, doctors may stop seeing Medicare patients.

Although the Bush Administration appears to support a long-term fix, Republicans and the White House would still likely oppose cutting payments to private Medicare Advantage plans as a way to offset the costs of the 18-month delay. Many Democrats have argued that the government overpays Medicare Advantage plans, but the White House came out against cuts in payments to the plans during budget negotiations last month. More targeted cuts to the private plans are a possibility, however, according to CQ. Democrats may also try to rewrite rules concerning private Medicare plan marketing -- addressing concerns that the plans have been too aggressive in their efforts to get seniors to join.

Lawmakers Plan to Address Medicare Changes, including the Physician Fee Cut, in 2008
Lawmakers are planning to address the 10.1% Medicare physician fee cut slated to take effect June 30 and other potential changes to the Medicare program early this year.

"We want to explore Medicare changes that did not make it into last year's physician pay fix bill because time ran out," said Senate Finance Committee Chair Max Baucus (D-MT) and ranking member Chuck Grassley (R-IA).

In addition to the fee cut, Congress may turn its attention to health information technology requirements, and mental health parity and genetic nondiscrimination measures, all of which have the support of the President. Senate Finance may also try to rewrite rules concerning Medicare Advantage plan marketing.

"With health care emerging as a top issue with voters, the election year might put increased pressure on lawmakers to present at least a few new health policies," although some proposals could draw veto threats, according to CongressDaily.

Also in 2008, lawmakers plan to make changes to the State Children's Health Insurance Program (SCHIP) and the Medicaid program.

Senate Finance Committee Finalizes Medicare Bill that Would Block the Pending 10% Physician Fee Cut; Senate Expected to Approve the Measure Today and House Likely to Follow Suit
The Senate Finance Committee reached agreement this morning on a Medicare measure that would, among other things, delay for six months a mandated 10.1% cut in Medicare physician pay rates and increase these payments 0.5% through June 30, 2008. Mandated by Medicare's Sustainable Growth Rate Formula, the cut will take effect January 1, 2008, unless Congress acts to block it.

The Senate will consider the Medicare package today and is expected to approve the plan, as is the House.

Among other things, the Medicare agreement would also extend Medicare Advantage special needs plans' authority to target enrollment to certain populations through 2009. The plan calls for a moratorium on new plans and expanded service areas, however, through December 31, 2009.

In addition, the package includes a provision that would extend for another six months a provision offering 5% bonus payments to physicians practicing in areas with physician shortages. It would also extend the physician quality reporting system and revise the Physician Assistance and Quality Initiative fund.

To offset costs, the plan would remove $1.5 billion from the stabilization fund for regional preferred provider organizations in 2012.

In addition to the Medicare changes, the package would also extend funding for the State Children's Health Insurance Program (SCHIP) through March 31, 2009 and make several changes to the Medicaid program.

Second National Provider Conference Call on 2008 Physician Quality Reporting Initiative Scheduled for December 19; Registration Deadline is December 18
The second in the Centers for Medicare and Medicaid Services' (CMS') series of national provider conference calls concerning the 2008 Physician Quality Reporting Initiative (PQRI) is slated for Wednesday, December 19.

The call, which will run from 3 to 5 PM, EST, will cover the provisions of the 2008 PQRI that were included in the 2008 Medicare Physician Fee Schedule Final Rule. The call will include a discussion of the 119 PQRI quality measures from which participating professionals can choose in 2008. The toll-free call will also offer eligible professionals an opportunity to ask questions of CMS experts.

Materials for the call will be posted at least one day prior to the teleconference.

To receive call-in information, you must register for the call. The deadline for registering is December 18 at 3 PM, EST.

Additional information about the 2007 and 2008 PQRI programs is available on CMS' PQRI Web page.

First National Provider Conference Call on 2008 Physician Quality Reporting Initiative Scheduled for November 28
The first in the Centers for Medicare and Medicaid Services' (CMS') series of national provider conference calls concerning the 2008 Physician Quality Reporting Initiative (PQRI) is slated for Wednesday, November 28.

