Lingering partisan divisions over the Patient Protection and Affordable Care Act and ongoing efforts to repeal and replace it will likely further complicate any Medicare payment overhaul.
However, Congress may not have any choice but to act this year because Medicare's sustainable growth-rate physician-payment formula requires a scheduled 29.5% cut on Jan. 1, 2012. Providers, hoping to avoid a repeat of the five disruptive short-term patches Congress enacted last year, are ramping up pressure for a permanent payment-system change this year before the deadline for scheduled cuts.
“The current Medicare physician payment formula is broken, and the AMA will work with policymakers on both sides of the aisle to replace it with a system that better reflects the costs and practice of 21st-century medical care and provides stability for physicians and their Medicare patients,” Dr. Cecil Wilson, the American Medical Association president, said in a written statement.
Any overhaul is unlikely to save money in the short term or eliminate the projected cost of closing the gap between what the SGR formula determined and what physicians are paid under the payment extension that expires at the end of the year. The size of that funding gap—estimated at $370 billion over 10 years, according to the president's budget—will likely further complicate any overhaul effort.
“I don't think there is a rational policy option that is going to make that number go away,” Hackbarth said.
Upfront funding increases would be required to implement at least some of redesign proposals, including outcomes and performance-based agreements, according to MedPAC presentations. But winning additional funding from Congress in the tight budget environment is unlikely.
“Medicare pays enough for adequate access to physician care,” Rep. Earl Blumenauer (D-Ore.) said at a March 15 hearing on MedPAC rate proposals. “But some redistribution of the payments is appropriate.”
The discussion of overhauling the program's payment model comes as MedPAC is recommending that Congress approve relatively modest or no rate increases for healthcare providers. The recommended 2012 rate increases included:
- 1% for both the inpatient and outpatient hospital services.
- 1% for physician fee-schedule services.
- 0.5% for ambulatory surgery centers.
- 1% for hospices.
- 1% for outpatient dialysis services.
- No increase for skilled-nursing facilities.
- Eliminating the market basket update for home-health services, with a two-year rebasing of rates beginning in 2013.
- No increase for inpatient rehabilitation facilities.
- No increase for long-term acute-care hospitals.
Separately this week, the Medicaid and CHIP Payment and Access Commission released its first report to Congress. Established by the Children's Health Insurance Program Reauthorization Act of 2009, the commission is funded through last year's Patient Protection and Affordable Care Act. Similar to MedPAC, MACPAC is responsible for advising Congress on a range of policies about payment, access, eligibility, enrollment and retention, coverage, quality and the interaction of the Medicaid and CHIP programs with Medicare and the rest of the nation's healthcare system.
Although this first report did not include any recommendations to Congress, it did provide statistics on both programs. Sen. Chuck Grassley (R-Iowa), former ranking member on the Senate Finance Committee—which oversees Medicare and Medicaid—said in a statement that it is valuable to have information on a program that covers more people and will spend more money than Medicare.
In fiscal 2010, the report said, the Medicaid program spent $406 billion in state and federal funding to cover 68 million people. The federal government's share of the program is $274 billion, and it accounts for 8.1% of all federal outlays. Meanwhile, the CHIP program spent $11 billion in both state and federal funding last year to cover some 8 million children, 90% of whom are from families who have income levels below 200% of the federal poverty level.
—with Jessica Zigmond