[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
EXPLORING OPTIONS FOR
IMPROVING THE MEDICARE
PHYSICIAN PAYMENT SYSTEM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
MARCH 6, 2007
__________
Serial No. 110-13
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
JOHN D. DINGELL, Michigan,
Chairman
HENRY A. WAXMAN, California JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts Ranking Member
RICK BOUCHER, Virginia RALPH M. HALL, Texas
EDOLPHUS TOWNS, New York J. DENNIS HASTERT, Illinois
FRANK PALLONE, Jr., New Jersey FRED UPTON, Michigan
BART GORDON, Tennessee CLIFF STEARNS, Florida
BOBBY L. RUSH, Illinois NATHAN DEAL, Georgia
ANNA G. ESHOO, California ED WHITFIELD, Kentucky
BART STUPAK, Michigan BARBARA CUBIN, Wyoming
ELIOT L. ENGEL, New York JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland HEATHER WILSON, New Mexico
GENE GREEN, Texas JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado CHARLES W. ``CHIP'' PICKERING,
Vice Chairman Mississippi
LOIS CAPPS, California VITO FOSSELLA, New York
MIKE DOYLE, Pennsylvania STEVE BUYER, Indiana
JANE HARMAN, California GEORGE RADANOVICH, California
TOM ALLEN, Maine JOSEPH R. PITTS, Pennsylvania
JAN SCHAKOWSKY, Illinois MARY BONO, California
HILDA L. SOLIS, California GREG WALDEN, Oregon
CHARLES A. GONZALEZ, Texas LEE TERRY, Nebraska
JAY INSLEE, Washington MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin MIKE ROGERS, Michigan
MIKE ROSS, Arkansas SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York TIM MURPHY, Pennsylvania
JIM MATHESON, Utah MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina MARSHA BLACKBURN, Tennessee
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
_______
Professional Staff
Dennis B. Fitzgibbons, Staff Director
Gregg A. Rothschild, Chief Counsel
Sharon E. Davis, Chief Clerk
Bud Albright, Minority Staff Director
(ii)
Subcommittee on Health
FRANK PALLONE, Jr., New Jersey, Chairman
HENRY A. WAXMAN, California NATHAN DEAL, Georgia,
EDOLPHUS TOWNS, New York Ranking Member
BART GORDON, Tennessee RALPH M. HALL, Texas
ANNA G. ESHOO, California BARBARA CUBIN, Wyoming
GENE GREEN, Texas HEATHER WILSON, New Mexico
Vice Chairman JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado STEVE BUYER, Indiana
LOIS CAPPS, California JOSEPH R. PITTS, Pennsylvania
TOM ALLEN, Maine MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin MIKE ROGERS, Michigan
ELIOT L. ENGEL, New York SUE WILKINS MYRICK, North Carolina
JAN SCHAKOWSKY, Illinois JOHN SULLIVAN, Oklahoma
HILDA L. SOLIS, California TIM MURPHY, Pennsylvania
MIKE ROSS, Arkansas MICHAEL C. BURGESS, Texas
DARLENE HOOLEY, Oregon MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York JOE BARTON, Texas (ex officio)
JIM MATHESON, Utah
JOHN D. DINGELL, Michigan (ex officio)
C O N T E N T S
----------
Page
Hon. Frank Pallone Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 1
Hon. Nathan Deal, a Representative in Congress from the State of
Georgia, opening statement..................................... 3
Hon. Anna G. Eshoo, a Representative in Congress from the State
of California, opening statement............................... 4
Prepared statement........................................... 4
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 5
Hon. Diana DeGette, a Representative in Congress from the State
of Colorado, opening statement................................. 6
Hon. Lois Capps, a Representative in Congress from the State of
California, opening statement.................................. 7
Hon. Darlene Hooley, a Representative in Congress from the State
of Oregon, opening statement................................... 8
Hon. Tim Murphy, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 9
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 10
Prepared statement........................................... 11
Hon. Tammy Baldwin, a Representative in Congress from the State
of Wisconsin, opening statement................................ 12
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 13
Hon. Tom Allen, a Representative in Congress from the State of
Maine, opening statement....................................... 14
Hon. Jim Matheson, a Representative in Congress from the State of
Utah, opening statement........................................ 15
Hon. Hilda L. Solis, a Representative in Congress from the State
of California, opening statement............................... 15
Hon. Barbara Cubin, a Representative in Congress from the State
of Wyoming, prepared statement................................. 16
Witnesses
Glenn M. Hackbarth, chairman, Medicare Payment Advisory
Commission..................................................... 17
Prepared statement........................................... 20
A. Bruce Steinwald, Director, Health Care, Government
Accountability Office, Washington, DC.......................... 62
Prepared statement........................................... 65
Elliott S. Fisher, M.D., professor, medicine and community and
family medicine, Dartmouth Medical School...................... 74
Prepared statement........................................... 76
T. Byron Thames, M.D., member, Board of directors, American
Association of Retired Persons................................. 92
Prepared statement........................................... 94
EXPLORING OPTIONS FOR IMPROVING THE MEDICARE PHYSICIAN PAYMENT SYSTEM
----------
TUESDAY, MARCH 6, 2007
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:35 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Frank
Pallone, Jr. (chairman) presiding.
Members present: Representatives Eshoo, Green, DeGette,
Capps, Allen, Baldwin, Solis, Ross, Hooley, Matheson, Dingell,
Deal, Hall, Wilson, Shadegg, Murphy, Burgess, and Barton.
Staff present: Robert Clark, Yvette Fontenot, Amy Hall,
Christie Houlihan, Jodi Seth, Bridgett Taylor, Brin Frazier,
Chad Grant, Ryan Long, Katherine Martin, Melissa Bartlett.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. I would like to call the meeting to order.
Today we are having a hearing on exploring options for
improving the Medicare physician payment system, and I am glad
to see that Mr. Hackbarth--we have two panels. The first is
just Mr. Hackbarth. And I will recognize myself now for an
opening statement. Since we are talking about physician
services today, I figured I would try to couch my statement in
medical terms so I am going to begin with a diagnosis. For the
past several years physicians participating in Medicare have
been threatened with payment cuts and these payments cuts are
the result of the complex formula used to reimburse physicians,
specifically physician payments are tied to an expenditure
target known as a sustainable growth rate or SGR.
As spending for physician services exceeds this spending
target then payments are reduced. Congress, however, has
stepped in each time to prevent these cuts from taking place
and instead we have provided physicians with a freeze in
payments or slight increase depending on the year. At the same
time we are grossly overpaying managed care plans that
participate in Medicare. According to the MedPAC report
released last week payments to Medicare Advantage plans are 12
percent higher than payments for physicians in traditional fee
for service. These overpayments haven't bought us much either.
There is no discernible difference in the quality of care or
health outcomes for beneficiaries enrolled in private plans
versus those who are enrolled in traditional fee for service.
If the current system is left unchanged the prognosis is
grim in my opinion. Physicians are already slated to receive
annual payment cuts over the next 10 years. Each year that
Congress steps in to avert these payment cuts from going into
effect that increases the size of the cuts that doctors face in
later years. As a result of previous interventions doctors will
face a cut of 10 percent in 2008 and additional cuts over the
next 10 years. The predicted payment cuts could have serious
implications for beneficiaries, including jeopardizing their
access to medical services, and while doctors don't seem to be
refusing Medicare patients yet, I have little doubt that if
Congress were to allow these payment cuts to go into place many
doctors would drop out of the program altogether.
Furthermore, if we do not correct the payment inequities
between Medicare Advantage plans and traditional fee for
service seniors are going to be forced into private managed
care where their choice of doctors and their access to services
will be severely constrained. We must preserve in my opinion
the right of beneficiaries to select a doctor of their choosing
which has been the hallmark of the Medicare program since it
was created over 40 years ago. Beneficiaries will face access
problems also if they can no longer afford the growing cost of
their part B premium. Our seniors have already faced 3 years of
record premium increases under Medicare. Currently, the part B
premium is $93.50 per month. I remember when people would
complain about it being $40 or $50. In 2008 the part B premium
is expected to increase by approximately $15 to $109.40 per
month. These increases are eating up a larger share of senior
Social Security checks and forcing them to make tough choices
between medical care they need and other necessities.
So what is the course of treatment now that we have the
diagnosis and the prognosis, what is the course of treatment,
and first and foremost we need to level the playing field
between Medicare Advantage plans and traditional fee for
service Medicare by establishing neutral payment systems. We
should also eliminate the slush fund used to provide extra
payments for preferred provider organizations. These two steps
alone will go a long way at reducing unnecessary costs in the
program and preserving access for seniors. The harder part is
deciding how to fix the payment structure. The MedPAC report
that we will hear about today will hopefully provide us with a
good starting point as we examine our options.
From what I have seen so far, I think there are some good
ideas included in this report, and I am eager to learn more
about them from Mr. Hackbarth. I think it is important to note,
however, that the task before us is a difficult one. We all
know that. The commissioners themselves admit that they could
not agree on a single approach or how to fix the problems
associated with the SGR and that should be some indication of
the challenges that Congress faces as we attempt to come up
with a solution.
Needless to say, we have our work cut out for us but that
shouldn't deter us. I have said before, and I will say again,
that we need a permanent solution to this problem. We should no
longer settle for short-term fixes that simply kick the can
down the road. In sum, we need to roll up our sleeves and get
to work. I am looking forward to hearing from our witnesses
today and working with all interested parties including my
colleagues on both sides of the aisle to find a solution. I
think that is important. It is really important for us, I
believe, to work in a bipartisan fashion on this issue.
I think we all want to provide physicians with a stable and
predictable payment system as well as preserve beneficiaries
access to care. I think I would just end by saying that I think
the worse thing is when we have a reimbursement rate or system
that is not based on what is actually happening out there when
the government doesn't look at things practically in terms of
what the real costs are and comes up with systems that are not
really related to actual costs then we get into trouble, and
that is what we need to fix. So thank you again. I will now
recognize the ranking member for an opening statement.
OPENING STATEMENT OF HON. NATHAN DEAL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA
Mr. Deal. Thank you, Mr. Chairman. Medicare physician
payment has been an issue that has come before this committee
several times over the last several years. In fact, I think we
had two hearings that related to the subject during the last
Congress. I am glad to see what we are looking at possible
reforms again today because I do think that is something that
we have to wrestle with. I think the report of MedPAC and the
lack of consensus among the commissioners themselves indicates
how complex this issue really is and how difficult it is to
arrive at a solution that will satisfy everybody, and I am
hopeful that we can use this as a springboard for coming to
more long-term solution.
I personally would have hoped that maybe MedPAC could have
given us a little more definitive guide path but there again I
think that fact recognizes the complexity of the issue and the
difficulty of the commissioners themselves to come to
consensus. The incentives in the existing payment system reward
those physicians whose practices see a high volume of cases
while paying much less attention to the quality of the services
performed. This has led to the dramatic growth that we have
seen in certain services. And here I think lies the significant
weakness of the SGR because while it takes automatic action to
check the cost of the service provided it does little to
address the number of time that service is provided.
Both of the components, the volume of services and the
price paid for the service, must be considered during reform of
physician payment. As the MedPAC report notes beneficiaries
that receive more services do not necessarily experience better
quality of care or better outcomes. I think this dynamic
between the growth and the number of services and how much is
paid for the service is why it is so important that the
committee focuses on reforms which emphasize that patients
receive high quality care. I believe we took a step in the
right direction last year by providing a bonus payment for
those physicians that voluntary report quality measures this
year, and I hope that we can expand upon it again during this
Congress. I thank you, Mr. Chairman.
Mr. Pallone. Thank you. And then we will continue with the
opening statements. I recognize the gentlewoman from
California, Ms. Eshoo.
OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Eshoo. First, Mr. Chairman, thank you for holding this
hearing. We have had hearings before. We know we have a very
large issue facing us that I hope we will finally address.
Physicians and patients are deeply affected by this across the
country. I could go member by member here. My staff has given
me the numbers affecting each one of our congressional
districts, the members that are here, and that really is a
microcosm for the rest of the Congress. It is costly, and I
think that is why the now minority really didn't get to address
it.
Every year there is a rush and a push on Congress to do
something about physician reimbursements and we have come up
with very temporary fixes, and this really calls for all of us
putting our heads together. And I look forward to asking
questions today, and I will place my statement in the record.
But thank you for having this hearing. I think it is going to
be instructive, and hopefully it will be a guide for how we can
reform. Thank you.
[The prepared statement of Ms. Eshoo follows:]
Prepared Statement of Hon. Anna G. Eshoo, a Representative in
Congress from the State of California
Mr. Chairman, this committee has held many hearings
examining the Medicare physician payment system over the last
several years. We've waited far too long to act on this issue
and physicians and their patients have suffered as a result.
I hope today's hearing will be different from those of the
past and that Congress will use this hearing as a guide for
drafting, introducing and passing legislation that is long
overdue. So thank you again, Chairman Dingell, for making this
issue a priority for the committee in the 110th Congress.
Last week, MedPAC released a report to Congress analyzing
the current state of Medicare physician payments. Although the
report did not contain a specific recommendation for how we
ought to fix this problem, it did recommend two things: payment
accuracy for physicians must be improved. To do so, the
sustainable growth rate (SGR) payment formula should be
abandoned in its current form.
If we continue to use expenditure targets, they must
involve two new themes: they must apply to all Medicare
expenditures (hospitals in addition to physicians); and they
must be applied at a smaller geographical scale, rather than
the current SGR formula which is applied at the national level.
With respect to the SGR, serious reforms are necessary and
they're needed now. Last year many of my colleagues and I
recommended that we eliminate the SGR and replace it with the
Medicare Economic Index (MEI). The MEI is an index based on
actual medical practice costs. It is used to reimburse all
other providers in the Medicare program (including hospitals,
health plans and nursing homes). MedPAC and many State medical
associations have been supportive of past proposals to
eliminate the SGR payment formula and adopt the MEI for
physician payments.
The SGR, however, is inappropriately tied to a non-medical
index, the Gross Domestic Product (GDP), which has resulted in
proposed physician payment cuts of more than 4 percent each
year since 2003. If Congress doesn't act now, Medicare
physician payment rates will be cut by roughly 10 percent on
January 1, 2008. Congress scrambles every year to enact a last-
minute fix. What we really need is a permanent fix, and
replacing the SGR with the MEI will do this.
MedPAC's recommendation to scale expenditure targets to
geographic areas leads me to raise a related issue of
considerable concern to me, that of the Geographic Payment
Locality. Despite major demographic changes across the country
since 1966, the Geographic Payment Locality hasn't been updated
in any meaningful way. The result is that physicians in 32
states and 174 counties are currently inaccurately underpaid by
up to 14 percent per year. Although the geographic payment
locality is not a national problem, it's a huge problem for the
affected localities.
For example, in Ranking Member Deal's district, Pickens
County physicians were underpaid by 12 percent in 2006. In
Ranking Member Barton's district, Ellis County physicians were
underpaid by 7.5 percent. In Chairman Dingell's district,
physicians in Monroe and Livingston Counties were underpaid by
5.4 percent last year.
And in my district, Santa Cruz County physicians are
underpaid by 10.2 percent. As of June 1 of last year,
physicians in Santa Cruz County are no longer accepting new
Medicare patients. This means that patients in Santa Cruz must
travel at least 25 miles to neighboring Santa Clara County to
receive care, if they are lucky enough to find a doctor who
will accept new Medicare patients.
We have to be careful moving forward: it makes absolutely
no sense to even consider applying new expenditure targets to
41-year-old geographies. We must first reform the payment
localities, and the locality-based payment levels so they
reflect actual real costs in the geographic units that we're
developing. Otherwise, we'll only compound an already
overwhelming problem.
I urge you, Mr. Chairman, and members of our committee to
listen carefully to the expert opinions of our witnesses today
and make a commitment to reform the Medicare Physician Payment
system before the summer recess.
We've spent far too long investigating this issue. It's
time to act.
----------
Mr. Pallone. Thank you. I recognize the gentleman from
Texas, Dr. Burgess.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. Thank you, Mr. Chairman. In anticipating I
won't get through all of this in 3 minutes, I am going to claim
the time of everyone who is not here on my side. Alan Greenspan
right before he retired as Chairman of the Federal Reserve
Board came and did a victory lap around the Hill last January,
and he met with a group of us on my side of the aisle, and sure
enough the questions came up are we going to be able to sustain
Medicare spending, the same sort of things we hear David
Walker, the comptroller, talk about.
Alan Greenspan was saying, he said I think ultimately you
will be able to solve those problems. It will be difficult but
you will be able to do it. My bigger concern, said Mr.
Greenspan, is there will be no one there to deliver the
services by the time you get there. And I share Mr. Greenspan's
concern. I am very anxious to hear from our witnesses today.
Before we go home for the Easter break, I will be reintroducing
legislation much as I did last year in Congress to deal with
this program. Since MedPAC has not addressed a solution to the
SGR problem, I will fill the void.
But let me just go through with the committee today some of
the principles that I think we must have in that legislation
when it comes forward at the end of the month. Congress must
develop a physician work force incentive that will insure
future beneficiaries accessibility and keep doctors in the
game. This has got to be complimentary to Medicare physician
payment reform. The current Medicare physician payment system
exacerbates negative physician work force trends. Therefore,
the SGR ultimately cannot be reformed. It is just simply going
to have to be eliminated or replaced with something else. I
vote for MEI.
Reimbursement must fairly compensate physicians who provide
services covered by Medicare. Any new system must be able to
adjust for growth and services but also be agile enough to
determine what constitutes appropriate growth and service
volume and when growth results in better patient outcomes that
is recognized. That was the issue that Charlie Norwood brought
up last year and hammered home when we had a similar panel to
this last fall. Since Medicare is an integrated program the
measure of appropriateness should take into account the growth
in certain service resulting in the decrease or avoidance of
other services covered elsewhere in the Medicare program.
We keep loading stuff onto part B. We expand the premium
for senior citizens. We cut the reimbursement rate to
physicians but this is money that we are no longer having to
spend in part A, part C, and part D. Medicare truly should be,
if it is an integrated program, it should be reflective of that
fact and not punitive to part B and ultimately punitive to
seniors and to physicians who are involved in the part B
program, so Congress must de-link any future cost containment
to trends in the economy that are completely external to
medicine.