To receive call-in information, you must register for the call. Registration will close November 27 at 3 PM, EST.

Information about the 2007 and 2008 PQRI programs is available on CMS' PQRI Web page

In related news……

When the 11/27 issue of AGS Week in Review hits your inbox, please take a moment to complete a 5-item survey about your experience with the 2007 PQRI. It's short and quick and will provide us with valuable feedback. Thanks, in advance, for participating!
On November 16, AGS attended a meeting, hosted by the American Medical Association, regarding the 2008 PQRI. The meeting offered an opportunity for medical societies to speak with Tom Valuck and other CMS staff about the PQRI and the final regulations. During the meeting, Dr. Valuck noted that Congress is considering whether to divert funding from the 2008 PQRI in order to support a remedy that would avert a mandated 10.1% cut in Medicare physician fees that's slated to take effect January 1.

Primary Provider Fields on Participant Claims Missing NPI, CMS Warns
The Centers for Medicare and Medicaid Services (CMS) is urging that PQRI participants use their National Provider Identifiers (NPIs) correctly for their quality-data submissions to count towards successful reporting. The NPI is a unique identification number for covered health care providers. Covered health care providers and all health plans and health care clearinghouses will use the NPIs in the administrative and financial transactions adopted under the Health Insurance Portability and Accountability Act (HIPAA).

CMS indicated that since October 15, 2007, Medicare has been sending information warnings that indicate when there was no NPI shown in the primary provider fields on participant claim(s). Medicare is including these informational warnings on your pre-pass reject reports provided to you directly or to your bulletin board.

Medicare informational warnings called "Provider Identification Code Qualifier Invalid Value" messages will be labeled M389, M390, M391 and/or M392. If you receive one of these messages, your claim did not include an NPI as required for PQRI reporting. However, if you are certain that your claim was submitted with an NPI, you may want to contact your clearinghouse or billing agent to ascertain the reason behind the message. There is a possibility that your clearinghouse or billing agent removed the NPI prior to submitting the claim to Medicare. You may also want to call your carrier/MAC to ask about the message and how you can correct future claims.

A CMS Tip Sheet was developed by CMS to assist PQRI participants with reporting accuracy.

CMS Issues Rule Calling for 10.1% Cut in Physician Payments Effective January 1, 2008; Please Join AGS in Calling On Congress to Block the Cut
Medicare payments for physician services will drop 10.1% as of January 1, 2008 under a final payment rule the Centers for Medicare & Medicaid Services (CMS) issued October 30. A recent American Medical Association survey found that many physicians would be forced to cut back on the number of Medicare beneficiaries they see should the fee cut take effect.

Medicare’s contentious Sustainable Growth Rate formula mandates the cut, but Congress can override this mandate and has done so in previous years in the wake of concerted advocacy efforts by the AGS, its members and others. The Society is currently reviewing the final rule and will continue to urge Congress to block the 10.1 % cut. It encourages all AGS members and other advocates of quality elder care to take a few moments to join its campaign by visiting its Health in Aging Advocacy Center. The campaign also calls on Congress to revise the SGR, which mandates cuts in physician payment rates whenever growth in outlays for these services outstrips growth in Gross Domestic Product.

The new Medicare payment rule, which will be published in the Federal Register on November 27, would offer physicians incentive bonuses for meeting certain quality standards and would make additional changes in fees for certain physician services.

Offering Alternative to Plan to Defer Medicare Payment Cuts for Two Years, Sen. Grassley Proposes One-Year Halt
Republicans on the Senate Finance Committee favor a one-year suspension of mandated cuts in Medicare payments to physicians, rather than the two-year suspension that the Democratic leadership has proposed, ranking committee member Sen. Chuck Grassley (R-IA) said October 25.

