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Panel: Medicare Doctor Pay Needs ‘Drastic Changes’

By Jordan Rau
Kaiser Health News

A panel convened by a major medical group is recommending that Medicare heal its physician payment shortfalls with “drastic changes” in how it reimburses doctors and other providers, rather than seeking more taxpayer money.

Medicare needs $138 billion over the next decade to avoid steep cuts in physician pay. Avoiding those cuts has become an annual scramble in Congress known as the “doc fix.” In a report released Monday, the panel—mainly composed of doctors—concludes that there are enough “marginal, harmful, ineffective, or unnecessary” services already being paid for in Medicare that outside funding is unnecessary.

Better pay for doctors who care and manage those with complicated medical problems could also come from money already in the health care system, according to the National Commission on Physician Payment Reform. The commission was put together by the Society of General Internal Medicine, which is made up of about 3,000 physicians on faculties at medical schools and teaching hospitals.

The panel also said Medicare could save money by targeting payments that vary based on where they are performed. As an example, the panel noted that Medicare pays $450 for an echocardiogram in a hospital, but only $180 when the procedure is performed in a doctor’s office. “There’s no reason for that whatsoever,” said Kavita Patel, a doctor and researcher at the Engelberg Center for Health Reform at the Brookings Institution who was on the panel.

The panel also took on the powerful Relative Value Scale Update Committee, (RUC) which is managed by the American Medical Association. The RUC influences how physicians are reimbursed through its recommendations to Medicare, which sets reimbursement rates and often follows its advice.  The panel joined a chorus of criticism that expensive, technology-heavy procedures such as surgery and imaging are overly encouraged by high payment rates. The report said the RUC’s dominance by specialists and the secretive way it operates are “seriously flawed.”

Overall, the panel called for speedy changes in Medicare’s fee-for-service payment system so that within five years doctors are paid in a way that rewards value, not volume.

“Over time, payers should largely eliminate stand-alone fee-for-service payment to medical practices because of its inherent inefficiencies and problematic financial incentives,” the panel wrote.

Medicare is already experimenting with several new methods of payments, including accountable care organizations and bundled payments, and the federal health law instructed Medicare to  make quality part of the calculation in reimbursing physicians by 2017.  Jonathan Blum, director of the Center for Medicare, told the Senate Finance Committee last week that this was the most challenging task in the law’s changes in health care financing.

The panel was chaired by Steven Schroeder, a physician and professor at the University of California, San Francisco and former president of the Robert Wood Johnson Foundation.  Nine of the 12 commissioners also are medical doctors. Former Republican Senate Majority Leader Bill Frist, also a doctor, lent his prestige to the panel as “honorary chair.”


Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

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