The doctors who practice medicine in this country have no
control over what we do up here in Washington that ultimately
affects the economy. Quality reporting, I am a big believer in
it, but I will tell you what, and I believe this to be true, if
you drive out the quality physicians, and I am talking about
the doctors who are 45 to 65 years of age, if you drive those
individuals out of the practice of medicine for our senior
citizens it is going to cost you a heck of a lot of money to
bring that quality back to speed and you will never recover.
The result is we will have the scope of practice issues where
we have people other than physicians delivering care to
arguably what are our most complex patients in this country,
our Medicare patients. I will yield back, Mr. Chairman.
Mr. Pallone. Thank you, Doctor. Next I recognize the
gentlewoman from Colorado, Ms. DeGette.
OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Ms. DeGette. Thank you very much, Mr. Chairman. I would
like to add my thanks to the other committee members for you
having this hearing today. For the last few years we have an
annual ritual in my office, which is we answer all the phone
calls from the doctors in my district begging me to fix the
reimbursement problem, and understandably they can't understand
or comprehend why we come to the brink of significant
reimbursement cuts every year only to make minor increases on
December 31. Most physicians at the end of the day are small
businessmen and women who need to make their payroll and cover
their rent, pay for equipment upgrades, and plan for the coming
year.
They need the continuity of predictable reimbursement so
that they can adequately plan for the future and spend their
time doing what they are good at which is caring for patients.
So in 2005 we heard all these same pleas for help, and we
decided to start down the road to make changes. In the Deficit
Reduction Act we called upon MedPAC to examine alternative
methods for reimbursing physicians while also controlling
levels of expenditures. I, like most of my colleagues here on
the committee, was hopeful that MedPAC would be able to
coalesce around a plan that could begin the process of
developing a reimbursement system that made sense.
So that is why I was disappointed to learn that the result
of the study was not consensus but simply more discussion. It
seems like as we pull the physician reimbursement system away
from the precipitous of cuts every year so too do we pull a
long-term fix away from successful development. And I think,
Mr. Chairman, you and the other members on this side of the
aisle, and I think our colleagues on the other side too, will
agree this has just simply got to stop. In the absence of a
concrete plan for fixing our physician reimbursement system, I
hope that our hearing today will start a process that will
eventually result in a usable model.
We have all spent a lot more time than we should have on
this issue, including the physicians, and it is time that we
put patients first, roll up our sleeves, and develop a system
that rewards high quality care at a reasonable price. Despite
my disappointment over not having a final solution to our
problem, I am happy to see that we are breaking the issue down
to some important fundamentals. I am looking forward to hearing
discussion of a pay for performance model, and I also want to
hear how a system can be constructed that supports coordination
of care among providers and rewards achieving the best outcome,
not necessarily the specific services that were provided.
Finally, I am interested in hearing how regional
differences in utilization can be better understood so we don't
just reward good behavior but we try to replicate it
nationwide. Mr. Chairman, despite my concerns, I do appreciate
the work that has been done to date, and I hope the discussion
today generates ideas that will eventually lead to plans to
move forward. And I yield back any time I might have. Thanks.
Mr. Pallone. Thank you. I recognize the gentlewoman from
California, Mrs. Capps.
OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mrs. Capps. Thank you, Chairman Pallone. I believe we all
agree that there is a dire need to reform the current Medicare
physician reimbursement system. I am very pleased that early on
in this session of Congress that you have called this hearing,
thankful that our witnesses are here. We have discussed this
topic in this committee quite often over the past few years,
and I think we all would agree now that the first step is
replacing the SGR formula. It is fundamentally flawed, needs to
be scrapped, so that we can develop a better system. We need to
set the stage for long-term solution that does not rely on
enacting last minute 1-year updates and threatening long-term
solvency concerns.
So that is one of the reasons I am very happy that we are
starting this discussion early on in the 110th Congress. It
should give us time now at this time to really take some action
as soon as possible. I hope that as we proceed with devising a
solution to the overall Medicare physician fee problem we will
also consider another related subject that deserves its own
hearings and its own fix and that is a geographic adjustment
issue. I brought this up before many times in this committee,
and I am going to continue to do so. It is really something I
would say almost every member who is here today at this hearing
and many others as well are very concerned about it because it
affects our districts.
In fact, there are 175 counties in 32 States where
physicians are paid 5 to 14 percent less than the Medicare
assigned geographic cost factors because they are assigned to
inappropriate localities. In my own district physicians in
Santa Barbara and San Luis Obispo counties currently receive
reimbursements much lower than the actual geographic cost
factors in those counties. There are proposals out there but
none have been acted on, and I want to take this opportunity to
stress how important a fix would be to our constituents. It is
heartbreaking to hear physicians closing up shop, beneficiaries
who can't find a doctor who will take a new patient on
Medicare. It is such a common theme across this country.
Just a few days ago, I heard that the last psychiatry
practice in San Luis Obispo County had to close its doors. With
each physician who leaves a number of patients are left to find
new doctors further away, wait longer for appointments, and
this is a situation we cannot allow to go on any longer.
Congress needs to act quickly to address the overall Medicare
physician payment system as well as the geographic practice
cost index. I am sure we are going to hear from our witnesses
today and I agree with them that we cannot improve our health
care delivery in this country when physicians cannot afford to
sustain their practice and when patients are left with
inadequate access to care. With that, I will yield back the
balance of my time.
Mr. Pallone. Thank you. The gentlewoman from Oregon, Ms.
Hooley, is recognized.
OPENING STATEMENT OF HON. DARLENE HOOLEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Ms. Hooley. Thank you, Mr. Chair. Good morning, Mr.
Hackbarth. It is particularly nice to welcome an Oregonian to
this committee. Medicare physician payment reform is a critical
issue for Congress to address this year. Physicians will face a
10 percent cut in payment next year if Congress fails to act.
The health of Medicare cannot afford for Congress to keep
relying on year-end stop gap measures to address the physician
payment shortfalls like we did last year. Our dedicated
physicians deserve better than to be forced to wait until the
last days of the year to find out if they can afford to provide
services to Medicare beneficiaries in the future.
I firmly believe that a long-term fix for the physician
reimbursement system is absolutely critical. Cutting physician
reimbursement rates put an increased burden on an already
strained system. Some seniors cannot get access to a physician
because they have stopped accepting Medicare patients, and
again I think you will hear this over and over again. There is
a patient access issue, and we cannot let the Medicare system
and our seniors be put at risk by failing to act on physician
payment reform. Oregon's physicians provide care more
efficiently than physicians in many parts of the country. The
alternatives to the SGR discussed in your report are a good
start toward addressing geographic disparities in how care is
provided.
It is important to assure that physicians who provide
inappropriate level of care for their patients like the vast
majority of physicians in Oregon benefit from the savings that
they create in the system. I also want to insure that physician
payment reform will not create a system under which providers
with disproportionately sicker patient population will be
punished. Medicare beneficiaries from underserved and rural
areas are more likely to see patients in worse health than
beneficiaries elsewhere. Any move toward pay for performance
must insure that the providers are not punished for taking on
the tough cases. We need to encourage providers to see the
sickest patients as well as the healthy ones.
Although I appreciate MedPAC's work in assessing
alternatives to the sustainable growth rate, I think that
MedPAC has not done enough to consider the impact of proposals
on physicians practicing in rural areas. I think this may be in
part because the commissioners with real health backgrounds are
under represented on MedPAC. In the future I hope to see a more
balanced representation of rural versus urban and suburban
commissioners appointed. Thank you, Mr. Chair, and I look
forward to discussing these issues more with you. Thank you for
being here.
Mr. Pallone. Thank you. I now recognize the gentleman from
Pennsylvania, Mr. Murphy.
OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Murphy. Thank you, Mr. Chairman, and thank you for your
high level of interest in helping to fix a number of things
about health care particularly because our health care system
is broken and must be reformed and fixing the system is not
about who is paying, it is about what we are paying for. A
broken system is not fixed only by shifting additional payments
to seniors, families, employers or taxpayers. Affordability
must begin with fundamental reforms to quality and
accessibility. Every year Congress steps in to avoid a
reduction in Medicare payments for our doctors. The two
alternatives identified by the Medicare payment advisory
commission to fix this problems involve repealing formulas and
implementing pay for performance under Medicare to all
providers including inpatient and outpatient hospital services,
post acute care services, and even part D services.
I am pleased MedPAC's recommendations to reward high
quality care and reduce fraud and abuse is taking place.
Whether the payment system remains unchanged or is replaced
either change will require significant increase in funding.
While it is important to reduce waste, fraud, and abuse in our
Federal health care programs rather than simply reducing care
and payment to our doctors, I have identified and plan on
introducing further legislation to achieve over $300 billion in
annual savings and a lot of lives. A few of these examples of
savings include $50 billion and 90,000 lives saved annually by
providing incentive payments to hospitals from publicly
reporting and reducing deadly health care associated
infections, expanding the number of volunteer doctors at
community health centers to insure that every family has a
neighborhood doctor since community health centers save about
30 percent of Medicaid cases yielding an annual savings of
about $17 billion, eliminating higher discriminatory co-
payments under Medicare for our nation's seniors for outpatient
health care services and untreated mental health services,
which also save money.
Establishing collaborations and demonstration projects to
improve the effectiveness of health information technology
which can save $162 billion annually by reducing redundant
tests, medical errors and mis-diagnoses. We have so much work
to do here and I hope that this committee will work towards
actually improving and renovating our health care system and
not just continue a pattern that Congress has had for several
decades of trying to find ways to save money on health care by
cutting payments. We want to make sure that physicians and
hospitals work effectively, but a fundamental part of that
should be the leadership that this Congress and this committee
takes in showing how we can do it better, more effectively,
more efficiently save money and save lives in the process by
transforming our nation's health care system. The Federal
Government will be saving billions of dollars and thousands of
lives. Thank you, Mr. Chairman.
Mr. Pallone. Thank you. Mr. Green is recognized.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman, for holding the
hearing. I would ask unanimous consent to place my full
statement in the record. It has been over a decade since a
physician fee schedule was put into place to help control
increases in Medicare payments of physicians. Unfortunately,
payments for physician services match the SGR and expenditure
targets for only the first 5 years since the actual
expenditures exceeded the target by so much that even Medicare
trustees no longer consider the system realistic. We also know
that the system isn't realistic on the physician level since
red flags about spending growth have done little to affect
physician behavior, and both physicians and the Medicare
trustees know that Congress will eventually enact stop gap
measures to prevent scheduled cuts making the system virtually
irrelevant.
The budgetary reality is staring us in the face. They
mandate that we fix this system before we start to see serious
access problems created in Medicare. The GAO has reassured us
that beneficiaries generally enjoy good access to care but I
worry about the future where fewer doctors may be willing to
treat Medicare beneficiaries simply because of the
reimbursement problems. In areas like mine that rely heavily on
Medicare and Medicaid it probably won't be a situation where
doctors will stop taking Medicare. Rather, we will see access
problems created by attrition where the gap created by
physicians retirements are not filled by new crops of doctors
willing to take Medicare patients.
If we reach that point, Medicare will have failed in its
mission to provide quality and access to health care for all
our seniors. There is no question the system contains some
inherent flaws that must be addressed to insure the long-term
viability of Medicare and access to beneficiaries. While the
current system essentially penalizes physicians for increased
service volume it does not distinguish between simple over
utilization and increased utilization actually leads to better
health outcomes. Unfortunately, the system does not recognize
its spending on certain physician services often alleviates the
needs for much more expensive inpatient services.
I am glad to hear that MedPAC discussed the idea of
different providers working together to devise a system that
works for Medicare beneficiaries and Medicare providers. We
have to facilitate some movement between part A and part B and
find some ways to realize in the budget that costs that occur
in part B can lead to savings in part A, not to mention a
better quality of life for our beneficiaries who would prefer a
doctor's visit to a stay in the hospital any day. I am also
glad MedPAC sees the need to improve benefits for fee for
service Medicare which had slowly begun to offer some
preventative benefits.
Mr. Chairman, I have a full statement I would like to put
in the record. And the frustration, I guess, is we would hope
at least in the odd-numbered years early in the year we would
have a fix that we could do permanently. But I understand our
budget realizations, but I would like us to at least do the
permanent fix as early as possible so doctors and providers
will be able to understand that they don't have to wait until
maybe next February or March to hear about it, that we can
actually do it even before December of this year. And I yield
back my time.
[The prepared statement of Mr. Green follows:]
Prepared Statement of Hon. Gene Green, a Representative in
Congress from the State of Texas
Thank you, Mr. Chairman, for holding this hearing on
physician reimbursement from Medicare.
It has been over a decade since the physician fee schedule
was put in place to help control increases in Medicare payments
to physicians.
Unfortunately, payments for physician services matched the
SGR and expenditure targets for only the first 5 years.
Since then, the actual expenditures have exceeded the
target by so much that even the Medicare trustees no longer
consider the system realistic.
We also know the system isn't realistic at the physician
level, since red flags about spending growth have done little
to affect physician behavior.
And both physicians and the Medicare trustees know that
Congress will eventually enact stop-gap measures to prevent
scheduled cuts--making the system virtually irrelevant.
The budgetary realities are staring us in the face, and
they mandate that we fix this system before we start to see
serious access to care problems in Medicare.
The GAO has reassured us that beneficiaries generally enjoy
good access to care, but I worry about a future where fewer
doctors may be willing to treat Medicare beneficiaries simply
because of reimbursement problems.
In areas like mine that rely heavily on Medicare and
Medicaid, it probably won't be a situation where doctors stop
taking Medicare.
Rather, we'll see access problems created by attrition--
where the gap created physician retirements is not filled by
new crops of doctors willing to take Medicare patients.
If we reach that point, Medicare will have failed in its
mission to provide equality in access to health care for our
senior citizens.
There is no question that this system contains some
inherent flaws that must be addressed to ensure the long term
viability of Medicare and access to beneficiaries.
While the current system essentially penalized physicians
for increased service volume, it does not distinguish between
simple overutilization and increased utilization that actually
leads to better health outcomes.
Unfortunately, the system does not recognize that spending
on certain physician services often alleviates the need for
much more expensive inpatient services.
I am glad to hear MedPAC discuss the idea of different
providers working together.
If we want to devise a system that works for Medicare
beneficiaries and Medicare providers, we have to facilitate
some movement between part A and part B and find some way to
realize in the budget that costs incurred in part B can lead to
savings in part A--not to mention a better quality of life for
our beneficiaries, who would prefer a doctor's visit to a
hospital stay any day of the week.
I am also glad that MedPAC sees the need to improve
benefits in fee-for-service Medicare, which has slowly begun to
offer some preventive benefits.
Congress has included some preventive benefits in Medicare
and we want utilization of these benefits to be high.
Yet the irony is that the current payment system would
penalize physicians at the end of the year for actually
utilizing these benefits.
I doubt the SGR is behind the 2 percent take-up rates
associated with the Welcome to Medicare physical and the
diabetes screening benefit, but the system has to encourage the
use of these benefits that are clearly cost-savers in the long
run.
I agree with MedPAC that any new system we devise should
encourage coordination of the care delivered under the Medicare
program.
Two-thirds of Medicare spending goes to treat beneficiaries
who suffer from five or more chronic conditions.
If we are going to give these beneficiaries the quality
care they deserve, we have to find ways to move beyond the
acute-care, condition-specific manner in which health care is
delivered and financed under this system.
For several Congresses now, Senator Blanche Lincoln and I
have been working on legislation to improve and coordinate
Geriatric and Chronic Care under Medicare.
And we're working to revamp that legislation to create the
right incentives for physicians so that Medicare beneficiaries
can find a true medical home, where their care will be
comprehensive and coordinated.
I am glad to see that MedPAC has laid out some interesting
options for us on that front and others, as we try to solve
this unavoidable problem.
And I appreciate our witnesses being here today to lend us
their expertise.
With that, Mr. Chairman, I yield back my time.
----------
Mr. Pallone. Thank you. And that is our goal obviously so I
appreciate what you said. And I now recognize the gentlewoman
from Wisconsin, Ms. Baldwin.
OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WISCONSIN
Ms. Baldwin. Thank you, Mr. Chairman. I join my colleagues
who have spoken before in underscoring the importance of
addressing this issue, and I really look forward to today's
witness testimony and discussion. Like many other members, I
support enacting a long-term fix to the Medicare physician
payment issue rather than continuing to do the yearly or
biannual fixes. These short-term solutions, band-aids really,
are unfair. They are unfair to the physicians who at the end of
the short-term fix are once again faced with projected cuts.
They are unfair to the Medicare beneficiaries who may face
access issues if cuts are enacted and are unfair to taxpayers
because the cost of providing a fix gets more and more
expensive with each passing year.
Put simply, the issue needs to be addressed. I welcome
today's opportunity to focus on MedPAC's recently released
report, and I am looking forward to exploring some of the newer
options that the report proposes. Being from Wisconsin, I am
especially interested in exploring MedPAC's views on geographic
disparities in Medicare expenditures. Growth and volume of
physician services has contributed to the increase in Medicare
expenditures, which then leads to the physician payment cuts.
Wisconsin tends to have lower than average volume of services
and lower Medicare expenditures, yet when the cuts are proposed
they apply nationally so doctors in Wisconsin are being
punished for the increased volume in services being provided in
high payment localities.
I think this is unfair and I am glad to see that MedPAC
acknowledged this in their recent report. Lastly, I would like
to emphasize that this issue and what we choose to do regarding
this issue has huge ramifications for Medicare beneficiaries.
If we do nothing beneficiaries might face access issues. If we
provide a fix without protecting part B premiums from increases
beneficiaries face unacceptably high premiums. And if we enact
a fix that increases Medicare spending then we will potentially
move up the date that we reach the 45 percent trigger that was
included in the MMA and will have to cut Medicare spending. So
while we tend to talk about physicians when we consider this
issue it has a huge impact on Medicare beneficiaries.
I thank the witnesses for coming today. I look forward to
your testimony and our discussion that will follow. I yield
back, Mr. Chairman.