Under Medicare’s contentious Sustainable Growth Rate (SGR) formula, physician payments will be cut 10% starting January 1, 2008, and another 5% starting January 1, 2009. The SGR mandates cuts in physician payments whenever growth in these expenditures outstrips growth in Gross Domestic Product. According to an American Medical Association survey, many physicians could be forced to see fewer Medicare beneficiaries should these cuts take effect. At the urging of the American Geriatrics Society, the AMA, other organizations and their members, Congress has blocked SGR-mandated cuts in the past. The Society urges all members and other advocates of quality healthcare for older adults to join its advocacy efforts aimed at blocking the pending 2008 cut.

Senate Finance Committee Chair Max Baucus (D-MT) has proposed a $25 billion to $30 billion Medicare package that would, among other things, suspend the scheduled physician pay cuts for the next two years . According to Sen. Grassley, however, legislators would have less difficulty passing a one-year than a two-year suspension of the cuts, since a two-year delay could cost $20 billion.

According to Congressional Quarterly, Sen. Baucus has proposed at least $8 billion to $12 billion in reductions in reimbursements to private Medicare Advantage (MA) plans to help offset the cost of a two-year delay. The AMA recently launched an advertising campaign urging Congress to cut payments to the plans, arguing that they cost Medicare $1,000 more per beneficiary than traditional Medicare. More than 350 beneficiaries enrolled in MA plans, however, rallied in Washington on October 24 in support of the plans.

President Bush Signs Law Restoring $7 Billion for Inpatient Reimbursement, Extending Part B Subsidy, Boosting Funds for Quality Reporting, and Delaying Rule Requiring Tamper-Proof Prescriptions
President Bush has signed legislation that will restore roughly $7 billion in Medicare funds for inpatient hospital care over the next five years, and extend a program covering Medicare Part B premiums for low-income beneficiaries.

The legislation, which Congress approved and the president signed in late September, will provide an additional $340 million over five years for Medicare's Physician Quality Reporting Initiative (PQRI), which offers bonus payments to physicians who report on a set of quality measures.

The new law will also postpone a controversial Centers for Medicare and Medicaid Services (CMS) rule that would have required physicians to write prescriptions for Medicaid beneficiaries on special tamper-resistant pads starting October 1. Critics argued that the rule didn't give healthcare providers enough time to obtain the special pads. In addition, the law will extend the Transitional Medical Assistance program, which allows families moving from welfare to work to retain Medicaid coverage for up to four months. Finally, the law extends, for three months, two federal programs slated to expire September 30. The first helps low-income individuals get healthcare coverage. The other is a federal abstinence education program.

The section of the legislation concerning Medicare inpatient hospital reimbursement revises a provision of a CMS rule that would have cut such reimbursement $20.3 billion over five years, CQ Healthbeat reports.

Senate Working on Package to Block the Pending Medicare Payment Cut
The Senate Finance Committee is working on a $20 billion proposal that would block the pending 10% Medicare physician payment cut slated to take effect January 1, according to AGS sources. These sources say it's likely that Congress will pass legislation this year to block the cut.

With the Senate addressing Medicare payments to physicians, now is the time for AGS members and other advocates of quality elder healthcare to ensure their voices are heard. Visit AGS' Health in Aging Advocacy Center to Support Medicare Physician Payment System Reform!

Earlier in the year, the House proposed a $65.3 billion measure that would have blocked the pending 10% cut and given physicians a 0.5% increase in payment rates for the next two years. This and other Medicare proposals, however, were recently dropped from a larger House bill to reauthorize the State Children's Health Insurance Program (SCHIP).

Unlike the House SCHIP proposal, the Senate's bill would provide a short-term fix but wouldn't make any large-scale changes to the Sustainable Growth Rate (SGR) formula that has mandated Medicare physician payment cuts each year since 2002. Earlier this year, Senate Finance Committee Chairman Max Baucus (D-MT) noted that the committee had no plans to revamp the formula this year.

CMS Releases Proposed Changes to Medicare Payment Rates, Calls for 9.9% Fee Cut; AGS Members Encouraged to Contact Congress
Medicare fees to physicians will drop almost 10% starting January 1, under a proposed regulation the Centers for Medicare and Medicaid Services (CMS) announced on June 30th. The proposed rule, which will be published in the Federal Register on July 12^th, would use a $1.35 Billion fund created by the Tax Reform and Health Care Act of 2006 to boost 2008 payments by about 1.5 percentage points for doctors who elect to take part in the voluntary data reporting program, known as the Physician Quality Reporting Initiative (PQRI).

