[Congressional Record Volume 144, Number 140 (Thursday, October 8, 1998)]
[Extensions of Remarks]
[Page E1962]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  PROTECTING DOCTORS AND PATIENTS IN MEDICARE+CHOICE: INTRODUCTION OF 
         LEGISLATION FURTHER LIMITING PHYSICIAN INCENTIVE PLANS

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                       Wednesday, October 7, 1998

  Mr. STARK. Mr. Speaker, as more Medicare beneficiaries join managed 
care plans, public fears about the effects of financial incentives to 
physicians demand renewed attention. Under current regulations. 
Medicare+Choice plans cannot make more than 25% of physicians' total 
payment dependent on financial incentives to alter practice behavior. 
This regulation only catches those organizations at the high end of the 
spectrum since most incentive plans effect less than 25% of total 
compensation.
  A recent editorial in the September 3, 1998 New England Journal of 
Medicine states that the intensity of incentives in a capitated 
compensation system clearly affects the extent of physicians' conflict 
of interest. Bonuses and withheld amounts paid out in lump sums when a 
specific target is attained can create especially intense conflicts of 
interest if the physician is close to qualifying for the extra money 
near the end of a contract period.
  An article in the August, 1998 issue of the Journal of Health 
Politics, Policy and Law states that ``more than 60 percent of managed 
care plans withhold a portion of physicians' salaries to cover 
expenditures that exceed target projections for use of specialists or 
hospitals. Furthermore, most plans withhold more than 11 percent of 
physicians' salaries and some even withhold more than 30 percent''. The 
Journal advocates precautionary measures to protect and reassure the 
public trust, including limiting financial incentives.
  Survey data of HMO managers suggests that physicians' decision making 
is influenced when financial incentives are between 5-10 percent of 
income. ``Half of the respondents believed that a bonus of 5-15% would 
affect ordering behavior,'' according to ``Data Watch: HMO Managers' 
Views on Financial Incentives and Quality'' by Hillman, Pauly, Kerman, 
and Martinek in the Winter 1991 issue of Health Affairs. Clearly there 
is a need to further reduce the allowable percentage of physicians 
financial incentives. If managed care programs continue to reward 
physicians who provide fewer services to patients, physicians will fail 
to be advocates of patients.
  The bill I am introducing today will reduce provider incentives to 
limit patient services by diminishing financial rewards to physicians 
who provide minimal services. This bill seeks to eliminate the current 
ethical dilemma facing physicians by further reducing from a maximum of 
25% to a maximum of 10% the percentage of physicians' salaries that are 
dependent on financial incentives. The rising number of Medicare HMO's 
make protecting patients by ensuring quality health care essential