Mr. Pallone. Thank the gentlewoman, and I would recognize
our chairman of the full committee, Mr. Dingell.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Dingell. I thank you, and I commend you for these
hearings today. They are very much needed. I want to applaud
the vigorous and wise way in which you are conducting the
business of the committee. I welcome Dr. Hackbarth, the
chairman of the Medicare Payment Advisory Commission, here. And
also Mr. Steinwald from the Government Accountability Office
and Dr. Fisher from Dartmouth University who have all thought
greatly about the question at hand. Also to Dr. Thames from
AARP, I thank him for bringing wise counsel and a good
beneficiary perspective to this discussion.
As we know, physicians are facing a 10 percent cut in their
Medicare payments in 2008, as well as continued reductions in
later years. No one can operate a business in that kind of
environment. If your employer presented you with the prospect
of a large pay cut for 10 years in a row, I am certain you
would not continue in that line of work. More importantly,
these payment reductions make running a quality health care
practice difficult at best. At worse they provide the wrong
incentives for the kind of care that Medicare beneficiaries
should receive. Our goal should be to align the payment
incentives so the patients are getting the right care at the
right time. While I am not an advocate of pay for performance
systems, we do need to create the right incentives for
providers to incorporate technology into the practice of
medicine to improve care outcomes and efficiency, and although
we know we must insure the ultimate incentive it remains to us
to decide what is the best way of delivering the care that is
best for the patient.
The perplexing problem in reforming Medicare physician
payments is what to do about identifying services that are
growing inappropriately. Clearly, the current system or global
cap is not working. A variety of factors can cause appropriate
service growth. For example, payment may not be aligned with
the actual cost of providing service. Providers may not be
clear of which treatments are most appropriate for the service
to be provided. This indicates that there is a problem that
will have to be addressed delicately but not with a hatchet or
a sledge hammer. One possibility that we hear about today is
comparing doctor practice patterns with their peers and
identifying and working collaboratively with those who when
adjusting for the relative health status of their patients have
practice patterns that fall outside the norm.
Again, there are ways to do things like this correctly and
ways to do them in ways that would cause harm to the patient.
Clearly, the latter must be avoided. This is what we must flush
out in today's hearings and in future hearings in discussions
on the matter. Changes to the Medicare physician payment system
are long overdue. We will work hand-in-hand with the provider
community and beneficiary representatives to protect Medicare
fee for service for generations to come.
I look forward, Mr. Chairman, to working closely with you
as well as Mr. Barton and Mr. Deal to craft a successful
conclusion to this problem. I want to again commend you for
what you are doing in holding these hearings today. I want to
point out that this is an enormously important question that
simply must be addressed not just in the interest of the
doctors or the Medicare system but also in the needs and the
concerns of the patients who after all the reason that this
system has been set up. Thank you, Mr. Chairman. I yield back
the balance of my time.
Mr. Pallone. Thank you, Chairman Dingell, and I know that
you have introduced legislation and have been trying to address
this for several years so thank you again. I would recognize
the gentleman from Pennsylvania, Mr. Pitts.
Mr. Pitts. No statement.
Mr. Pallone. OK. Mr. Allen is recognized.
OPENING STATEMENT OF HON. TOM ALLEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MAINE
Mr. Allen. Thank you, Mr. Chairman, for convening this
hearing to take a serious look at the Medicare physician
payment system and the effect future reductions will have on
patients access to care. Although Congress was able to block
the scheduled 5.1 percent Medicare payment cut this year
physicians are facing a 10 percent reimbursement cut next year
if we don't act. I am disappointed that the President's fiscal
2008 budget does not provide any funds to deal with this
problem. Maine and other rural States face unique challenges in
attracting and retaining qualified physicians and insuring
access to specialists. Insufficient payment by both Medicare
and Medicaid is a major disincentive to providers in our State
who are caring for a disproportionate share of elderly
citizens.
Seventeen percent of Maine's population is on Medicare, and
we have 17 practicing physicians per 1,000 beneficiaries. This
is a below average ratio of physicians to Medicare
beneficiaries. In addition, our physician population is older
than the national average. Forty-six percent of our doctors are
over 50, and many have chosen to reduce their patient case
loads. Congress must evaluate the current reimbursement system
and create a more sound financial foundation for physician
payment rates. Only by doing so will we avoid what has become
an annual race to avert a financial crisis. Our goal must be to
replace the current funding formula with one that accurately
reflects physicians practice costs, new technology, and the age
and health of the patient population being served. I look
forward to hearing from our distinguished panel and yield back
the balance of my time.
Mr. Pallone. Thank you. I recognize Mr. Matheson of Utah.
OPENING STATEMENT OF HON. JIM MATHESON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF UTAH
Mr. Matheson. Thank you, Mr. Chairman. While I am a new
member of the Health Subcommittee, I have long argued that the
current formula used for determining physician payment rates is
flawed and should be reformed. During my first 6 years in
Congress, I have heard from hundreds of Utah physicians
regarding this issue. They provided me with many examples of
the disconnect that exists between the formula and the actual
cost of providing services. They have raised compelling
concerns about reduced access to health care if the formula is
allowed to be implemented, and many of them have also provided
suggestions regarding ways to fix the problems associated with
the current payment calculation.
As a result, I co-sponsored legislation at the last
Congress that would reform the formula to more accurately
reflect the cost of practicing medicine. Unfortunately, these
reforms were not enacted prior to the end of last year's
Congress. In fact, during my tenure in office Congress has
always waited until the very last minute to pass a temporary
fix to the problem. This creates uncertainty in the marketplace
and is simply a case of avoiding the fundamental issue. I would
also like to highlight the fact that last year's fix did
include language allowing physicians who voluntarily report
certain qualify measures to receive bonus payments of 1\1/2\
percent beginning July 1, 2007. I think that this was a good
step forward and I am pleased to see that MedPAC is also
interested in working with the Congress and with CMS on this
aspect of reform.
Mr. Chairman, I hope the committee will be able to tackle
the issue this year because I believe the physicians need to be
able to provide seniors the access to care that is so
desperately needed. Thank you. I yield back the balance of my
time.
Mr. Pallone. Thank you. I recognize Ms. Solis of
California.
OPENING STATEMENT OF HON. HILDA L. SOLIS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Solis. Thank you, Mr. Chairman, and good morning. Thank
you for holding this very important hearing. Medicare was
enacted to provide affordable health insurance to older
Americans and is important to address the sky rocketing cost of
health care and access especially to quality affordable health
care and especially in critical communities, minority
communities, communities of color since these populations often
encounter greater burdens of disease. Seniors in California, as
you know, are struggling, and I have heard from my constituents
that some California physicians have stopped taking new
Medicare patients because of inadequate reimbursements. We find
this in areas in east Los Angeles where I have heard from many
of our medical providers and doctors and physicians who are
already losing a lot of money by being there but continue to do
so but have continuously told me, ``Congresswoman, we need to
do more to help provide for a greater rate of reimbursement''.
So they stay in our communities because there are a low
number of these physicians that are actually continuing to
provide services in our much needed area. And earlier MedPAC
reports stated that the percentage of physicians taking new
Medicare patients has decreased. More than 62,000 seniors live
in my district, and I wonder where those seniors are going to
go if these doctors aren't receiving adequate payment. Sixteen
percent of Medicare beneficiaries in California, by the way,
happen to be Latino. Latinos already face many barriers in
accessing medically necessary health services, and a MedPAC
report published in 2006 stated that 7.1 of Latino Medicare
beneficiaries delayed getting care due to cost.
Less access to care in my opinion will result in further
health care disparities in our communities. I believe that
Medicare beneficiaries should receive equal access to
physicians who provide quality care. The rapidly increasing
costs of health care are problems for residents in my district.
The current payment system has not solved the problem of higher
Medicare spending and out-of-pocket costs for our seniors as
well. Instead, some seniors are receiving unnecessary and
expensive services that do not provide additional health
benefits, and I am concerned about safety net providers, our
clinics, who are already struggling to care for their patients.
We need to insure that our physicians continue to care for
our seniors and a physician payment system should emphasize
prevention, primary care, and especially since today's seniors
are living longer suffering from serious and costly chronic
diseases such as diabetes and heart disease. I hope that any
proposed physician payment system reimburses our doctors fairly
for the vital services they provide and keeps health care
affordable for the millions of seniors whom we represent, and
we know they rely very heavily on Medicare. I look forward to
hearing your recommendations and working with you to protect
our seniors health care system. Thank you.
Mr. Pallone. Thank you. And that, I believe, concludes our
opening statements by the members of the subcommittee.
Any other statements for the record will be accepted at
this time.
[The prepared statement of Mrs. Cubin follows:]
Prepared Statement of Hon. Barbara Cubin, a Representative
in Congress from the State of Wyoming
Thank you Mr. Chairman. On January 1, 2007, America's
physicians were scheduled to receive a 5 percent cut in
Medicare reimbursement if Congress did not step in to provide a
one-time bonus payment in the Tax Relief and Healthcare Act of
2006.
I was pleased to support this important intervention on
behalf of Wyoming's 70,000 Medicare beneficiaries. The negative
physician fee schedule, based on the flawed sustainable growth
rate, most certainly presents an unacceptable situation not
just for Wyoming's beneficiaries, but for the physicians they
rely on.
These doctors are also small businesses. They are saddled
with high malpractice premiums. They practice in rural areas,
and in some cases are the only providers in their communities.
If just one Medicare provider shuts his or her doors in
Wyoming, a whole community could be affected. But every time we
act to stave off the cuts mandated by the sustainable growth
rate, we are not only delaying the inevitable, we are making it
worse.
In 2006, we faced an eventual 5 percent cut in 2008. We may
have stopped the 2007 cuts, but now we face a nearly 10 percent
cut in 2008, with more to follow several years thereafter.
Facing cuts of this magnitude, we cannot simply rely on
physicians' generosity to treat Medicare patients regardless of
the reimbursement rate.
The sustainable growth rate formula was enacted to reduce
the overutilization of Medicare services and control the growth
of the Medicare program. While it has by many indications
failed in respect to these goals, we cannot lose sight of them.
The Centers for Medicare and Medicaid Services Office of the
Actuary estimates that national health expenditures will double
to $4 trillion over 6 years. Like the ever-present threat of
physician payment cuts, this is a harsh realization we need to
face head on.
The Republican-led Congress faced this realization when it
directed the Medicare Payment Advisory Commission, or MedPac,
to look at alternatives to the sustainable growth rate in the
Deficit Reduction Act of 2005.
Today we have the opportunity to explore MedPac's long-term
recommendations, with the goal of minimizing the cost of a
long-term physician payment fix. I hope today's panelists will
shed light on how this can be accomplished while at the same
time taking steps to ensure quality and appropriate care to our
Nation's Medicare beneficiaries.
I thank our panelists for joining us and look forward to
their testimony.
----------
Mr. Pallone. We will now turn to Mr. Hackbarth. Let me say
that Mr. Hackbarth is the chairman of the Medicare Payment
Advisory Commission. Your statement becomes part of the hearing
record, and of course at the discretion of the committee you
can submit additional brief and pertinent statements in writing
for inclusion in the record. And I would now recognize you for
a 5-minute opening statement. Thank you for being here.
STATEMENT OF GLENN M. HACKBARTH, CHAIRMAN, MEDICARE PAYMENT
ADVISORY COMMISSION
Mr. Hackbarth. Thank you, Chairman Pallone, and Ranking
Member Deal. I appreciate this opportunity to talk about
MedPAC's recommendations on alternatives to Medicare
sustainable growth rate system. As requested in the
congressional mandate, MedPAC has analyzed the pros and cons of
expenditure targets in general as well as the five options
specifically included in the mandate. We present two
alternatives paths for your consideration, one that includes
continuation of an expenditure target and one that does not.
As you know, MedPAC is a 17-member commission with diverse
participation including clinicians and health care executives
and academics and former government officials. Despite the
diversity of the commission, we generally are able to reach
consensus on even complicated issues as has been discussed.
That has not been possible on all dimensions of the SGR
problem. To help you understand where the commissioners do
agree and where we disagree, I have divided the SGR problem
into four dimensions which are here on the screen. The first of
those encourage efficiency in the delivery of health care. Let
me begin with a quick definition of efficiency.
Improving efficiency is not just about reducing cost.
Efficiency is about maximizing the benefit for the patient for
any given level of expenditure. There is unanimous agreement
within MedPAC that expenditure targets like the SGR do not
themselves establish appropriate incentives for efficiency.
Indeed, by only constraining the amount paid for each
individual physician service and expenditure target may
actually increase, induce an appropriate or cost increasing
behavior. Moreover, payments that become too low relative to
the cost of delivering care may ultimately impede access to
care.
To establish proper incentives for efficiency, Congress
must pursue the agenda briefly described on the second slide.
There are a lot of very complicated stuff included under these
broad headings so I won't take time in my opening statement but
I would be happy to go back and talk about the specific ideas
within each of these categories. So there is unanimous
agreement that these sorts of policy changes are what are
needed to in fact improve the efficiency of the Medicare
program. The commission is also unanimous in believing that
this agenda for increasing value and efficiency in Medicare is
urgent and requires a much larger investment in CMS in order to
speed its ability to develop, implement, and refine payment
systems.
Some progress to be sure is being made but that progress is
far too slow. The second bullet here, as you can see, is
encouraging fiscal discipline in policy making. Its expenditure
targets like SGR don't by themselves establish proper
incentives for efficiency. What might they be good for? And it
is here that the commissioners disagree. Some commissioners
believe that expenditure targets are useful for encouraging
fiscal discipline in the policy-making process. To be clear,
they don't establish appropriate incentives for providers but
they may alter the dynamics of the policy-making process and
result in more constraints, lower updates for providers.
Some commissioners think that is a good thing. In addition,
expenditure targets may create the political leverage to force
providers to accept reforms they might otherwise resist. Other
commissioners, while acknowledging these potential benefits,
agree that they come at far too high a price, and hence the
disagreement within the commission. The third bullet,
increasing equity among regions and providers. Here is another
point on which there is substantial although not complete
consensus within MedPAC. The existing SGR system is highly
inequitable in important respects. If the target is exceeded
all physicians are punished equally regardless of their
individual behavior.
In addition, all regions of the country are treated equally
even though there is abundant evidence that health care
delivery is more efficient in some places than in others. And
finally the SGR system as it exists currently targets only
physicians when in fact Medicare has a total cost problem, not
just a physician cost problem. Thus, if Congress elects to
retain an expenditure target in some form it would be fairer
and more effective to apply that target to total Medicare cost,
not just physicians, to apply greater pressure in high cost
regions than low cost regions and allow an opportunity for
groups of providers to band together in what we refer to as
accountable care organizations to receive their own performance
assessment against the targets established by Congress.
Making expenditure targets more equitable will not be an
easy task. Time, patience, determination, and investment would
be required and without these the risk of failure and
unintended consequences will increase dramatically. Now let me
turn finally to the last bullet here, minimizing or offsetting
the budget score of fixing the SGR system. As you know all too
well, proposals to repeal or modify SGR often carry a very
large budget score as a result of the difference between the
assumed payment rates and the base line and what are realistic
rates to assure access to care. MedPAC nor anyone else for that
matter has a simple magic solution to fill that gap. We do
believe, however, that MedPAC's proposals can make a very, very
substantial contribution to filling that budget gap. CBO has
estimated that the 10-year cost of repealing SGR and replacing
it with an alternative system is somewhere over $200 billion.
According to CBO going to financial neutrality for Medicare
Advantage plans as MedPAC has proposed would save about $160
billion. Couple that with restraints on updates for other
providers which MedPAC recommends. Couple that with the value
and efficiency agenda that I alluded to earlier and you have a
very substantial contribution towards filling that $200 billion
plus budget gap. With that, Mr. Chairman, I will conclude my
opening comment, and I look forward to questions.
[The prepared statement of Mr. Hackbarth follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Pallone. Thank you, Mr. Hackbarth. I am just going to
recognize myself for 5 minutes initially. You mentioned a much
larger investment in CMS to achieve the goals and you obviously
talked about the role of CMS so that is my first question. It
seems likely that the key to any change in physician payments
is CMS' ability to implement the change. And so my question
really two fold, can CMS implement any of your recommendations
without legislation, and, second, what kind of resources and
time are they going to need?
Mr. Hackbarth. If you could put up the second of the two
slides. Let me just quickly go through this agenda and talk
about where the various pieces stand. Beginning with pricing
accuracy, what this refers to is trying to establish prices
that reflect the cost of providing high quality efficient care.
It is an issue not just with the physician payment system but
with all of Medicare's payment systems for hospitals and post
acute providers as well as physicians. MedPAC in recent years
has made numerous recommendations about how those systems can
be refined and made more accurate. There is a lot of work
underway in CMS currently. No new legislative authority is
generally required. The issue is really the speed at which that
refinement work occurs and that is often affected by available
resources.
Mr. Pallone. What do you think we need in terms of
resources and then what would the time line be depending if
they were available?
Mr. Hackbarth. Making a specific recommendation about how
much of the resources should be increased is beyond where
MedPAC has gone at this point, and frankly a little beyond our
expertise. Those are operational questions and require very
detailed knowledge of CMS operations. What we are reflecting is
that we talk to them about these issues and often they agree in
principle with what we are recommending but the pace at which
they can churn out the refinements is slower than it needs to
be.
Mr. Pallone. If you can't be more specific then I think I
am going to move on. OK. I also wanted to ask about the HMOs
because you mentioned how you can save a significant amount of
money by looking at this differential in payment with the HMOs.
In your update on the Medicare private plans you report that
Medicare HMOs are paid 112 percent of traditional Medicare on
average. In other words, for every beneficiary who chooses to
enroll in a Medicare HMO the Medicare program pays 12 percent
more than if they were to remain in traditional Medicare. So if
you could just comment briefly on the commission's
recommendations related to Medicare private plan payments. I
know you did.
Mr. Hackbarth. Yes.
Mr. Pallone. But do you believe that they pose a threat to
the traditional Medicare program, and if you want to go into a
little more detail about how we are going to save money in
terms of that overall. I know you mentioned 160 versus 200.