AGS joined the AMA and 85 other physician and health professional organizations in a letter strongly urging the Administration to use the fund money to help Medicare physician payments keep pace with increases in practice costs. The Medicare Payment Advisory Commission (MedPAC) made a similar recommendation.

The House and Senate have the authority to prevent the overall fee cut, which Medicare's Sustainable Growth Rate (SGR) formula mandates whenever growth in these expenditures outpaces growth in Gross Domestic Product. It is likely that Congress will pass legislation later this year to block the cut.

House Democrats are already working on a Medicare package, which may include provisions that would block the pending fee cut for the next two years and add a half-percent increase each year as well, according to health care sources.

The package may also address ways to revise the Sustainable Growth Rate (SGR) formula to fix doctor payment rates for the long-term. One possible change includes removing outlays for drugs and biologics from calculations of the spending target. Another possible change addresses the current spending target set for all physicians, which may be revised so that there are multiple targets set. This will allow some targets, such as primary and preventative care, to be based on spending growth, rather then the Gross Domestic Product (GDP) alone.

With House Democrats already working on a package, it's a good time for AGS members to make sure their voices are heard. Visit the Health in Aging Advocacy Center to Support Medicare Physician Payment System Reform!

Higher Medicare Spending For Physician Services Mainly the Result of Increased Volume and Intensity of Services, Rather than Reimbursement Rates, CBO Report Finds
Growth in Medicare spending for physician services is primarily due to "increases in the volume and intensity of physicians' services" rather than changes in physician reimbursement rates, according to a recent Congressional Budget Office (CBO) report.

Medicare reimbursement rates have varied since 1998, when Medicare began using the Sustainable Growth Rate (SGR) formula, which mandates cuts in physicians' payment rates when increases in expenditures for physicians' services outpace growth in gross domestic product. Between 1997 and 2005, Medicare spending on physician reimbursement rose 79.2%. After adjusting for changes in the cost of providing physicians' services and for growth in the number of Medicare beneficiaries, however, spending on physicians' services increased just 34.5% during that period, the report finds. This growth, the report concludes, "is explained by growth in the volume and intensity of physicians' services rather than by changes in Medicare's payment rates."

"In fact, the quantity of services that physicians provided during that period increased by slightly more --39.4% -- than did Medicare's per-beneficiary spending on physician services," the report notes. After increased costs of providing care are taken into account "Medicare's payment rates for such services actually declined slightly during that period," it states.

"We are pleased that the report points out that more than half of the increase in Medicare spending on physician services between 1997 and 2005 stems from coverage expansions and changes in the beneficiary population and that nearly all of the remainder is due to factors such as prevalence of disease and medical innovation," said American Medical Association Chair Cecil Wilson, MD. "The report illustrates the complex factors that drive demand for physician services, and shows that blunt instruments like the SGR will only exacerbate the problem."

The AMA, in coalition with AGS and other organizations, is citing the report in an ongoing advocacy campaign to convince Congress to block a scheduled 10% cut in Medicare payments to physicians that's slated to take effect January 1 and institute a 1.7% increase instead. The campaign also aims to convince Congress to find alternatives to the SGR. See Related News Story.

AMA Launches Campaign to Block Cut in Medicare Payments to Providers, Releases Survey Finding that Many Docs Will See Fewer Medicare Beneficiaries Should Cut Go Through

The American Medical Association (AMA) this week launched a $2 million lobbying campaign to convince Congress to block a scheduled 10% cut in Medicare payments to physicians that's slated to take effect January 1. The American Geriatrics Society and other organizations have joined the AMA in these efforts. The scheduled cut is mandated by Medicare’s controversial Sustainable Growth Rate (SGR) formula, which requires such rollbacks when increases in spending for these services exceed growth in gross domestic product.

