[Congressional Record Volume 140, Number 145 (Friday, October 7, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: October 7, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
              STATUS OF MEDICARE PHYSICIAN PAYMENT REFORM

 Mr. ROCKEFELLER. Mr. President, it is my strong belief that 
the defeat of comprehensive health care reform legislation in this 
session of Congress affects not only the health security of virtually 
every single American, but our Nation's long term economic security as 
well.
  Beyond the human tragedy of the failure to extend universal health 
care coverage to every American, Congress' inaction on health care 
legislation will have a great many specific programmatic effects which 
we will have to deal with next year.
  As the chairman of the Medicare and Long Term Care Subcommittee on 
the Senate Finance Committee, I want my colleagues to be award that 
since we were unable to make some important technical corrections and 
improvements in the Medicare program, we missed an opportunity to do 
some general housekeeping regarding certain parts of the program that 
is truly regrettable.
  Today, I would like to discuss one particular section of the Medicare 
program that we will have to turn our attention to next year--
Medicare's physician payment system. The absence of congressional 
action on health care legislation this year will mean that physicians 
who participate in the Medicare program will receive payment updates 
that are specified by a statutory default formula written in the 
legislation I authored in 1989. For fiscal year 1995, this amounts to, 
on average, an update of almost 8 percent for all physicians and over 
12 percent for surgeons.
  I am concerned that in 3 of the 5 years that an update has been 
established under the Medicare volume performance standard [MVPS] 
system--enacted as part of physician have both been set by the default 
formula in the statute and not according to policy adopted by the 
Congress. When we passed this reform, Congress did not intend that we 
would regularly resort to the default. The legislative history will 
certainly testify to that. A default was put into place as a safeguard.
  The default formula for the MVP standard produces a high standard, 
and a high standard leads to a high update. For example, the 1995 
update is based on the 1993 MVP standard which was established by the 
default formula. This is the second year in a row that the update and 
standard have been established by the default formulas which partly 
explains why they are high. The 1995 default standard will similarly 
lead to a high 1997 update.
  To review, Medicare physician payment reform consisted of three 
separate but interrelated provisions. The first part consisted of 
developing a resource-based relative value scale which properly valued 
surgical and other procedures in relationship to primary care 
procedures. This helped to end the payment imbalance in Medicare which 
contributed to the underpayment of primary care services.
  The second part consisted of the Medicare volume performance standard 
[MVPS] which was designed to slow the growth in the volume and 
intensity of Medicare part B services. Medicare part B expenditures had 
an annual average growth approaching 15 percent during the 1980s. The 
MVPS system was designed to reward physicians for controlling volume 
and intensity of Medicare services by allowing for higher updates if 
they did so. Prior to 1989, the default update was the amount estimated 
that physician input prices would increase. This usually averages three 
to four percent a year. Congress sometimes enacted a lower amount. It 
rarely established a higher amount.
  Thirdly, Medicare physician payment reform put in place beneficiary 
protections that limited the amounts physicians could extra-bill 
beneficiaries.
  The first MVP standard was set in 1990 which governed the 1992 
physician update. The relative value scale is currently being phased-in 
over 4 years. Although the transition will not be completed for another 
year, Medicare payments for overpriced procedures have been 
dramatically reduced. Balance billing limits were phased in and were 
fully effective in 1992 resulting in millions of dollars of beneficiary 
liability being removed from the system.
  Part B growth has slowed dramatically in recent years. However, it is 
still unclear whether the national system of updates gives an 
individual physician an incentive to control his or her volume and 
intensity of services. It is also unclear whether the recent lower 
growth in Medicare part B physician outlays is attributable to lower 
inflation in general and national trends in utilization that go beyond 
Medicare.
  I believe that we ought to examine the Medicare volume performance 
system in the next Congress to see whether fundamental changes are 
warranted. On the one hand, we need to avoid the further erosion of 
Medicare fees in relationship to private sector fees to protect 
beneficiary access. On the other hand, Medicare physician fees should 
not increase more rapidly than Medicare payments to hospitals, home 
health agencies, nurses, and other providers or general medical 
inflation absent unique justification for such increases.
  I believe we should explore a variety of options which could include 
returning to an update based on the rise in input prices, shortening 
the time between measurement of performance, or testing a system base 
on withholds. I am sure there are other options which should be 
reviewed as well.
  I also strongly believe we ought to explore several refinements to 
the existing system if it is concluded that more fundamental changes 
are not desirable at this time. These include decentralizing the reward 
system to the State or speciality level, redressing the growing 
imbalance in the relative value system between services engendered by 
the system of differential updates for surgeons, primary care and other 
physicians, and reexamining the default formulas to determine if a more 
objective baseline for growth should be used, such as per capita GDP.
  Finally, we should also explore other ways, outside of the MVPS 
system to redress the balance between payment for primary and specialty 
care. These include reforming the methodology for paying practice 
expenses and the system of bonuses paid to physicians practicing in 
underserved areas. Many of these ideas were promoted as parts of health 
care reform measures which a large number of my colleagues supported.
  Mr. President, I believe, that after five Congressional sessions 
since the enactment of physician payment reform, it is time to evaluate 
and reexamine the systems we put in place. Improvements and refinements 
are needed and I intend to make that a high priority in the next 
Congress.

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