Mr. Hackbarth. MedPAC has often stated that we believe
having private plans as an option for beneficiaries is a good
thing. We believe that many private plans may be able to offer
something of value to Medicare beneficiaries through their
efficiency, through their ability to deal with providers in
ways that Medicare itself finds difficult to do. So having that
option is very important. However, we think that that option
ought to be on a financially neutral basis so if private plans
can achieve efficiency and as a result of that efficiency have
savings to share with Medicare beneficiaries in the form of
added benefits and the like that is a terrific thing and we are
all in favor of it.
Mr. Pallone. Are you concerned that if we don't achieve
that neutrality that they are going to be a threat to the
traditional Medicare program?
Mr. Hackbarth. Our concern is that if you pay more than
Medicare's cost what you start to do is attract plans into
Medicare that aren't adding value, that aren't more efficient
than traditional Medicare and are only driving up the cost of
the program. And we have particular concern about the private
fee for service plans, which are in fact the most expensive of
the plan types offered under Medicare Advantage. They offer
relatively little value but they become very attractive to
Medicare beneficiaries for obvious reasons, more benefits, no
restrictions of any type on free choice, and so there is very
rapid growth under the private fee for service plans, and they
are much more expensive so that has put us on a path that could
be dangerous for the program.
Mr. Pallone. Thank you. Thank you very much. Mr. Deal.
Mr. Deal. Thank you. Mr. Hackbarth, in your testimony and
in your report, you outline two basic paths. I want to talk to
you about the second path. In your testimony just a few minutes
ago you said that if we retain the overall spending targets
that one of the ways we could make it more effective is to
apply it across all providers. Let me ask you just a very
simple question to begin with and then I am going to ask you to
explain it. Now by that, I would assume you are talking about
including hospitals within the overall provider group.
Mr. Hackbarth. Yes.
Mr. Deal. Now obviously we have part A and part B of
Medicare funded differently. Would you explain to me how if we
were to adopt that approach how do we reconcile the different
part A and part B components, and is that a problem or is it
not a problem? Would you explain how you would envision that
incorporation?
Mr. Hackbarth. Well, the basic idea is to say this is our
target for total expenditures for Medicare beneficiaries, and
then to the extent that we miss that target it would affect the
updates provided not just to physicians but to hospitals and
all the providers. As to how that would interact with the
different financing of the various trust funds, we have not
looked at that in detail but rather focused on the basic idea
of constraining updates across the board and not just for
physicians. And one of the reasons we think, some
commissioners, think that that would be a better thing to do is
that we don't have just a physician cost problem. We have a
total cost problem.
And as some of the members of the committee have pointed
out, if you focus just on physician cost and constrain only
that when in fact there is potential substitution of services,
growth in physician services to avoid hospital costs, a system
that focuses only on physicians is really unfair.
Mr. Deal. That is part of the complaint the physician
community has had for a long time is that actions that they
have taken to restrain overall costs have inured to the benefit
of hospitals and their reimbursement formula but has penalized
the physician community.
Mr. Hackbarth. We want growth some places. Some types of
services we want more in order to reduce other places,
hopefully more expensive services. And so a total expenditure
target in that sense would be fairer and more effective.
Mr. Deal. You mentioned the regional discrepancies of costs
and quality of care. Could you rather quickly sort of outline
some examples of that?
Mr. Hackbarth. I would be happy to do so. We have got the
expert on that on the next panel, Dr. Fisher, and he could do
it far better than I. But briefly what we see is at the State
level more than two fold variation in Medicare expenditures per
beneficiary after adjusting for differences in the populations,
differences in the risk characteristics and the like. If you go
to smaller geographic areas and States then the variation is
even higher than two fold variation. We also have found that
higher expenditures per beneficiary does not necessarily mean a
better quality. In fact, many of the lower cost States fare
very well in terms of their quality measures.
So the idea behind regionalizing the expenditure target is
to say if Congress decides we have got a Medicare cost problem
it doesn't make any sense to apply the pressure equally to all
States. Some States are demonstrably contributing more to that
problem than others so if we got a cost problem we ought to
apply the pressure differentially, apply the greatest pressure
to the areas of the country that contribute most to the problem
and less correspondingly to the lower cost areas, and in that
sense it would be more equitable than the current SGR.
Mr. Deal. In my closing seconds, I want to thank you for in
your report addressing the specific issues that the DRA asked
you to do. I think you have done a pretty good job of
addressing those, and there are some areas such as the outliers
that I think we have to explore in much greater detail, but
thank you for being here.
Mr. Pallone. Thank you. The gentlewoman from California,
Ms. Eshoo.
Ms. Eshoo. Thank you, Mr. Chairman. Thank you, Dr.
Hackbarth. I have a lot of questions. Let me see how I can
summarize them. The Deficit Reduction Act required MedPAC to
look at alternatives and targets and other ways of
reconfiguring the existing SGR and improving on the
performance. And I appreciate the work that has gone into your
report but I don't find that you have provided Congress with
any recommendation to remedy the situation. Now maybe I missed
it somewhere but I don't see any clear recommendation. Do you
agree with that description?
Mr. Hackbarth. No.
Ms. Eshoo. All right. Well, in 2001 MedPAC concluded that
the SGR should be eliminated, physicians should be subject to
the inflation-based update system that the commission uses for
other provider groups. Now has your position changed since then
or is it the same?
Mr. Hackbarth. Our position has changed somewhat for two
reasons.
Ms. Eshoo. And tell us why you abandoned it. Would you tell
us the new recommendations?
Mr. Hackbarth. Our positions changed somewhat for two
reasons. One is, as you know, the composition of the commission
changes over time, and so we have a different set of
commissioners than we had in 2001 with a somewhat different
perspective. The second thing that has changed is, and I think
this applies to all commissioners, a growing sense of urgency
about Medicare's cost problem and the health care system in
general, its problem with costs. We are 5, 6 years further
along on a path that the commissioners believe is ultimately
unsustainable----
Ms. Eshoo. So just succinctly what is your new
recommendation? I have to tell you that looking at this is--
well, I think it is one of the skimpiest things I have ever
seen. This is increasing value and efficiency in Medicare,
pricing accuracy, coordination of care, accountability. The one
that I love the most at the bottom is information. This is a
commission that was put together by the Congress, instructed
that it should be put together, and I know I am being a little
hard but that is hardly any meat on the bones, I have to tell
you. If this is what MedPAC is coming up with, I think you got
to go back to the drawing boards. I mean this is really
sophomoric what is up on the board.
Mr. Hackbarth. We literally have hundreds of pages
explaining those proposals in detail, and I would be happy to
spend as much time as you would like----
Ms. Eshoo. But when you are here, you need to summarize it
but I think that you need to summarize and have some meat on
the bones. I really have had trouble understanding what you
have recommended to us in these key areas.
Mr. Hackbarth. Well, the point that I hope the committee
will understand is that we don't think that there is a single
solution to this problem, that in fact there is unanimous
agreement within the commission that a long series of changes
need to be made to encourage efficiency in the Medicare program
and follow----
Ms. Eshoo. Now did MedPAC take a look at the geographic
payment locality issue?
Mr. Hackbarth. Not in this particular report, no, but we
have previously.
Ms. Eshoo. And when did you last take a look at that?
Mr. Hackbarth. I think it was 2 years ago.
Ms. Eshoo. Well, that was developed more than 40 years ago,
and many areas in the country have changed and changed
dramatically, and it seems to me that a commission that looks
at or is responsible for reviewing how Medicare is delivered
and to whom and by whom, I think this really cries out for
review but maybe you have so much work to do that you can't
take a look at it. Do you have a work plan that says that you
are going to review this and make a recommendation to the
Congress?
Mr. Hackbarth. As I said, we looked at the issue 2 years
ago and, no, we don't have any immediate plan to take----
Ms. Eshoo. Does MedPAC think that Congress has done
something it and that is why you are not reviewing it?
Mr. Hackbarth. No. What we have said is that we think that
there needs to be a system of geographic adjustment, that there
are some problems, isolated problems, with the existing system,
that the lines can be redrawn, should be redrawn in some
States, including California, that those changes ought to be
done on a budget neutral basis within the State, and that CMS
ought to respect the fact that at least some States have
elected to have a single area for the whole State. We don't run
the Medicare program.
Ms. Eshoo. I didn't suggest that you did, but you have the
clear responsibility in terms of making I think clear and
concise recommendations to Congress. I am having a hard time
drawing them. I think my time is up. Thank you, Mr. Chairman.
Mr. Pallone. Thank you. Dr. Burgess.
Mr. Burgess. Thanks, Mr. Chairman. One of the issues that I
think we have to most seriously address is the issue of quality
reporting and I have always felt very strongly that there
actually ought to be a platform of several quality reporting
mechanisms available to doctors and that they not be punitive,
that they be additive. And yet when we heard some of the other
opening statements people talked about how grateful they were
we were able to add an update in the bill that we passed right
before the end of last year. But I have some data from Scott
and White Hospital, from Dr. Rohack, who is the cardiologist
there on the clinical faculty, on the medical school faculty,
also I think a board member from the AMA, and they did a
calculation for the last 6 months of 2006, their clinic part B
allowables. Running that calculation it actually cost them $298
per physician to do the paperwork in order to capture the
monies that are going to be made available to them, I believe
at the end of this year if CMS does indeed come up with those
recommendations in June, and they jump through all of the hoops
that they are required to jump through.
So that hardly seems like an additive benefit. In fact,
most physicians will look at that and simply shrug their
shoulders and throw that into the file. They are not going to
participate in a quality measure that in fact doesn't bring
them additional revenue but ends up costing them revenue just
to calculate what they are owed under the new formula. How do
you see us getting around that type of problem because to me
the critical aspect of quality reporting is that it has to be
an additional payment in addition to what is available, whether
it be under MEI or SGR, what is your feeling on that?
Mr. Hackbarth. As you know, we favor the concept of not
just quality reporting but also pay for performance, but we
have also said that doing it for physicians presents some
unique challenges for a couple of reasons. One is that there is
a much higher degree of specialization among physicians than
hospitals, for example. The infrastructure, the informational
infrastructure, is less in small physician practices than it is
in hospitals. And so there is some concern within the
commission about just indiscriminately saying more quality
reporting is better for physicians and the more measures the
better.
Mr. Burgess. Yes, I would just point out that Scott and
White Hospital does enjoy already a good reputation for
quality. I think they are number ranked No. 14 in the Nation,
and they are not a small organization. They have 320 physicians
in their central unit and another 180 physicians in their
outlying areas. So a significant problem that we have created
for them in our efforts to help them, and it just underscores
how difficult and sometimes how awkward this process can be.
With that in mind, what you described in your report with the
ACO is a virtual care organization of some type. How do we
insure that that does what it is intended to do and is not just
simply a virtual organization to absorb dollars and not deliver
any benefit?
Mr. Hackbarth. The basis for supporting the idea of
accountable care organization is that patients can benefit from
more organization, systematic organization.
Mr. Burgess. We have already seen the application at least
in Dr. Rohack's case ended up being a detriment to their rather
sizable quality practice in central Texas.
Mr. Hackbarth. But I am not familiar with what is happening
at that clinic right now. Are they in the group practice
demonstration?
Mr. Burgess. I am not sure whether they are in----
Mr. Hackbarth. I don't know if they are or not. I don't
think that they are.
Mr. Burgess. But the figures that were given by CMS is what
they anticipate the bonus to be so it was back of the envelope
calculation to be sure but I wanted to get an idea, did we help
Dr. Rohack when we passed this bill at the end of the year, and
it looks at least at first blush we didn't help a bit. In fact,
we cost them money if they put their actuaries to work on
trying to collect the bonus to which they would be entitled by
doing their quality reporting. Let me just point out to you
additionally probably one of the worse days of my life as a
practicing physician was when RVRBS came on the scene. Is there
a better way to calculate the cost of differing services and
differing practices and differing areas.
Mr. Hackbarth. If I could, Mr. Burgess, I would just like
to go back to the previous question for a second. When we are
talking about accountable care organizations what we are
talking about is a model whereby you would look at the total
cost for beneficiaries within, for example, this clinic, and
then share with the clinic the savings to the extent that they
are able to hold costs below the target levels, so it is very
different than the quality pay for performance model that was
in the Tax Act. This is the model that is being tested now in
the group practice demo. That is what we are referring to as
accountable care organizations, and there the benefit might be
much larger.
Mr. Burgess. When will you be able to make this data
available to us?
Mr. Hackbarth. Well, the group practice demo is underway as
we speak at 13 different locations across the country.
Mr. Burgess. So when will we have the data available?
Mr. Hackbarth. It is a 3-year demo, and we are like at the
second year now.
Mr. Burgess. Obviously that is a long time in this
trajectory where we are catching up every year and trying to do
something to prevent the total collapse.
Mr. Pallone. We got to move on. You were over a minute.
Thanks. I recognize Ms. DeGette.
Ms. DeGette. Thank you, Mr. Chairman. Mr. Hackbarth, we are
all kind of concerned over here about the MedPAC
recommendations because Congress has been looking for a long
time at how we can find a long-term fix for the physician
reimbursement problem, and in reading your written testimony
and listening today it is virtually impossible for us sitting
up here to figure out what your recommendations are, and in
fact in your written testimony you say that Congress must
decide between two paths. One path repeals the SGR and doesn't
replace it with the new expenditure target. Congress
accelerates development and adoption of approaches for
improving incentives. Alternatively, the Congress could replace
the SGR with a new expenditure target system. And it seems to
me, No. one, these two alternatives are both a little bit
nebulous. The second, it is two alternatives that we thought we
created you to make a recommendation, so my question to you
following up on what Ms. Eshoo said is if you were us and you
had to pick one of the two alternatives, what would you do?
Mr. Hackbarth. The commission is split on it. You can ask
people who have expertise on these issues what they think. What
they think is there is a disagreement. The commission is split
down the middle on whether expenditure targets are useful in
Medicare.
Ms. DeGette. So if the commission, who are the experts, are
split on what to do how do you think Congress should go about
trying to figure out a solution, a long-term solution?
Mr. Hackbarth. Again, you can ask people what they think
and you can't generate agreement where it doesn't exist. There
is agreement on a very broad agenda and a very detailed agenda
that falls under these broad headings.
Ms. DeGette. Right. As Ms. Eshoo points out to me just now,
we can get information. I don't mean to belittle your efforts
but what we are struggling to try to do is come up with
solutions which we have been doing for some years and why we
created you guys.
Mr. Hackbarth. I would be happy to come and meet with you
individually to talk about the specifics under these items and
what it means by information in that bullet.
Ms. DeGette. I respect you, and I know that there are many
pages of information that support those four points, but the
bottom line is there are still two recommendations, neither of
which are flushed out in detail, somehow leaving it up to us to
try to pick and choose, and for us as Mr. Green said, it just
kicks the can down the road a little bit more.
Mr. Hackbarth. Well, let us talk about the two paths and
the difference in thinking between them. As I said in my
initial comments the people who believe that expenditure
targets should be preserved in some form believe they feel a
great sense of urgency about the cost growth in the Medicare
program and they believe that it is appropriate to take some
risk, frankly, to maintain expenditure targets in order to
establish fiscal discipline in the program. Ultimately, the
Congress is the judge of how urgent that problem is and how
concerned you are about the drain on resources for other
important programs.
Ms. DeGette. So would you say then that that is the
approach that Congress should take only if we think that the
fiscal pressures are great but that the other approach would be
preferable?
Mr. Hackbarth. The other approach focuses on trying to
change payment systems at a very detailed level to improve the
fairness of those systems and to encourage greater efficiency
in the delivery of care. It is a complicated agenda. It is not
an easy agenda. But in the long run if you want to improve
fairness and efficiency these are the things that you need to
do and there are literally dozens of steps under this agenda
and all the commissioners agree on that.
Ms. DeGette. This agenda could also be cost effective if
implemented correctly.
Mr. Hackbarth. Absolutely. And the commission is unanimous
on that. There is no disagreement about that.
Ms. DeGette. Mr. Chairman, with all due respect, I think
that we should either disband this commission and get a new one
that will give us clear recommendations or we should send the
existing commission back to come up with a clear choice for us
so that we can actually use this information. And I do
appreciate Mr. Hackbarth coming today to talk to us but I think
that the work product is unfinished and that we need much more
information. Thank you for your indulgence, Mr. Chairman.
Mr. Pallone. Thank you, Ms. DeGette. I would just point out
again though that a lot has to do with what you were tasked to
accomplish. I mean obviously we can ask you to do certain
things and we can be more specific too in what we task you to
do. And I think part of the concern is what exactly you were
tasked to do. I am not going to get into that now but that is
always the question is how specific we get in what we ask you
to do. I would like to now move to recognize Mr. Murphy from
Pennsylvania.
Mr. Murphy. Thank you, Mr. Chairman. I thought I was
further down the list. I just want to focus on some of the
questions about waste and get some sense from you and some more
details of how much do you think is currently within the
Medicare system, the payment system, in terms of the waste that
is taking place. Do you have some concrete assessments of that?
Mr. Hackbarth. No. That is a very difficult question to
answer including what you mean by waste.
Mr. Murphy. Some of that would be just the efficiency of
the system, health care system.
Mr. Hackbarth. The problem in U.S. health care is not
necessarily lots and lots of zero benefit care being provided
but rather care being provided that adds only a little bit to
better outcomes for patients at a very high cost. So there is
some pure waste, no benefit care. In fact, there is some care
provided that is actually harmful to patients but the big
problem in U.S. health care is a lack of efficiency, care
provided of only marginal benefit at great expense.
Mr. Murphy. Well, one of the points that you may have heard
me making in my opening statement had to do with the infection
rate in hospitals in America. I know to their credit many
hospitals are working diligently on this and many have provided
significant or seen significant decreases in, for example,
post-operative infection rates through many things including
giving antibiotics at the right time before and after surgery
but in some of them the low tech high turnout of outcome so
even washing their hands, sterilizing or cleaning up before and
after procedures, et cetera, and yet Medicare still pays for
infections people get in hospitals. As I mentioned, I
introduced a bill that would require hospitals to publicly
state their infection rates.
And what I would also like to see us do is actually take
some of the cost savings from that and use it as grants to
hospitals that are able to lower the infection rates to zero.