At the same time, the AMA released the results of a survey of 9,000 doctors that found 60% would limit the number of new Medicare patients they accept if the cut takes effect. The survey also found that more than two-thirds would defer the purchase of needed information technology next year, half would reduce their staff, and 14% would "completely get out of patient care," should the cut take effect, the Atlanta Journal-Constitution reports.

The AMA is advocating for a 1.7% increase in payments to providers in 2008, as recommended by the Medicare Payment Advisory Commission in a March report to Congress. In addition, the AMA is urging Congress to eliminate the SGR. Legislators have blocked SGR-mandated cuts each year since 2002. Because the formula remains in place, however, Congressional action preventing the cuts one year sets the stage for larger SGR-mandated cuts in subsequent years. According to the AMA, scheduled SGR adjustments will amount to a 40% payment cut for providers over the next nine years. During that same period, doctors expect their practice expenses to rise about 20%.

Senator Max Baucus (D-MT), Chair of the Senate Finance Committee, and Representative Pete Stark (D-CA), Chair of the House Ways and Means Health Subcommittee, have already said that an overhaul of the SGR formula this year is very unlikely.

According to the AMA, a reduction in payments to private Medicare Advantage plans, which are currently 12% higher than payments for traditional Medicare, can provide extra funds for physician reimbursement.

AMA, AGS, Other Medical Organizations Send Medicare Payment Reform Proposal to Congress

The American Medical Association (AMA) and 86 other medical organizations, including the American Geriatrics Society (AGS), recently sent Congress recommendations for revamping the Medicare physician payment system.

The recommendations reiterate that the Sustainable Growth Rate (SGR) formula --now used to determine Medicare payments to healthcare professionals providing care to Medicare beneficiaries -- should be "repealed and replaced with an update system that reflects increases in physicians' and other health professionals' practice costs."

The recommendations speak to the possibility that immediate repeal may not be possible, and propose a postponement option under which "Congress must establish by law a transition, pathway and date certain to complete elimination of the SGR." Should such a postponement be necessary, the recommendations call for yearly payment increases until the SGR is repealed.

Additional recommendations call for initiatives that would "bridge gaps in care and assure the appropriateness of services provided to Medicare beneficiaries." Among other things, these initiatives would provide incentives for physicians and other healthcare professions to adopt health information technology to improve efficiency. The proposal also calls for utilization management and education programs to address geographic variations in care.

Lastly, the recommendations suggest that the 2007 Medicare Physician Quality Reporting Initiative (PQRI) be re-evaluated before it is extended beyond 2007.

MedPAC Report Outlines Alternatives to the Sustainable Growth Rate But Stops Short of Recommending a Single Solution

In a recent report to Congress, the Medicare Payment Advisory Commission (MedPAC) outlines alternatives to the formula Medicare uses to calculate payments to physicians caring for beneficiaries, but stops short of recommending a particular fix.

The much-awaited report, Assessing Alternatives to the Sustainable Growth Rate, was one of two reports MedPAC sent to legislators March 1. A second, Medicare Payment Policy, makes recommendations on payment updates and policy regarding eight Medicare payment "systems" including hospitals, physicians, nursing homes and home health agencies. The Sustainable Growth Rate (SGR) formula, the controversial formula by which Medicare determines payments to physicians, aims to control expenditures for their services. In essence, the formula calls for cuts in Medicare physician fees whenever growth in these expenditures exceeds growth in Gross Domestic Product.

"The SGR is widely considered to be flawed," MedPAC reports, because "it neither rewards physicians who restrain volume growth nor punishes those who prescribe unnecessary services." In addition, the commission notes, relying on the formula to contain costs is problematic because Congress regularly overrides SGR-mandated cuts in payments, providing temporary relief to physicians, but setting the stage for higher SGR-mandated cuts in subsequent years.

The MedPAC report stops short of recommending a specific alternative to the SGR because "significant disagreement exists within the Commission about the utility of expenditure targets," the agency explains. Instead, Assessing Alternatives outlines two possible approaches for Congress. The first would involve repealing the SGR and coming up with a new protocol for updating physician payments. The second would involve replacing the SGR with a new expenditure target system.

