WASHINGTON —The permanent "doc-fix" deal that cleared the Senate by an overwhelming margin on Tuesday night ends a perennial fight over Medicare payments that's dragged on for more than a decade.
The legislation repeals Medicare's loathed sustainable growth-rate formula for paying doctors and averts a 21.2% cut in payments that would have kicked in this month. It also sets up a two-track payment system that's designed to push physicians away from the traditional fee-for-service reimbursement model.
“It's a watershed event,” said Bill Kramer, executive director for national health policy at the Pacific Business Group on Health. “We've been stuck with fee-for-service for almost 50 years. We've been stuck with this SGR formula for more than 15 years. This finally breaks the logjam.”
Physicians have been the most significant holdout in the industry's movement away from the fee-for-service payment system, said Blair Childs, senior vice president of public affairs at Premier, an alliance of hospitals and other providers working on alternative payment models. “This makes it starkly clear. There's no question that everyone's being pushed to alternative payment models,” Childs said. “Physicians are going to start to engage in a way they haven't before.”
The bill, the most important piece of healthcare legislation since the 2010 passage of the Affordable Care Act, cleared the Senate by a 92-8 vote on Tuesday night. It previously cleared the House with more than 300 votes. The deal was cooked up by House Speaker John Boehner and Minority Leader Nancy Pelosi in a display of bipartisanship that's exceedingly rare, especially on healthcare matters.
The package also included a two-year extension of the Children's Health Insurance Program and $7.2 billion in funding for community health centers. In addition, numerous healthcare policy and finance provisions were stuffed into the bill, including a six-month delay of the controversial “two-midnight” payment policy for short hospital stays.
But Kramer argues that the shift away from fee-for-service and toward alternatives such as accountable care organizations and bundled-payment initiatives is the most important development. Starting in 2019, doctors who have at least 25% of their patients in value-based payment models will be eligible for 5% bonus payments through 2024. After that they'll receive annual payment bumps of 0.75%, three times the level of increase for physicians that remain on the fee-for-service track.
“The transition from fee-for-service to alternative payment models can't happen overnight,” Kramer said. “Many physician are not ready to do that. This is going to take a change in not only their business model, how they receive payments, but also in the way they provide care.”
Not everyone is so optimistic about how the new system will work. Skeptics of the deal question whether physicians will be satisfied with annual payment hikes that will almost certainly fail to keep pace with inflation and suggest that they'll be back on Capitol Hill soon seeking more money.
“The idea that this is a permanent fix is false,” said James Capretta, a visiting scholar at the American Enterprise Institute who previously served as a top GOP healthcare staffer in both the House and Senate. “I just think that's total folly.”
But Paul Van de Water, a senior fellow at the left-leaning Center on Budget and Policy Priorities, points out that nothing is permanent in healthcare because the dynamics are constantly shifting. “I don't lose a moment's sleep over whether this formula is going to be the right formula in 2030 or not,” Van de Water said. “Getting off of this unfortunate annual treadmill is very important.”
Capretta is also extremely dubious that the overhaul of Medicare's physician payment system will succeed in creating more cost-effective, higher quality treatment models. Instead, he argues, it will simply force doctors into hospital-run ACOs with rules decreed by the federal government. “The bill is a massive CMS power grab,” Capretta said. “It's amazing to me frankly that Republicans went along with it.”
Dr. Robert Berenson, a healthcare finance expert at the Urban Institute, shares that skepticism about how the new system will work in large part because of a lack of credible quality measurements for physicians. “I don't think the provisions that purportedly will produce value-based physician care will achieve that perfectly good, aspirational objective,” said Berenson, who previously served on the Medicare Payment Advisory Commission. “We have lousy measures that don't measure the core activities of what doctors do.”
Berenson supports scrapping the SGR, but argues that the specter of a 21.2% cut in payments to doctors caused Congress to act irrationally and embrace a system that there's no evidence will actually achieve the desired objectives. “They hold their noses and accept stuff that they otherwise wouldn't,” he said.
Van de Water, though, counters that it's way too early to reach any such grim conclusions and that most healthcare policy experts think the framework makes sense for prodding physicians to embrace value-based payment model such as ACOs. “The federal government is hardly the only payer that's trying to push in this direction,” Van de Water said. “The private payers are looking to go down this road as well.”