Are these things that you think are doable, that we can really
use the clout of Medicare's payment system to say this is
something we ought to really be looking at and not continue to
pay for that?
Mr. Hackbarth. Yes. We do think that substantial progress
can be made both through public reporting and pay for
performance, and there is just no reason why we should have the
level of infection rates that we have. We agree with that and
there are steps that can be taken.
Mr. Murphy. Let me ask another area, and that is with
preventative care. Do you believe that Medicare should be
reimbursing doctors for some preventative care services? And
another area is patient care management. Let me explain a
little bit about that. You probably are aware of this but I
know that a couple studies done in Pittsburgh hospitals, one
was following diabetics, and we recognize about 80 percent or
so of health care costs of those were chronically ill. And a
substantial portion of those are folks who we used to call it
hospital non-compliant patients, we realize better now that a
lot of that was from chronically ill patients who have very
complicated cases. It is nearly impossible for them to monitor
and do all the right things from their diet, their medication,
their insulin, their exercise, their mental health, all those
things that are so very, very important.
One hospital found that just by monitoring the care of
these patients and calling them on a weekly basis to ask them a
few simple questions actually with diabetic patients reduced
re-hospitalization rates by 75 percent. Another hospital
reduced hospitalizations of those with heart disease by 50
percent. These are massive savings. And yet my understanding is
the Medicare system for diabetics will reimburse or pay the
hospitals for providing hospital care or amputations, et
cetera, but do not pay for a nurse to make a 5-minute call or
for a doctor to set up an e-mail system. What kind of changes
do you think realistically we can make there?
Mr. Hackbarth. So what you are doing, Mr. Murphy, is
actually going through the items on this list, and what you are
talking about falls under the heading of coordination of care.
And Medicare does not properly pay for coordination of care by
primary care physicians, and MedPAC has recommended a number of
ways that that might be altered. In addition to that, CMS is
now testing different models for encouraging coordination of
care. There is the health support pilot project that is looking
at patients with chronic illness including diabetes, and we
think potentially that is a very helpful model.
In addition to that, there is a medical home demonstration
that is now in the process of being established which basically
increases payments for physicians for that ongoing
relationship, counseling, education of patients, following up
on their care, following up on specialist visits and the like.
We think there is huge opportunity there.
Mr. Murphy. I appreciate it. Mr. Chairman, I hope this is
an area we can look further at because the cost savings on this
are pretty massive so I thank you for dealing with this issue.
Thank you, sir.
Mr. Pallone. I understand. Thanks. Mrs. Capps.
Mrs. Capps. Thank you, Dr. Hackbarth. And I have two
different topics I would like to get into so keep in mind that
this question I am about to address having to do with the
geographic price cost index is but the first half. I am deeply
concerned as you might know about the current GPCI, if we can
call it that, formula currently in place. And I think it is
interesting that you in your recommendations have highlighted
the need to revisit. You have a proposal to establish
expenditure targets based on geographic regions but I am
wondering how you can do this. You said the last time the
commission discussed GPCI was 2 years ago, but doesn't this
proposal to deal with geographic regions highlight the need to
revisit how we reimburse physicians based on their location
because of the inequities in the current system and those
inequities have become a huge barrier to access, and so many of
counties across the country in my district.
So I am asking you about how we update the current
classification of geographic localities even as we devise a new
system for Medicare physician reimbursements. I am worried that
if we adopted the model of establishing expenditure targets
without first revisiting GPCI classifications we would only be
further compounding the existing problem. After all as I
mentioned in my opening statement the bottom line is insuring
access for all beneficiaries. The failure to account for these
fatal flaws in the current price cost index is going to further
exacerbate any kind of proposal you are going to make, and I am
just asking you now have you taken into account these current
inequities as you have formulated suggestions for updating the
overall payment system?
Mr. Hackbarth. As I said in my response earlier on the
specific issues of GPCIs in California, we have said that we
think there are some problems, and we do think that there are
ways to correct them but that it ought to be done on a budget
neutral basis within California.
Mrs. Capps. Well, it is actually among 135 or so counties
across the country, this inequity exists, so it is not just our
region although I am certainly going to acknowledge that.
Mr. Hackbarth. I wouldn't say that it exists only in
California. I am not sure I would agree with 135 either. I
don't know how that is calculated.
Mrs. Capps. We can give you that information and maybe you
can correct it if it is wrong.
Mr. Hackbarth. Yes, but it is on a national basis a
relatively isolated problem that we think can be corrected.
Mrs. Capps. OK. I am just suggesting before I move on that
in order to carry out the recommendations you are making now
that we can't do it on the back of a very flawed system. We
have to do more than one thing at the same time if we are going
to make any progress. Maybe we need to revisit the actual
mandate that you were given to deal with on this whole fix. But
let me talk about another topic because it also is very
relevant to the Deficit Reduction Act, and that has to do with
imaging procedures. We have discussed this many times last year
but I am still concerned about how these cuts have been
proposed.
MedPAC continues to cite the volume of imaging services as
growing at a faster rate than all fee schedule services. But I
don't believe you are taking into account the fact that over
the last few years many imaging services have moved from
hospitals to physician offices as a cost saving to health care
both to the patients and to the providers of health care. It is
less expensive if you do this in an outpatient or an office-
based setting. That should be a good thing also for the sake of
preventive health services. Preventive health care is by far
the least expensive way to provide health care with the best
outcomes. I would hope you would agree with that.
So I am wondering if you have done any further analysis of
the growth and imaging services since our hearing in July, 2006
to take into account the shifts in the site of service. I think
it is safe to argue that early diagnosis of disease can be
identified by imaging procedures. Early diagnosis produces much
more savings in the long run but if we continue on the current
path of this disparate discrepancy in reimbursement for office-
based services we are going to see physicians stopping to do
this and it is going to end up increasing the cost again.
Mr. Hackbarth. As we discussed last time, imaging is----
Mrs. Capps. Well, let me ask you, have you discussed this
further since that time?
Mr. Hackbarth. MedPAC has not taken up imaging since our
last conversation on this. Let me just review some points
because I think we agree on some of this. Imaging is tricky
because there are important technological advances. We can do
great things for patients.
Mrs. Capps. Yes.
Mr. Hackbarth. And we are all in favor of that. In some
cases potentially growth in imaging can avoid the need for
other more costly services.
Mrs. Capps. We all agree with that.
Mr. Hackbarth. In some cases moving things from a hospital
base to a physician base can be a good thing, and so I think we
agree on that. We don't think that from hospital base to a
physician base explains all of the growth in imaging. We have
looked at that, and we think it is just a substitution effect.
Mrs. Capps. I have to finish by saying that you are
throwing the baby out with the bath water by hesitating to
allow physicians to or giving them some guidelines showing the
ways that they can do this that will be cost savings. And I
would strongly urge that this needs to be dealt with in the
earliest possible time frame----
Mr. Pallone. We need to move on.
Mrs. Capps. Thank you.
Mr. Pallone. OK. Next we have Mr. Pitts of Pennsylvania is
recognized for 8 minutes.
Mr. Pitts. Thank you, Mr. Chairman. A couple of questions
for you, Mr. Hackbarth, to continue this line of questioning on
the imaging. I think that we can all support the need within
Medicare to reward providers for an efficient use of resources.
In this report, MedPAC continues to cite the growth in imaging
as being a problem, yet ultrasound-guided breast biopsies save
Medicare $1,000 per patient, and decrease the risk of
infection, speed the time to diagnosis, and have better
cosmetic results. However, ultrasound guided breast biopsies
mean that two ultrasound are performed that would not be
performed if the surgeon performed an open surgical biopsy.
My first question, would MedPAC not consider this an
efficient use of services, ultrasound services, where
comparative effectiveness information has played a role in
increasing ultrasound services related to breast biopsies while
providing a better outcome for all parties? Second, is it clear
from MedPAC's examination of the SGR by type of service
included, that is, imaging lab services, et cetera, that the
growth within the physician's fee schedule is not appropriate?
I would assume that with Medicare beneficiaries living longer,
increased incidents of disease change and clinical practice
guidelines, shift in site of service and the screening benefits
that Congress has enacted over the last several years that the
growth found by MedPAC could be a result of the health care
system being more efficient with the care going to the site of
service with the lowest overhead and greatest beneficiary
access.
Mr. Hackbarth. We think that some of the growth is imaging
is appropriate and to the benefit of patients and may even
reduce other Medicare costs. We don't believe that applies to
all of the growth in imaging. We think that part of the growth
in imaging may in fact be driven by distortions in the Medicare
payment system where we overpay for some types of services.
Providers know that we over pay. They know they are profitable
and so they increase the volume of those services. So it is a
mixture, and I know that is frustrating to the committee but
rarely these things have black and white answers. MedPAC has
never recommended that we try to cut imaging across the board.
The thrust of our recommendations has been for much more
targeted, sophisticated approach than that because we recognize
that there are benefits from some imaging.
Mr. Pitts. And perhaps demographics of the Medicare
population, the migration from invasive to non-invasive
diagnostic tool.
Mr. Hackbarth. Those are part of the reason for the rapid
growth but we don't think that they explain all of it.
Mr. Pitts. Well, MedPAC continues in this report to cite
the volume of imaging services as growing at a faster rate than
all fee schedule services over the last few years. Many imaging
services have moved from hospitals to physician's offices. Has
MedPAC done any further analysis of the growth and imaging
services to take into account the shifts in site of service
since our hearing in July 2006 and was MedPAC able to look at
both the hospital outpatient fee schedule data and the
physician fee schedule data combined over time to account for
this site in service shift or are we again without real data
regarding what is the true new growth in each of these types of
services?
Mr. Hackbarth. We have not looked as a commission at the
issue since the last hearing but at that hearing the numbers
that we talked about, we did look at the substitution issue and
whether the growth in fee schedule expenditure and imaging was
solely due to substitution, and we did not find that to be the
case. We don't think that substitution of physician services
for hospital services explains all the growth and imaging.
There are a lot of different factors that go into it.
Mr. Pitts. Your analysis only used Medicare physician fee
schedule database, is that correct, therefore, the MedPAC has
not adjusted the growth rate to count for that shift in the
site of service?
Mr. Hackbarth. We have tried to look at whether movement
from hospital-based imaging to physician-based imaging explains
the growth and we don't think it explains all the growth, no.
Mr. Pitts. And what about my first question, the efficient
use of services?
Mr. Hackbarth. Well, as I said earlier there are new types
of imaging that can be more efficient. They can improve patient
outcomes and reduce the need for other services that are higher
cost. And that is good. We want to preserve that. We don't
believe that is all that is happening in the growth imaging. We
think some of the growth is for care of marginal benefit to
patients at a high cost. We think some of the growth is due to
inaccurate pricing and unusual profit opportunities. You go to
physician conferences and you can see the imaging manufacturers
selling their wares, talking about what a great profit
opportunity this is, so that is a factor in this complicated
picture as well.
Mr. Pitts. Thank you, Mr. Chairman.
Mr. Pallone. Thank you. I recognize Ms. Hooley of Oregon.
Ms. Hooley. Thank you, Mr. Chairman. I have three
questions. I am going to ask you all three of them, and then we
will have a chance to discuss them. MedPAC concluded in its
report to Congress that Medicare beneficiaries do not suffer
from a lack of access to physicians. However, that is not what
Medicare beneficiaries tell me in Oregon. That is not what they
say. It is not what the doctors say. And I used to jokingly say
to my friends that are about ready to retire if your doctor is
older you better find a younger doctor, otherwise, you are not
going to be able to get a doctor if you are retired and are on
Medicare.
I used to say it jokingly. I now am dead serious when I say
that. You are from Oregon. I want to know if you have heard the
same problems in Oregon or what is happening in Oregon that may
be unusual in terms of the rest of the country. The second
question is Oregon provided health care at a very reasonable
cost. We were very efficient. We had a high penetration of
managed care. And because of that we had been penalized over
and over again for low reimbursement rates. And in rural areas
where you have a high percentage of Medicare beneficiaries than
in other parts of the country you combine that with a high
number of beneficiaries and a low reimbursement rate, and
frankly you can't find doctors to serve in the rural areas
because they simply can't make a living doing it, and the
question is has that been taken into account.
And then the third question is MedPAC noted in its report
that adjusting payments based on physicians participating in a
group practice would be difficult to implement in rural
communities because few if any rural providers can join multi-
specialty practices. I was very pleased to see that you
recognized that. However, that is the only thing in your report
that you really pay attention to the impact of MedPAC on rural
providers. And my question is why doesn't MedPAC's report give
more attention to highlighting the differences and how various
proposals would impact rural communities versus other
communities?
Mr. Hackbarth. OK.
Ms. Hooley. Are we different in Oregon?
Mr. Hackbarth. I don't know about different in Oregon in
general but there are places within Oregon where there might be
unusual access issues. Let me just start with the big picture.
When we ask both beneficiaries and physicians about access to
care in the case of physicians willingness to accept new
patients, in the case of beneficiaries their satisfaction with
access on a national basis things look pretty good on both
beneficiaries and physician front. Access compares pretty well
to what exists for privately insured, non-Medicare patients.
Ms. Hooley. They may be fine nationwide but I am telling
you it is a problem.
Mr. Hackbarth. Now having said that, obviously the picture
can differ in particular communities. Take mine of Bend.
I think that there are somewhat greater access issues for
Medicare beneficiaries in Bend than in most other parts of the
country. Are those the result of Medicare payment rates and
Medicare payment rates alone? I don't think so. One of the
issues that fast-growing communities face is that there can be
an imbalance between the number of patients and the supply of
physicians. I think that is true in Bend. We have had very
rapid growth in a retiree population and that has grown faster
than the supply of physicians. That is not just a matter of
Medicare payment rates. There are broader issues involved
there.
Ms. Hooley. But Salem, an area, capital city, there are
literally no doctors taking Medicare patients.
Mr. Hackbarth. I don't know what the data are in Salem in
particular but we do know on a national basis the access
continues to be pretty good. It wouldn't necessarily stay that
way as Chairman Pallone mentioned in his statement if we had
successive years of cuts in rates. We do believe that would
affect access but we are not seeing that in the national
picture right now. As for the second question about low cost
states being penalized to some extent, let us put it this way,
they are not rewarded under Medicare for their efficiency and
systems like SGR that cut across the board, hurt the low cost
states maybe more than others. That is why some commissioners
think that we ought to go to a geographically-based system of
targets that applies the greatest pressure in the high cost
states, not the low cost states like Oregon.
Ms. Hooley. I am talking about Oregon in general, not just
my district, you have places in rural communities because of
the high number of beneficiaries there, and the low
reimbursement doctor's offices are closing. There is one
doctor's office in the area. I mean they just simply can't
afford to take another Medicare patient, and it is interesting
because if you look at the rest of Oregon it is amazing, and
that is why I tell my friends you better get a young doctor is
if they have other insurance they seem to be able to get
accepted into that doctor's practice but if they have Medicare
they don't get accepted into the doctor's practice.
Mr. Pallone. I am going to have to stop you guys. I know
you only got into the second of the three questions but I will
just ask you to respond to complete the second and get to the
third in the record because we are just over, that is all.
Mr. Hackbarth. On this issue of access in rural areas, I
think it is a critical question.
Mr. Pallone. OK. Just if you could summarize because we
already went over almost 2 minutes.
Mr. Hackbarth. What doctors tell us is that almost 60
percent of rural physicians say they accept all new Medicare
patients. That is what physicians tell us.
Mr. Pallone. And, Mr. Hackbarth, if you could just finish
the rest of it in a written response, I would appreciate it.
Thank you.
Ms. Hooley. Thank you.
Mr. Pallone. Next we have our ranking member, Mr. Barton,
of Texas.
Mr. Barton. Thank you, Mr. Chairman. We are going to
disagree a number of times this year on solutions but I think
we have bipartisan agreement that this particular issue is a
huge problem trying to find a way to adequately reimburse our
physicians while at the same time not bankrupting the Medicare
trust fund and the part B premium payers. The recipients, our
Medicare beneficiaries, is an ongoing problem. I wrestled with
it. Mr. Tauzin wrestled with it. Now you and Mr. Dingell are
wrestling with it. So some time this year when we get to the
solution stage, we are certainly going to be vigorous probably
in debating solutions but we don't disagree that this is a
problem.
Did your group prepare the table that lists all the costs
of the proposed solutions or is that something that CBO has
done? It has 15 different alternatives from a freeze payment
rate in 2008 and hold future updates at current law levels.
That cost $4.2 billion. And then No. 15 is an automatic MEI
update that replaces the SGR and holds the premium payers
harmless, and that is $330 billion. Is that your table?
Mr. Hackbarth. That is CBO's. It is not ours. My guess is
it is a CBO table.
Mr. Barton. OK. Have you seen that table?
Mr. Hackbarth. The $330 billion figure is not the one that
I have seen. The one I have seen is I think $260 billion, $270
billion for repeal and replaced with MEI.
Mr. Barton. Do you have a cost estimate for whatever MedPAC
has said is the solution?
Mr. Hackbarth. We don't do cost estimates, Mr. Barton. That
is----
Mr. Barton. That is convenient.
Mr. Hackbarth. Well, that is CBO's institutional
responsibility. We are both congressional support agencies and
that is their responsibility, not ours.
Mr. Barton. Well, what is your policy recommendation or
recommendations then?
Mr. Hackbarth. Well, what we have recommended is not just
in this report but in previous reports a long series of
recommendations to improve pricing accuracy and to encourage
efficiency in Medicare, and I would be happy to go through it
but I have a feeling that I am not going to have a chance to.
Mr. Barton. So you don't have a recommendation on this
chart that CBO has put out about a specific recommendation like
the 1 percent update in 2008 and 2009 or an MEI update in 2008?
Mr. Hackbarth. On this specific issue, Mr. Barton, of what
the annual increase should be for physicians what we recommend
is that that not be set in legislation but that the Congress
look at it year by year to determine what the appropriate
increase is so----
Mr. Barton. Do you advocate abolishing the SGR?
Mr. Hackbarth. That is the issue on which the commission is
divided, Mr. Barton.
Mr. Barton. So there are some that say it should be and
some that say it shouldn't be?