"If the Congress chooses to pursue this path, the Commission has concluded that the target system should not apply solely to physicians," the authors of the report explain. "Rather, it should ultimately apply to all providers. Controlling total Medicare expenditures and producing the optimal mix of services requires that all types of providers work together, not at cross purposes, to keep costs as low as possible while increasing quality."

Any payment policies Congress adopts should reward all providers for efficiency and offer incentives for improved quality and care coordination, MedPAC further advises. "Polices such as pay for performance that link payment to the quality of care physicians furnish should be implemented," they advise. "At the same time, Medicare should encourage coordination of care and provision of primary care, allow gain sharing arrangements, bundle and package services where appropriate to reduce overuse, [and] ensure that prices are accurate," among other things.

Regardless of which approach Congress ultimately takes, Washington must give the Centers for Medicare and Medicaid Services sufficient time, financial resources and "administrative flexibility" to develop, institute and refine payment systems that "improve value for both beneficiaries and taxpayers," the authors conclude.

In their second report to Congress, MedPAC members recommend a 2008 update for physicians and for outpatient dialysis equal to the increase in input prices less expected productivity growth. For inpatient and outpatient services, they suggest both updates equal to the hospital "market basket" and the concurrent implementation of a quality incentive program. The agency, however, recommends no increase for nursing homes, home health agencies, and long-term care hospitals. This suggestion came under immediate fire from many of these agencies. For inpatient rehabilitation facilities, the MedPAC report suggests a 1% increase.

In a particularly controversial section of the report that is already attracting much attention in Congress, MedPAC reports that CMS spends about 12% more for care provided to beneficiaries through private Medicare Advantage plans than through traditional Medicare. The Commission recommends eliminating this payment gap, for a savings of roughly $65 billion over five years.

Revamping System for Paying Physicians Who Treat Medicare Beneficiaries Will be Costly, Analysts Predict
Efforts to overhaul the way Medicare pays physicians who care for beneficiaries will be exceedingly costly, say Congressional aides and lobbyists who met this week at the National Health Policy Conference.

Among other things, those attending the conference considered changes to the Sustainable Growth Rate (SGR), the formula by which Medicare calculates payments to physicians. The controversial formula, which has been in place since 1997, calls for cuts in Medicare physician fees whenever growth in these expenditures exceeds growth in Gross Domestic Product. Addressing the SGR is a major priority for Congress this year.

Since 2001, the SGR has mandated cuts in Medicare payments to physicians and Congress has blocked these at the eleventh-hour after scrambling to find funds to avert the cuts. This past December, Congress blocked a SGR-mandated 5% cut in 2007 physician payments - a move that leaves Congress facing an even bigger scheduled cut for 2008. President Bush's proposed 2008 budget assumes a 10% cut in physician payments next year. Legislators, however, are already going on the record in opposition to the cut.

"We all know that's not going to happen," Senate Budget Committee Chair Kent Conrad (D-ND) told Department of Health and Human Services Secretary Michael O. Leavitt at a Tuesday committee meeting. "It's not realistic with how we are going to treat physicians."

At the same session, Sen. Wayne Allard (R-CO) reported that physicians in his state are already seeing fewer Medicare patients because Medicare reimbursement is too low to cover costs. Physicians may still be accepting Medicare, but fewer are agreeing to see new patients, he told Secretary Leavitt.

Avoiding SGR-mandated cuts will be costly. Simply blocking the SGR-mandated 2008 Medicare physician pay cut will cost $28 billion over 10 years and freezing current payments for the next decade will cost at least $170.8 billion, analysts estimate. Offering physicians a 1% increase would cost nearly $209 billion over the next decade and tying payments to the Medicare Economic Index, which tracks the cost of providing care, would cost more than $252 billion over the course of 10 years.

Next month, the Medicare Payment Advisory Commission (MedPAC) will present Congress with suggestions for revamping the SGR formula. The release of the report will be the "kickoff" for Congressional debate concerning Medicare physician payments, a House aide told Congressional Quarterly.