Mr. Hackbarth. Yes. Roughly half the commission would like
to see a system of expenditure targets retained although not
applied only to physicians but rather to all providers.
Mr. Barton. Now what we did last year was put some quality
measures and put some bonus payments and we just did a very--
not a permanent change but created a small incentive program
for the next year or so. Does MedPAC support that?
Mr. Hackbarth. We support the general idea of quality
reporting and of rewarding that.
Mr. Barton. But on the issue of the cost your group doesn't
try to cost any of these alternatives out?
Mr. Hackbarth. No. CBO does the cost estimate.
Mr. Barton. Mr. Chairman, I am going to yield back and look
forward to working with you and Mr. Deal and Mr. Dingell to try
to find a way out of this mess.
Mr. Pallone. I appreciate that. Thank you.
Mr. Green of Texas.
Mr. Green. Thank you, Mr. Chairman, and following our
former chairman of the committee, I know last year he told me
many times he wanted to have a permanent fix to it, and we are
in the same situation, and even in the odd numbered years like
I said earlier as well as in the even numbered years. Mr.
Hackbarth, we often hear from physicians who describe their
payment situation under Medicare when they are comparing it to
hospitals, specifically we hear that hospitals get annual
updates with no global target or automatic cuts if the volume
grows too much. Can you speak to the differences in the payment
systems for the physicians and the hospitals?
Mr. Hackbarth. Well, again this is the issue that I
referred to earlier. There are some commissioners who believe
that treating hospitals and physicians differently in this
regard is inequitable, and Medicare has a total cost problem,
not just a physician cost problem. And so if there is an
expenditure targeted it ought to be applied equally to
hospitals and physicians.
Mr. Green. OK. Physicians get paid for each service they
provide while hospitals get paid on the episode or group of
services, and could Medicare group those services together and
pay physicians for a whole episode rather than a service by
service fee, and in your opinion would this payment practice
encourage care coordination?
Mr. Hackbarth. We have recommended that Medicare begin
looking at physician resource use on an episode basis so how
much does it cost to care for a patient with say diabetes as
opposed to just looking at office visits and imaging,
everything separate. Our recommendation is that in the first
instance we provide that information to physicians on how their
patterns and practice compare to their peers and do it on a
confidential basis. As we develop the tools and experience with
them then the analysis might be used with payment rates and
higher updates, for example, for physicians that are
consistently efficient in their episodes, so that is a
direction that we think we ought to go.
Mr. Green. Thank you. Mr. Chairman, I would hope that we
can look at, for example, whether diabetes patients or
something else instead of one treating each visit, it is
actually the episode of visits similar with the hospitals.
Since my co-sponsor on the bill on imaging, Congressman Pitts,
asked a question about--highlighted MedPAC's comments about the
importance of imaging in primary care and care coordination,
and Ms. Capps mentioned how nowadays there is lots of imaging
being done in doctor's offices compared to hospitals, let me
ask you a different question. Two-thirds of Medicare spending
goes for individuals with more chronic conditions, and I agree
with your recommendation that we should encourage care
coordination and more emphasis on primary care.
However, the Medicare system is designed both in delivery
and financing health care to address acute condition specific
problems. Can you discuss how this element of the Medicare
system serves as a barrier to effective primary care and care
coordination, and would it take a fundamental change in the
system either through CMS or through statute to insure that
proper delivery of primary care and the care coordination,
again this fits in with the first question, but do we need the
structural change to do that?
Mr. Hackbarth. Yes. There is going to need to be a
structural change in all likelihood. A big part of it is going
to require legislation to do. There are some things that can be
done without legislation but, for example, the medical home
idea where we pay a primary care physician to work with a
patient over time, particularly a patient with chronic illness,
that requires a new payment method that will have to be
legislated. We are looking at different models for how best to
do that and have demonstration projects underway that will
hopefully give us guidance.
Mr. Green. Does MedPAC have a time frame for that study and
those models?
Mr. Hackbarth. Well, the demos of course are being run by
CMS, and each has its own schedule. The one that is most
advanced at this point is the Medicare health support pilot
that was initiated I guess under MMA. Some of the other
demonstrations are still in the developmental stage.
Mr. Green. Thank you, Mr. Chairman. I yield back my time
but again I would urge--hopefully our committee would look at
that because again I think it might end up hopefully saving
money but it also makes sure that physicians know that patient
is with him and the whole episode of their illnesses
particularly the chronic, the numbers that we saw. Thank you,
Mr. Chairman.
Mr. Pallone. Thank you. And you raise some very important
questions that we have to look into, so thanks again. Mr.
Shadegg of Arizona.
Mr. Shadegg. Thank you, Mr. Chairman, and I appreciate your
holding this hearing. It is yet one more in a series that I
have participated in what continues to puzzle me. I must begin
by saying, Mr. Hackbarth, that I sympathize with you. As I hear
my colleagues complain about not liking your product, it seems
to me that the next thing we need to do, and I want to make
sure this is understood to be tongue in cheek, is create a
commission to study your commission. I think you have been
given an impossible task. In my tenure in Congress, I have
watched Medicare funding. I have watched the SGR system fail
year in and year out. I have watched the Congress do what I
think I just heard you recommend which is look at each year and
try to figure out the appropriate level of funding.
What I think you are charged with doing is price fixing or
setting prices appropriately for the entire health care
industry and I quite frankly think that is an impossible task.
I also think, and I have said it here before but I want to say
it again, that it is a scandal that the United States Congress
creates a program, promises health care to a category of
people, then discovers that it doesn't have enough money to pay
the providers to deliver that health care and so it says, well,
we won't scale back the promised benefits, what we will do is,
quite frankly, cheat or under pay the providers. I guess that
gives me some sense of understanding why the providers then
naturally gain where some portions of the SGR have
overcompensated some categories of work and others under
compensate, and so providers are drawn to the areas where they
overcompensate.
Let me ask you first, as I understand your testimony what
you have been able to come up with is two different
alternatives, I gather in part because the commission is
partially divided. One is to repeal the SGR, not replace it,
but go to some form of alternative which I gather would be pay
for performance, is that the so-called path one?
Mr. Hackbarth. Pay for performance would be part of it but
not the whole thing. Care coordination would be part of it as
we just discussed with Mr. Green. Resource measurement episode
based analysis would be part of it. There are many different
pieces to it.
Mr. Shadegg. The second piece of it as I understand it
would be to actually replace the SGR with a new price setting
mechanism that would apply to all care providers in the hope
that that would reduce the untoward incentives in the current
system which has the SGR just setting position rates, is that
correct?
Mr. Hackbarth. Generally speaking, right.
Mr. Shadegg. To the extent that pay for performance were to
be a part of the first path, who would decide which physicians
had performed or not performed? How do you envision that
decision being made?
Mr. Hackbarth. One of the things that we have looked and
will come back to is how to institutionalize the process of
developing performance measurements. I think physicians and all
providers for that matter have a right to expect that there be
some consistency in that process and that it be done in
accordance with the best available evidence as opposed to be
done in a bureaucratic process.
Mr. Shadegg. That is the available evidence. Are you
envisioning that it would then be--or maybe you haven't gotten
to this point. My bottom line question is, is physician
performance going to predominantly be measured by patient
satisfaction, patients saying we were satisfied, or by external
measures other than the expression of patient satisfaction?
Mr. Hackbarth. I think it needs to be both. It needs to be
incorporated in the framework with patient satisfaction and
technical measurements of quality based on best available
evidence.
Mr. Shadegg. I have deep concerns about any system which is
not predominantly driven by patient satisfaction, and I would
encourage you if you are going to look at this to look at
making--while I understand there are professional evaluations
my cardiologist in whose hands I have put my life knows the
other good cardiologists in town and knows the good practices.
At the same time I believe that patient evaluation as it should
be, must be a huge component of this. Let me ask you another
question. With regard to an alternative to SGR you have been
asked to look at its failure and to recommend alternatives.
Have you considered or could you consider in the future a big
picture evaluation, that is to say perhaps doing away with
government price setting in Medicare altogether, and instead
providing people with essentially a stipend or a fixed amount
of money, a tax credit, if you will, and allowing the consumers
of Medicare services to spend that for Medicare services the
way they deem appropriate so that you wouldn't need a top down
government price setting mechanism but you could use a Medicare
patient driven system because I personally believe that in all
of health care where we have gone wrong is by taking patients
out of the driver's seat, and I don't see patients being put
back into the driver's seat. Is that an issue you could look
at?
Mr. Hackbarth. What we have said is that Medicare needs
some of each, that we believe that there should continue to be
the traditional Medicare program but that private options ought
to be available to Medicare beneficiaries and that there ought
to be a financially neutral choice between the two so private
plans can do it more efficiently and if beneficiaries want to
choose them they ought to have that opportunity to do so. What
we object to is paying private plans more than traditional
Medicare.
Mr. Shadegg. My time has expired. But let me just conclude
by saying I am not suggesting necessarily private plans. I am
suggesting that--and I would accept this as one portion, one
alternative, putting the money in the hands of the patients and
letting them spend it where they thought it was appropriate so
that you use them to set prices even as a demonstration
project. I thank you, Mr. Chairman.
Mr. Pallone. Thank you. Ms. Baldwin.
Ms. Baldwin. Thank you, Mr. Chairman. I have two sort of
directions for my questions. Both have been touched on already,
but I hope that you can perhaps explore these a little bit more
deeply with me. The first relates to reimbursement practices in
primary care, and the second goes back to this area of the
concept of the geographical disparities. So first on primary
care, I have had the opportunity, as I am sure many of my
colleagues have, to meet with physicians engaged in primary
care practices and also to talk a little bit about the number
of medical students who are choosing to specialize rather than
go into primary care practices, and the trend is of concern
certainly away from primary care, family practice or internal
medicine studies.
I visited a clinic in my district during our last recess
where the Medicare payment trends were of great concern. It is
a physician group that is only primary care, and the percentage
of Medicaid and Medicare patients that they have and the low
reimbursement rates are such that they have unsustainable
losses that they are experiencing that are increasing in each
year. They don't have any specialty doctors in their practice
with which they could do some sort of cross subsidy or cost
shifting, and in fact they even broke down in charts that they
provided to me the per physician per year cost to subsidize
basically the Medicaid and Medicare services that they are
providing.
And it was very distressing to me to wonder how long they
can sustain such a practice. And so I would ask you how can our
payment policies as we look at this, look at a long-term fix,
what sort of hope can I give these primary care physicians, and
also with regard to students entering medical school, how can
our payment policies impact this very problematic trend that we
are seeing with regard to the number of students going into
primary care.
Mr. Hackbarth. Improving payment for primary care involves
work on three paths. One is we think there are problems in how
the relative values are set for different physician services
that lead to underpayment of some primary care services, and we
have made some recommendations on that. We think that Medicare
might also look at adding some new codes to the system
specifically directed at rewarding time spent in educating
counseling patients, basic primary care activities. Finally, as
we discussed already, there are demonstrations underway that
look at rewarding care coordination specifically through an
added payment, a per patient payment, to cover the cost of care
coordination, especially for those with serious chronic
illness, so there are multiple different approaches to
improving primary care payment.
As for the supply issue certainly the low income potential
for primary care relative to other specialties is a deterrent
for some medical students. People who are deeply involved in
that process and medical education, working with medical
students, tell me though that income isn't the only factor,
that other factors that discourage people from going into
primary care are the lifestyle compared to some of the
specialties. It is a harder lifestyle. And finally it seems as
having less intellectual challenge than some of the
sophisticated sub-specialties. So in short we favor increasing
payment for primary care in various ways. We shouldn't have any
illusions though about how easily it will change the supply of
primary care physicians.
Ms. Baldwin. I would love to explore that more deeply. I am
going to not do so because I want to quickly get in a question
about the geographic disparities. We talked a bit about this
and I guess two questions. One is the extent to which MedPAC
and CMS has measured the differences in volume of services
provided in different localities so how much of that data
exists. And, second, in your report you discuss the option of
reimbursing physicians based on sub-national geographic areas.
I wonder what you mean by that is what is the most feasible
unit of measurement, states, portions of states or groups of
states.
Mr. Hackbarth. Yes. On the first piece the available
evidence on variation, Dr. Fisher, who is on the next panel, is
the expert on that question so maybe I will let him address it
in detail for you. As opposed to the appropriate geographic
unit, roughly half the commission likes the idea, first of all.
We didn't talk about what the right geographic unit would be.
There is a trade off. As you go to smaller units you get more
precision in the targeting but with smaller units you get some
problems like variability with small numbers, instability in
the numbers from year to year, a risk that people will start to
cross borders to receive their care or physicians will change
location of practices.
And so there is not a clear right answer that I can offer
you as to the right geographic unit, but we can go into that
more at another time if you wish.
Mr. Pallone. We are running out of time. Thank you. OK. I
recognize Ms. Wilson of New Mexico.
Ms. Wilson. Thank you, Mr. Chairman. I think I join my
colleagues on both sides of the aisle here in agreeing that
this sustainable growth formula is unsustainable, and it should
be permanently fixed. But I also don't think it is reasonable
to try to mandate consensus among experts if a consensus isn't
really there. I recognize it is a very difficult problem that
thoughtful people and thoughtful people can disagree. So I
appreciate your input. Really two areas of questions that I
wanted to focus on. And the first has to do with incentives.
You highlight a number of areas of possible incentives or ways
to change the system so there are incentives for providing high
quality care and so forth.
Do you think there are any savings inherent in those
approaches or is the recommendation of the commission to put
those incentives in place and allow or indeed encourage those
funds to be kept in patient care?
Mr. Hackbarth. We do believe that there are savings. We do
believe that the better incentives will change patterns of care
and make care more efficient. They are not the sort of savings
that are readily scored by CBO though because they involve
behavioral change over a long period of time.
Ms. Wilson. I also, like some of my colleagues from other
rural states, I am always concerned when people talk about
changing the formulas and making different formulas for sub-
national geographical areas, and we saw in the managed care
formulas, for examples, significantly disadvantaged rural
areas, and a lot of the formulas the way they are set up pay
much less in rural areas, and I can understand where the cost
of space or the cost of energy may be different in different
regions of the country but the cost of a physician's time
should not depend on where they live. And the value and the
increasing value of their time should not depend on where they
live.
When you talk about sub-national geographic areas, if we
were to do this, have you all done any modeling on which areas
or type of areas of the country would be winners and which
would be losers?
Mr. Hackbarth. We have not. Again, the commission has not
agreed on that issue of doing sub-national geographic targets,
and we have not made a recommendation to do that, and as a
result we haven't tried to figure out all of the variations
within that category.
Ms. Wilson. So you haven't gone back and looked at data and
done modeling and said if we had done this what would have
happened?
Mr. Hackbarth. In response to previous requests from
Congress looked at variation by state and how Medicare
expenditures vary by state. Dr. Fisher has looked at it based
on hospital service areas and I couldn't characterize simply
who the winners are and who the losers are. We can provide a
list of the states and who has low cost and who has high cost.
I would be happy to do that.
Ms. Wilson. I appreciate that. I worry that when we start
doing that you immediately start to put pressure on rural
areas, and I have seen it happen in other formulas here, and I
also know the reality is that concentrated population centers
in America have more votes in the House of Representatives, and
that is a reality but it is something I am very concerned
about.
Mr. Hackbarth. The proponents of geographically based
expenditure targets believe that that system would be fairer to
the low cost states, many of which have large rural components.
Many of the states that are highest cost have very large urban
areas and so the intent certainly is not to disadvantage rural
areas, and in fact it may benefit many rural areas, many rural
states.
Ms. Wilson. If you have any further data on that that you
are able to share or information on it that would help us to
expand our understanding on what that might mean, I would very
much appreciate it. Thank you, Mr. Chairman.
Mr. Pallone. Thank you. Ms. Solis.
Ms. Solis. Thank you, Mr. Chairman. I know we don't have a
lot of time. I did want to touch base regarding the geographic
payment locality issue as well. I am not sure what statistics
or information you have about Los Angeles County in southern
California, but I am very concerned because as I said earlier
in my opening statement we are losing the ability to attract
doctors to come in to low income underserved areas. And the
county of Los Angeles if we use say a median income or a median
formula to pay for reimbursements could actually end up
penalizing communities that are unincorporated, which are part
of Los Angeles County, as an example, but have the highest
number of seniors that really require and would be eligible for
this type of assistance. So I am anxious to hear at some point,
if not now, to get that information from you.
And then also you mentioned earlier that there might be
some type of attempt to try to compensate physicians that have
to do a little bit more counseling. One of the things that has
come up in the course of my being here on the hill is trying to
figure out how we can help provide for incentives for doctors
who do have to spend more time translating information to
immigrant populations to seniors from diverse backgrounds and
the notion that they should be given some additional pay
because they are spending more time to technically go through
and actually explain and interpret every little detail as to
the care for that patient.
And then lastly how do we bridge the gap for disparities
because we have so many underserved African-American, Asian and
Latino communities where they typically are not being, for
example, given the same kinds of testing or examinations or
vaccinations like influenza. And I have a real concern with
that because our communities are being overlooked so if you
could please touch on those three items.
Mr. Hackbarth. On the issue of the geographic adjusters in
California maybe the most efficient way to deal with that would
be to have a follow-up conversation and provide a letter for
you about Los Angeles County. I don't know the facts off the
top of my head so we would have to do some research on that. On
the issue of the cost of translation that is not an issue that
we have looked at specifically one way or the other.
Ms. Solis. It has never come up?
Mr. Hackbarth. Translation specifically, no, it has not.
Ms. Solis. Even the demographic challenges and the case
load that is increasing in the Hispanic population? I find that
rather surprising. I would urge the commission to strongly
consider that.
Mr. Hackbarth. Yes, that is fair enough.
Ms. Solis. Disparities, and how do we have kind of a across
the board health examination for communities that typically
don't get, for example, influenza vaccinations as readily as
say the traditional population.
Mr. Hackbarth. Yes. Certainly there are disparities in
access. Our focus has been on trying to assure fair payment for
all types of providers. How to change that issue is not
something that we specifically talked about the disparities.
Ms. Solis. That is a big issue in our district.
Mr. Hackbarth. We may come back to that.
Ms. Solis. And maybe I could just mention quickly that we
have a tri-caucus that exists in the House; Black Caucus, Asian
Caucus, and Hispanic Caucus, and we are going to be introducing
legislation on health care disparities of which many of our
seniors are impacted heavily with respect to how to tackle
chronic illnesses particularly in the area of diabetes
treatment, stroke, cancers, things of that nature, and would
love to share with you that information.
And then something that one of my colleagues brought up
that I have to also touch on is the fact that it is hard to
attract physicians and incoming interns, medical interns, into
low income service areas. And I understand the need to have
more available in rural areas, particularly on Indian
reservations and other low income areas. But in the areas that
I represent it is very hard to attract young students and
beginning that process early on, not at their senior year and
not at the college level, and what incentives might we be able
to look at since we see this increasing changing demographic
population in the senior community that is going to live
longer, that is going to look a lot different than what we
normally have provided treatment to in the last 40 years, and
if maybe there is an incentive or there is initiatives that we
could put forward through the Congress to help you in that
manner to help promote that.
Mr. Pallone. Did you want to comment? Do you agree?
Mr. Hackbarth. In principle but we just have not studied it
so I don't have anything to offer on behalf of the commission.
Ms. Solis. Thank you.
Mr. Pallone. Thank you. And last but not least is the
gentleman from Texas, Mr. Hall.
Mr. Hall. Mr. Chairman, thank you. As you know, I have two
Energy and Commerce subcommittees working, the Energy
Subcommittee on the third floor, and I have been there and not
knowing the questions that have been asked, I won't take his
time. I am sure that the chairman is going to allow us to
submit questions and they will give us answers, and we will do
that. But I thank Chairman Hackbarth for his time and the time
of preparation and the time in appearing here, and the good
services you render this country. I appreciate it, and I am
sure this committee and this chairman appreciates it. I yield
back my time.
Mr. Pallone. Thank you, Mr. Hall. Let me reiterate that we
do appreciate what the commission has done, and I thought it
was a very thorough analysis today. You have taken a lot of
questions here for the last couple hours or so, so thank you so
much for all that you do. And, you know, again I always say we
can only expect you to do what we task you to do. That is
always the issue here. So thanks again.
I would ask the next panel to come forward.
I will start by introducing Mr. Bruce Steinwald, who is
Director of Health Care for the Government Accountability
Office, and then we have Dr. Elliott Fisher, who is a professor
of Medicine and of Community and Family Medicine at Dartmouth
Medical School, and I know that your mom has been ill so I did
want to thank you for coming down here to testify today even
despite that situation with her. I hope that she is getting
better and that everything works out. Thank you.
Dr. Thames, we have seen you many times. Thank you for
coming back again. He is Dr. Byron Thames, member of the Board
of Directors of the American Association of Retired Persons. I
guess we will begin with Mr. Steinwald.
STATEMENT OF A. BRUCE STEINWALD, DIRECTOR, HEALTH CARE,
GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Steinwald. Thank you, Mr. Chairman, Mr. Deal, and
members of the subcommittee. Thank you for having me here
today. I am going to briefly summarize the findings of a
recently completed GAO study, but before I do I wanted to speak
directly into the microphone and give you a little pictorial
summary of how we got into the situation we face today. Very
briefly, these are the years covered by the SGR on that
exhibit. The bars that are up there now show the annual
increases in the Medicare economic index, which is about 2\1/2\
percent per year, not a great deal.
The next chart shows the annual updates in physician fees
under the SGR system. You can see the updates in the early
years of the SGR were in excess of inflation and the cost of
running a medical practice until 2002 when there was the 1-year
decline, and subsequent to that modest updates by result of an
act of Congress overriding the scheduled negative updates that
the SGR called for. All of that was related to increases in
Medicare spending for part B services per beneficiary. You can
see in the years 2000 and 2001, those spending amount increases
per beneficiary far exceeded the updates in the MEI. It is
those spending increases that led to the decrease in 2002, and
you can see subsequent to then the spending increases have far
exceeded either the MEI or the update.
And let me point out and emphasize those spending increases
that have occurred in the first half of this decade have both
yielded additional revenue to doctors above the update factor
and yielded additional co-payments on the part of
beneficiaries. So with that as a back drop, let me go on to the
current study. We have done two studies in response to mandates
in the Medicare Modernization Act. The first was a study on the
sustainable growth rate itself. The second was a study that
directed us to look at physician compensation generally, and
when we consulted with Hill staff and others about how we might
make best use of this direction, we decided to address what are
the principle criticisms of the SGR, ones that we share.
It is a very blunt instrument. It treats all doctors the
same. It doesn't discriminate between efficient and inefficient
medical practices, and it doesn't provide incentives that
operate at the individual physician level. And so we embark on
a study that would try to get out those deficiencies of the
SGR. These are generally what we did up there on the screen.
The first thing we did was we looked at what some health care
purchasers, not Medicare, but outside of Medicare are doing to
encourage efficiency in medical practice. We looked at a wide
range of purchasers. Some of them are private insurance
companies, some of them were provider organizations, and some
were government directed including one Canadian province.
They all do several things, one of which is they look at
the spending of the physicians' patients, not just for
physicians' own services but for a full range of services. They
create bench marks for efficiency to try to gauge and identify
the doctors who appear to be practicing medicine inefficiently.
They all measure quality as well as efficiency and have
performance measures that combine quality with efficiency, and
they all try very hard to bring their physicians on board and
explain to them what they are trying to accomplish. And what is
listed on the chart are some of the things that these
purchasers do with that profiling information once they collect
it.
They range from simply educating physicians, providing
information on how they stack up compared to their peers all
the way to more stringent arrangements including directing
patients to receive care from the doctors who score high on
performance measures up to and sometimes excluding inefficient
physicians from provider networks. By having seen what some
provider organizations do, we then embarked on an examination
of Medicare claims data to see if we could devise a methodology
that could identify efficiency in Medicare and could we do what
some of these providers do, and we selected 12 metropolitan
areas in which to conduct this study. First, we identified
patients who appear to be overly expensive given their health
status. It is very important to correct for health status
because obviously expect patients who have multiple illnesses
to consume more services.
Second, we measured not just what these patients were
spending for doctor services but a full range of services and
then we drew a threshold, we tried to see whether these overly
expensive patients tended to cluster among certain doctors or
were they randomly distributed. In all of the 12 areas that we
studied, we found that there was some clustering of these
overly expensive patients among a relatively few doctors. There
was more clustering in some areas than others. In the Miami
metropolitan area, for example, there was a great deal of
clustering over the overly expensive patients.
And then finally having gone through this exercise, we
asked ourselves, well, what is the applicability of the kinds
of things that the other purchasers are doing to Medicare, and
we find that there are some important strengths and
differences. Medicare has tools available to do this kind of
identification of efficient practices. They have a
comprehensive claims database on patient consumption of health
care services. They are several hundred thousand physicians
that participate in Medicare so that in almost every community
you can form meaningful comparisons among doctors, and they
have experience in using methods to account for differences in
patient health status.
Mr. Pallone. I just want you to wrap up because we are
going over.
Mr. Steinwald. I am wrapping up right now. We are sending a
report to CMS later this week for their review. We don't think
that this approach is a panacea and it is not going to be the
solution to the SGR problem, but the primary virtue of this
kind of approach is that it does get at the problem of SGR
being such a blunt instrument and so inequitable. We hope that
CMS will work with you and others to see if this is one
approach that could be included in a package of reforms to help
reform Medicare payment for physicians. Thank you very much.
[The prepared statement of Mr. Steinwald follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Pallone. Thank you, Mr. Steinwald. Dr. Fisher.
STATEMENT OF ELLIOTT S. FISHER, M.D., M.P.H., PROFESSOR,
MEDICINE AND COMMUNITY AND FAMILY MEDICINE, DARTMOUTH MEDICAL
SCHOOL
Dr. Fisher. First I would like to thank you for your
expression of concern about my mother. I think she will be
fine. It is a wonderful example of the challenges of care
coordination that are faced by Medicare beneficiaries and their
children. Mr. Chairman, Congressman Deal, and remaining members
of the committee, the recently released report assessing
alternatives to the sustainable growth rate system provides an
outstanding analysis of the key issues and challenges
confronting Congress as it considers both how to reform payment
approaches in a period of serious budget constraints.
The report outlines a broad array of policy approaches that
Congress and CMS could and probably should pursue to improve
the quality and cost of Medicare beneficiaries. I agree with
almost all of their principles and many of the specific
recommendations. I am going to focus on the relevance of my own
research to the implications for reform and what I believe are
some of the principles that you should pursue. Two full
differences in Medicare spending exist across U.S. regions and
across the populations cared for by hospitals and major
academic medical centers. These aren't due to differences in
patient needs or the prices of services. Rather they are due to
the volume of care, differences in the amount of care provided
to similar patients.
The differences are largely due to what Jack Wennberg and I
have now termed supply sensitive services, things like the
frequency of physician visits, use of specialists in lieu of
primary care physicians, use of the acute care hospital as a
site of care for patients who might otherwise be cared for
elsewhere, and the frequency of diagnostic tests and imaging.
Our work has shown convincingly that higher spending regions,
higher spending hospitals, those with higher volume do not
provide better care. On the contrary the evidence suggests that
higher spending is associated with lower quality, and more
recently that U.S. regions that grew fastest fell further
behind in their quality and outcomes.
The research highlights the magnitude of the opportunity to
improve the value of Medicare services. It said a little bit
with tongue in cheek recognizing that it would be hard to do
but if all U.S. regions could safely adopt the practice
patterns of the most conservative regions Medicare spending
would fall by 30 percent. The research also provides support
for several key payment reform principles that are imbedded in
the commission's pathway two. First, insuring that incentives
to control spending growth apply to all providers whether
through expenditure targets or other means.
Second, striving to reduce regional disparities in spending
by applying greater pressure on currently high spending
regions. And finally our research provides strong support for
the importance of fostering what the commission refers to as
accountable care organizations. These are locally integrated
delivery systems that would have the following key attributes.
First, they are large enough to support comprehensive and
effective performance measurement. Second, they can provide or
manage with others the full continuum of care, patient care,
provided to Medicare beneficiaries. And, third, they could
participate in shared savings approaches to payment reform as
an interim step toward fundamental reform of the Medicare
payment system.
Accountable care organizations should be a key element of
payment reform for the following four reasons. First, most
physicians actually already practice within the context of an
existing virtual multi-specialty group practice. Most
physicians make their referrals to other physicians within a
local network. Most physicians admit their patients to a single
hospital and work within the context of that hospital and the
local physicians who are practicing with them. Therefore,
modest incentives that could prompt physicians to come together
around either the hospital or medical groups would neither
disrupt the physician's current practice patterns nor disrupt
their patients' experience of care.
These virtual multi-specialty group practices are described
in the commission's report and currently exist in almost all
communities of the United States. ACOs could be given
incentives to control total Medicare payments allowing
budgetary savings with smaller relative impact on individual
provider incomes. Third, performance measurement at the level
of an accountable care organization would be much more
trackable in the near term than any other efforts to measure
performance. I have served on the Institute of Medicine
performance measurement committee that reported to Congress a
year ago. We have in the testimony that I submitted examples of
the kinds of performance measurement that could be readily
implemented at the level of an accountable care organization or
local entity.
Finally, most physicians continue to practice in one or two
physician practices, in small group practices. Accountable care
organizations, whether it is large physician groups or built
around hospitals, would have the capacity to invest in
electronic health records, improve care management protocols,
coordination of care, the issues that are highlighted as the
major problems that we face in U.S. health care today. We have
found that growth in spending on physician services varies
dramatically across these virtual medical specialty groups, and
data that is included in the written testimony we have shown
that within these groups within the United States growth rates
over the last 4 years ranged between 2.4 percent per year in
the slowest growing fifth of current physician practices, so
almost 10 percent per year in the highest growing fifth of
physician practices.
We can therefore now identify the ACOs that are most
responsible for growth in spending and they should be held
accountable for their contribution to growth in spending but we
can also offer to identify those groups, those who are growing
at 2.4 percent per year or less that offer us a path toward
improved value for Medicare. Thank you very much for the
opportunity to testify.
[The prepared statement of Dr. Fisher follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Pallone. Thank you, Dr. Fisher. Dr. Thames.
STATEMENT OF T. BYRON THAMES, M.D., MEMBER, BOARD OF DIRECTORS,
AMERICAN ASSOCIATION OF RETIRED PERSONS
Dr. Thames. Mr. Chairman, Mr. Deal, thank you very much for
inviting AARP to testify today. AARP believes that the Medicare
physician payment system should be changed from one that
rewards quality to one that rewards quality. AARP recently
conducted a survey of our members, current and future Medicare
beneficiaries, about their experience with physicians. The vast
majority report good access to and high levels of satisfaction
with their physicians but for many the cost of care remains a
concern. These AARP members represent the nearly 43 million
Americans who rely on Medicare for their health care coverage.
Physicians are central to delivery of that care. While we
believe physicians who treat Medicare beneficiaries should be
paid fairly. Our members tell us the program must be kept
affordable as well. Determining how to balance these two needs
is a complex yet critical policy problem that must be solved
for the Medicare program to remain strong for future
generations. The sustainable growth rate system which has been
widely recognized as flawed does not distinguish between
doctors who provide Medicare beneficiaries with high quality
care and those who provide unnecessary or inappropriate
services. Moreover, the SGR has not been effective at
controlling the volume or intensity of services leading to
higher Medicare spending and greater out of pocket cost for
beneficiaries.
The monthly Medicare part B premium set at 25 percent of
part B spending has doubled since 2000. Beneficiaries also face
increased cost sharing obligations and higher deductibles when
part B expenditures rise. There doesn't seem to be an end in
sight for these out-of-pocket increases. Using existing SGR
methodology physician fees are expected to be reduced each year
at least until 2012. Under this scenario, we can expect to
continue the now annual cycle of physician groups lobbying
Congress to avoid payment cuts, doctors threatening to stop
taking Medicare patients, and Congress overriding the SGR at
the last minute.
We must find a better approach. AARP believes that
ultimately the SGR should be replaced with a system that
encourages physicians to provide beneficiaries of the Medicare
program with greater value for the health care dollar. Medicare
beneficiaries need and expect their doctors to provide
respective treatment. Payment incentives should encourage high
quality, not unnecessary quantity. A truly sustainable payment
system will be built on a foundation that emphasizes four key
elements; one, information technology; two, greater use of
comparative effectiveness research; three, performance
measurement including physician resource use; and, four,
enhanced care coordination.
My written statement details each of these but before any
changes to the SGR are made there are a number of factors to
consider. First, ultimately repealing the SGR will be quite
costly. A transition to a value-based purchasing framework must
not be financed at beneficiary expense. Second, we need to make
sure beneficiaries are protected from extraordinary out-of-
pocket expenses as the system is reformed. One such protection
would be a cap on part B premium increases. Another potential
option is to limit the total part B out-of-pocket costs. Third,
elimination of the SGR cannot be viewed as carte blanche for
physicians to maximize revenues through uncontrolled volume.
Rather, a new payment system should be designed to
encourage appropriate care. Congress cannot continue to avoid
the current problem in the part B payment system. Each year we
wait the problem only gets worse. AARP stands ready to work
with Congress and the physician community to develop a workable
solution. Thank you, Mr. Chairman.
[The prepared statement of Dr. Thames follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Pallone. Thank you, Dr. Thames. I will start off
recognizing myself for 5 minutes of questions, and I wanted to
ask Mr. Steinwald a couple questions. You mentioned how in the
GAO study you were judging doctors against their peers in the
community, and obviously medicine traditionally follows that
local standard of practice. In other words, doctors are judged
against their peers in the community. But when you compare
doctors in the community did you still find significant
variations in the use of services for similar beneficiaries?
Mr. Steinwald. Yes, we did, Mr. Chairman. We divided all
beneficiaries into 31 different risk categories so we were
really trying to hold their health status constant. And then
within each one of those categories we took the top 20 percent
of beneficiaries who were spending the most holding risk
constant, and we do find variations within the community on how
those patients are treated. As I said before, we found that
there tends to be clustering of those expensive patients among
a subset of doctors in the community. The amount of clustering
varies from one metropolitan area to another.
Mr. Pallone. Now what areas had the most of the outliers,
the doctors that were providing extra care or whatever
prescribing more services than is normal, what areas did you
find had the most of those?
Mr. Steinwald. Well, we selected 12 metropolitan areas so
we don't have a survey of the entire country. Of the 12 Miami
metropolitan area is what was by far the most extreme, and I
think second was Baton Rouge. And then there are others. As I
say, all had some of these doctors but others were less than
those two.
Mr. Pallone. Did you find that there were any
characteristics that the outliers had in common across the 12
regions that you studied or those 12 metropolitan areas?
Mr. Steinwald. I should have said that we were only looking
at generalists, not specialists in that study.
Mr. Pallone. OK.
Mr. Steinwald. And we don't have measures of how they
differ from one another. We do have some measures of how their
patients differ though. And, for example, we found that the
patients of these doctors tend to me more frequently
hospitalized and especially more frequently hospitalized
multiple times in a year.
Mr. Pallone. OK. In your testimony you note that CMS has
the tools to identify the outliers, but I mean if they have
those tools why are they doing it? Is it a legislative barrier?
Is it something that Congress has to do to help them move
forward?
Mr. Steinwald. CMS currently has tools that it uses
principally in its program integrity efforts to detect fraud
and abuse. What we are suggesting that they think about doing
goes far beyond just detecting fraud and abuse, and if they
were in fact to consider doing some of the things that the
other payers I mentioned do, they would almost certainly need
new legislative authority for that purpose.
Mr. Pallone. OK. Thank you. Thank you, Mr. Steinwald. I
want to ask Dr. Fisher, in your opinion what role does
information play in insuring proper utilization and accurate
payment rates? In other words, should we be alerting physicians
who are outliers with regard to the utilization use? Should
that information be public or remain private? I know these are
touchy issues but what is your opinion on it?
Dr. Fisher. The role of information is absolutely critical.
I highlight two areas that you haven't mentioned, the need for
comparative effective research and performance measurement, but
focusing specifically on the kinds of individual provider
profiling that are being discussed and were highlighted in the
GAO report. I think the key question is around the validity,
accuracy, and meaningfulness of the measures that are used to
profile the physicians. When those measures are meaningful and
can be fed back to physicians that provide useful information
to physicians and there is good data from a variety of studies
over the last 30 years then physician feedback and performance
information is a useful way to help physicians move toward the
middle.
It will not, however, address the problem of underlying
increases in health care costs. It will help improve physician
practice. It may bring physicians back toward the middle of the
mean but the problems between Miami and Minneapolis is the mean
is that they are different in the averages, and most of the
clinical decisions that physicians are making are subject to
substantial clinical judgment, cannot be specifically judged to
be inappropriate, so the challenge is how to guide local
delivery systems to improve the overall efficiency of care.
If there were one hypothesis I would have about why
physicians or high cost physicians are clustered together is we
know well from our work comparing academic medical centers
across the country that the patients who were cared for by some
academic medical centers within Los Angeles or within Miami are
treated very differently by the physicians who work within that
particular system, and what we believe is the driver of the
differences in cost between a high cost hospital and Miami and
the lower cost health system is Miami in terms of per
beneficiary cost is the relative capacity of that system, how
many hospital beds they have or beneficiaries they serve
because physicians and hospital physicians will rely on the
beds if they can get their hands on them because it is easier
for us to manage our patients when we have access to a hospital
bed.
Mr. Pallone. So you wouldn't want to draw any broad
conclusions about how or what information we should provide to
physicians or whether we should make information public or
remain private. You have to look at a lot of different
situations.
Dr. Fisher. I think feedback to physicians with good
measures is very important. I think public release of that
information at the individual physician level is not likely to
be helpful. Neither MedPAC nor the Institute of Medicine was
willing to talk about release of information. It depends a lot
on the information that you are releasing, information on how
patient-centered care, how effective a physician is at
providing patient-centered care. That may well be important to
release at the individual physician level, who has got good
manners, who listens to their patients.
Resource use measures are much more complicated than the
technical issues around those, and measurement and attribution
at the individual physician level remain a controversial
measurement issue that I think is not yet ready for public
release.
Mr. Pallone. OK. That is helpful. Thank you. Mr. Deal.
Mr. Deal. Thank you. I am going to try to see if I can put
together some pieces of what everybody has said here and see if
we can come up with some general idea of where we can head if
we have the courage to approach designing a new system. And I
guess I would start with the four ingredients that Dr. Thames
has outlined briefly, information technology, greater use of
comparative effectiveness research, performance measurements
including physician resource use, and enhanced care
coordination. The other two gentlemen, do you both agree that
those are essential ingredients of whatever we try to design?
Dr. Fisher. Sure.
Mr. Steinwald. Yes.
Mr. Deal. And I think that is also consistent with what we
heard from MedPAC as to the general categories of that. Now
when we go beyond that we have some real problems with how we
design something, and let me focus in on that. Dr. Fisher, you
said volume of services is one of the primary ingredients of
driving costs up, and this is pretty self-explanatory, I think.
If we go to a system like an accountable care organization, I
presume the idea would be that if we are going to set spending
targets that instead of it being a national spending target we
would begin to segment that down into the minutia of even these
accountable care organizations having a set target for
themselves, would that be sort of the concept?
Dr. Fisher. MedPAC has talked about a concept that would
have the target at a regional level with shared savings models
for the accountable care organizations within those and others
subject to the expenditure target.
Mr. Deal. We would probably have to do it that way to start
with anyway.
Dr. Fisher. Yes, but I think the fundamental notion of
trying to have the incentives aligned so that accountable care
organizations could benefit from doing all of those four things
and reducing the cost of care that they would receive some of
the savings when they achieved that. That is the fundamental
notion.
Mr. Deal. But it is this cohesiveness and coordination of
care that we are trying to emphasize. Now in that regard if we
return to looking at getting into health IT that we did not
finalize last year one of the big sticking points was the
grants and how big the grant program is going to be, et cetera.
It would seem to me that if we want to do something here that
implements that then maybe in the grants for health IT they
ought to be centered in organizations such as this that would
give you an overall arching information base rather than just
piecemealing it out into pieces that are disjointed. Does that
have some sense to it?
Dr. Fisher. I would certainly agree with that.
Mr. Deal. Because that is one of the key ingredients that
we sort of all agree to is information technology. OK.
Obviously in whatever we set as goals, we have to balance the
cost versus quality of care and the great irony as your study
shows is that you don't reach the conclusions that you would
normally expect that greater costs reach greater efficiencies.
In fact, it may be exactly the opposite of that. Let us then
try to take what GAO looked at in the private sector with
regard to what they do, and I presume these are PPOs, these are
managed care organizations, and so forth, is that right?
Mr. Steinwald. Yes, a wide range of organizations ranging
from traditional insurers to some government-sponsored
programs.
Mr. Deal. OK. But if we are going to begin with these
accountable care organizations, them being the umbrella
organization that sort of manages and has responsibility for
containing cost and insuring quality of care, are some of the
principles that Mr. Steinwald said that the private sector is
doing applicable to them, and the ones that sort of jumped out
at me was giving the enrollees some financial incentive to see
physicians in particular tiers that meet certain criteria. Now
I don't know how you do that, but is that something that could
be translated into this sector, Dr. Fisher? I suppose I will
ask you.
Dr. Fisher. I believe it could. I would probably set it up
if I were a health care czar so that you had several
accountable care organizations within a community and patients
would be given information about the quality and cost of care
there which might influence both their part B premiums and
might encourage them to choose the higher quality and lower
cost systems.
Mr. Deal. Incentivizing.
Dr. Fisher. Incentivize.
Mr. Deal. If it is going to affect their premiums, is it
going to affect their premiums in the aggregate which is the
way we compute premiums now or are we going to approach the
concept of premium allocations based on the efficiencies within
an area.
Dr. Fisher. That is a question I probably can't answer. I
can't think quickly enough to give you an intelligent answer.
Mr. Deal. Mr. Steinwald.
Mr. Steinwald. Well, the payers that we looked at were
mostly tiering for co-payment purposes so the co-payment might
be less when they go see a doctor that is gauged to be high on
performance measures than if they saw other doctors.
Mr. Deal. Could we make that work in a Medicare system?
Mr. Steinwald. I think every idea ought to be on the table
because the situation that you face is serious enough. It
couldn't be done under current law but I think it could be
considered. And let me add one thing. It is hard to find much
good news in this discussion and from the previous panel as
well, but one thing that Dr. Fisher pointed out that I think
could be viewed that way is that quality and efficiency are not
enemies. You can't have only one of them. His research and his
organization has shown that very often good quality and
efficient care go together. The question is how do we encourage
more within our health care system.
Mr. Deal. Let me take probably the most difficult of what
the private sector does and ask if it could be applied to a
reformed Medicare system and that was excluding inefficient
physicians from the network. We have concentrated our concerns
about doctors who are voluntarily leaving the system because
the inadequacies and inequities of the current system put those
pressures on the good doctors and many of them are the ones
that are leaving. Can we make a system that basically puts the
pressure in the opposite direction like the private sector does
of saying that if you don't meet certain criteria you don't
qualify to serve Medicare patients.
Dr. Fisher. It seems to me there are two parts to that
question. The technical part is that it is feasible to do it.
With good measures it will be feasible to define those
providers who could be limited and are restricted and not
allowed to participate in the Medicare program. The second
problem is a political problem and that would not be one that I
could easily answer and that you would have to address.
Mr. Deal. It also means that you got to make the Medicare
program financially incentivized enough so that doctors want to
stay in the system and it is something they want to participate
in. Thank you, Mr. Chairman, for being lenient with me.
Mr. Pallone. Thank you. Dr. Burgess.
Mr. Burgess. Well, just very briefly, either Mr. Steinwald
or Dr. Fisher, to carry Mr. Deal's logic a little bit further,
is there a risk of driving out the good physicians if these
types of principles are applied unevenly or in an non-even
handed fashion where you only ended up with the poor
performers?
Mr. Steinwald. Well, you certainly want to have good,
credible measures, and it is one thing to do a statistical
analysis of the kind that we did, but if you were going to take
that information and really apply it more stringently than the
program currently does, I think you would want to supplement it
with additional information at the individual physician level.
So it is essential that the measures be good, credible, and
fair.
Mr. Burgess. Since I can't always count on the chairman
giving me the extra minute that he gave Mr. Deal, let me go
kind of quickly. Mr. Steinwald, you talked about insuring that
the incentives applied to all providers. Were you speaking
strictly of physician providers or were you talking about all
parts of what should be an integrated Medicare system where
hospitals, HMOs, part D pharmaceuticals would all be considered
as part of that financial landscape?
Mr. Steinwald. Our approach was different from the one that
MedPAC adopted. What we were suggesting is that physicians be
profiled but not just for services that they provide themselves
but for a full range of services. Research generally has shown
about 20 percent of spending is for physician services but they
control something like 90 percent so it is their decisions to
admit to the hospital and refer to other services accounts for
that other spending.
Mr. Burgess. Just briefly on the ACOs, Dr. Fisher, you said
in some cases that may be a hospital in a medium size
community. If you are going to use the ACO to help you with the
technology platforms that are going to be available, how do you
get around the star clause? We wrestled with that last time and
never really got past go with that.
Dr. Fisher. There are a number of serious barriers to
moving forward with ACOs, among them the legal barriers to
collaboration among hospitals and physicians. Those would have
to be addressed and Gayle Lewinsky has written a nice piece in
Health Affairs about some of the challenges around addressing
gain sharing, and the importance of doing so in order to
improve care collaboration and care coordination. There are
other barriers as well but obviously some legal changes would
have to take place if you were to have independent physicians
collaborating with hospitals under the current legal model.
Mr. Burgess. If that were the model in a medium sized
community where I practiced for over 25 years was a community
of 60,000 with an HCA hospital right in the middle of, so
presumably that by default would be looked to as the ACO. How
is the accountability then governed?
Dr. Fisher. I think the challenges of defining the legal
structures of the physician organization are substantial but
there are models, physician hospital organization which emerged
in the early 1990's and then quickly died as capitation was
eliminated, independent practice association models where the
physicians could----
Mr. Burgess. And that was not without financial pain, let
me just underscore.
Dr. Fisher. I understand. But the notion of trying to
create some form of physician group accountability and shared
opportunity to gain----
Mr. Burgess. And that is exactly the point. Does that
accountability derive from the HCA hospital in the middle of
the community?
Dr. Fisher. There are models and some of them are discussed
in our testimony and in the Health Affairs article, and I would
be happy to provide those, where hospitals own physician
groups, where physician groups----
Mr. Burgess. I don't think you can do that in Texas, that
we have a lot of corporate practice of medicine. But if the
hospital is the notice of that accountability then the
physicians surrounding the hospital while, yes, they make up
the medical staff, and, yes, they are responsible for the bulk
of the decisions about what medical services to utilize it is
ultimately the hospital answerable to its owners and boards off
site that is going to be the entity to which Medicare is
responding for that accountability. That is, if a bonus is paid
it is paid to the hospital, not necessarily to the physicians
that surround the hospital if their network is so loose that
there is not an identifiable physician's organization.
Now if there is an identifiable physician's organization we
also get into some difficulty with the anti-trust statutes as
they exist today because as you know we are not allowed to talk
to each other about what we would or wouldn't accept as fair
and reasonable compensation for a medical service or hauled up
before the FTC downtown, and while we will eventually get off
it costs us $250,000 in legal fees and we are all scared to
death of taking that on. Is that something that you are looking
at with the development of the ACO model?
Dr. Fisher. We are talking with a number of people about
how to try to move it forward effectively, and there are lots
of legal barriers, technical barriers and social and cultural
barriers to moving it forward but our general sense is that
among all of the strategies that are out there for improving
both the quality and costs of care fostering better
collaboration and coordination among physicians and between
physicians and other providers within the community, not just
hospitals but also nursing homes is an important one to
consider.
Mr. Pallone. Dr. Burgess, we are going to do a second
round. We are going to come around again so one more time.
Mr. Burgess. My minute over isn't up yet.
Mr. Pallone. I know, but you will have another 5 minutes so
let us move on. This will be the last round. We haven't asked
you, Dr. Thames, too many questions so I want to ask you a
question. You are aware CMS has embarked on a voluntary pay for
performance system for physicians in Medicare, and this program
asks all physicians to report on a number of measures intended
to measure and improve quality. Of course, now we have the
financial incentive to do so but this did exist, this system
previously, and the results so far have been paltry due to lack
of participation. That might change maybe with the financial
incentive. But I wanted to ask from your perspective, are there
certain modifications that AARP believe should be made to CMS'
current pay for performance efforts with regard to how they are
focused?
Dr. Thames. Well, sir, we think that the measures that are
going to be used ought to be vetted where particularly say
vetted through the national quality forum because it not only
has providers but it has purchasers and it has consumers so
that the measures that you get are valid. Now we are going to
have to see since it is a new program and I understand not
starting very well now whether before the end of the year those
incentives really get you the information that you need.
Mr. Pallone. You want it changed and refocused, if you
will, on these high cost, highly prevalent conditions for which
you have the valid----
Dr. Thames. Yes. We want it focused on those chronic
diseases that cost the most money in order to get the
information that is most valuable to us sooner.
Mr. Pallone. OK. I was just going to ask him but I see you
are kind of twitching there. Did you want to say something, Dr.
Fisher?
Dr. Fisher. I am nodding my head saying I agree.
Mr. Pallone. All right. Thank you. That is all I have. Mr.
Deal.
Mr. Deal. Let me revisit one of the other things that, Dr.
Fisher, I think your research indicates, and that is that just
as nature abhors a vacuum in the medical field empty beds abhor
a vacuum, new imaging equipment abhors a vacuum when it is not
being used, and specialists abhor a vacuum when their services
are not being called on, so your high cost is in part
attributable to those areas that have more bed space in the
hospitals, more specialists in the community, and I presume if
we were to branch it on out into the imaging more high cost
imaging equipment in the community. All of that leads to an
escalation of cost, is that correct?
Dr. Fisher. That is correct.
Mr. Deal. OK. How do we get a handle on that part? I want
to give you a specific example. My state has been a certificate
of need state in Georgia. My legislature is in serious debate
right now as to whether or not to repeal it in its entirety or
at least partially, and I don't know how to predict what the
outcome of that will be. In looking at the chart even though
mine is a black and white chart, and the color coding I have a
little bit of difficulty deciphering, I still think we are
probably one of those high cost states even with out
certificate of need law.
Now we allowed the moratorium on specialty hospitals to
expire last year. I was not one of those who favored allowing
that to happen because I think we will see this vacuum that I
just alluded to probably increase as more specialty hospitals
come on line. Do you have any of you have any suggestions as to
how should we approach that? Should we take a hands-off
approach, which now appears to be pretty much what we are in
the posture of doing, and as we see more states do like mine of
taking a hands-off approach too, aren't we going to see an
escalation of this phenomenon?
Dr. Fisher. I believe you are. I think the challenge we
face is that physician incomes and the incomes of providers
within the current delivery system depend upon through put,
depend upon staying busy, and as fees are cut whether it is in
the private market or by Medicare the way to maintain your
income is to increase the volume or adopt new practices such as
a specialty on a hospital or an outpatient facility or an
imaging device that the physician owns themselves. The key to
the puzzle, I believe, is in fostering accountability for
future costs. One of the advantages of a model that is either
regional or ideally accountable so that the physicians have to
stare at each other eyeball to eyeball when they are making
their decisions the notion of an accountable care organization
is that the best way with a shared savings model even under fee
for service the most effective way to have your incomes be
increased in the future is to reduce the recruitment of new
physicians to avoid buying new technologies and perhaps to let
physicians who are doing too much health services research to
remain competent physicians to step down and stop practicing,
as my colleagues have recommended to me.
But the notion of professional birth control is a future
strategy for physicians to be able to maintain their incomes or
for hospitals to control their future growth of services is the
way even for the high cost areas to gain from a shared savings
model and slow the growth of total health care spending.
Mr. Deal. My concern is how do we put the adequate
mechanism in place to allow that to happen because just as Dr.
Burgess is concerned about the physician who may be in effect
trapped by the hospital, I can see a situation where you have
competing factions within this ACO in which somebody who is
being responsible is being penalized because one component
within the ACO is not being responsible. What kind of
discipline measure do you have other than the discipline that
we have got the problem with now of the good actor suffering
with the bad? How do you differentiate even with an ACO even
though you break it down into smaller components? You still
have that human nature at play. How would you address that?
Dr. Fisher. Well, this is not a simple problem. We are in a
complicated problem in the Medicare system right now and in
health care in general in the United States. The strategy I
think is clear of moving towards models of accountability for
both quality and cost. A prospective payment system would be
much more effective but it took us 5 years to design the DRG
payment system and 6 years to do the RBRBS. The current
examples from the physician group practice demonstration that
was mentioned by Chairman Hackbarth this morning at least the
preliminary data talking with many of those groups is that they
look as though they are doing the things that you would hope
they would do to improve the quality and the cost of care
because the potential gains from shared savings at the large
group are quite substantial when you have large enough groups,
so it depends a little bit on how the incentives and how they
play out, so I can't predict the future but those would be my
thoughts.
Mr. Deal. On a related subject, does gain sharing in which
a hospital would allow a gain sharing arrangement with a doctor
or a doctor's group, does it have any liability in terms of
minimizing these creative of maybe extraneous service
components?
Dr. Fisher. I believe that well-designed gain sharing
arrangements which could avoid the creation of a competing
hospital, specialty hospital, and increase in local capacity
could be very important.
Mr. Deal. Mr. Chairman, I want to thank all of these
gentlemen. They have been very helpful to us. Thank you.
Mr. Pallone. And I also want to thank all of you. I thought
this was very helpful today, and we appreciate your being here
and sharing your thoughts with us. Thanks again. I would also
remind members that you may submit additional questions for the
record to be answered by the relevant witnesses so you may get
additional questions, and those are submitted to the committee
clerk within the next 10 days. And without objection, this
meeting of the subcommittee is adjourned. Thank you.
[Whereupon, at 12:45 p.m., the subcommittee was adjourned.]