[Congressional Record Volume 157, Number 1 (Wednesday, January 5, 2011)]
[Senate]
[Pages S56-S59]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MEDICARE
Mr. GRASSLEY. Mr. President, as we begin the 112th Congress I want to
discuss one of my continuing concerns with the Medicare Program. For
the last 10 years, I have served most recently as ranking member and
previously as the chairman of the Senate Committee on Finance, which
has jurisdiction over Medicare. During this time I have led efforts to
reform the Medicare payment system and realign incentives in Medicare
to promote higher quality and more efficient care. Today, I would like
to address one of the flaws in the Medicare payment system: the
inaccuracy of the Medicare geographic adjustment factors used for
physician practice expense and the adverse impact they have on rural
Medicare beneficiaries' access to care. This flaw has for many years
resulted in unfairly low payments to high quality areas like my own
home State of Iowa and many other rural States.
Medicare payment varies from one area to another based on the
geographic adjustments known as the geographic practice cost indices or
GPCIs. These geographic adjustments are intended to equalize physician
payment by reflecting differences in physician's practice costs. But
they do not accurately represent those costs in Iowa or other rural
States. They have failed to do the job. They penalize rather than
equalize Medicare reimbursement in rural States and discourage
physicians from practicing in areas like New Mexico, Arkansas,
Missouri, and Iowa because of their unfairly low Medicare rates. Iowa
is widely recognized as providing some of the highest quality care in
the country yet Iowa physicians receive some of the lowest Medicare
reimbursement in the country due to these inequitable geographic
disparities.
I introduced legislation to correct these unwarranted geographic
payment disparities in the 110th Congress, the Medicare Physician
Payment Equity Act of 2008. In the 111th Congress, I introduced the
Medicare Rural Health Access Improvement Act of 2009. And when the
Senate Finance Committee conducted its markup of health reform
legislation in the fall of 2009, I offered an amendment to reform the
practice expense geographic adjustment, PE GPCI, that has caused unduly
low payments in rural areas due to the inaccurate data and methodology
that is used. My amendment provided more equity and accuracy in
calculating this adjustment, and it provided a national solution to the
problem. It was accepted unanimously by the Senate Finance Committee,
and it was included in the Senate health reform bill, the Patient
Protection and Affordable Care Act, PPACA, that was enacted last year.
The goal of my amendment was to assure that the statutory mandate of
the Social Security Act is met and that the most recent and relevant
data is used for these geographic adjusters. The language of section
3102(b) is very
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specific. It requires a transitional 2-year period of limited relief to
reduce the impact of the current, inequitable practice expense formula
in rural areas while a broader analysis of the methodology and
evaluation of the data is conducted by the Department of Health and
Human Services, HHS. The Secretary is mandated to limit the impact of
the existing adjustments by reflecting only one-half of the geographic
differences in employee wages and rents in the PE GPCI adjustment for
2010 and 2011 and to hold harmless those localities that would
otherwise see a reduction as a result of this adjustment. Most
importantly, the provision requires that a longer term solution be
implemented in 2012, at which time the Secretary must make appropriate
adjustments to the formula to ensure accurate geographic practice
expense adjustments.
This 2-year transition in 2010 and 2011 was provided to allow time
for a focused, in-depth study by the Centers for Medicare and Medicaid
Services, CMS, on the data and methodology used to support a revised PE
GPCI formula that would be implemented by January 1, 2012. However, to
date CMS has failed to make any significant changes in the sources of
the data or the methodology used in calculation of the practice expense
adjustment. Although CMS has acknowledged its obligations for an
additional study as called for by section 3102(b), they continue to
claim that their ``analysis of the current methods of establishing PE
GPCIs and [their] evaluation of data that fairly and reliably establish
distinctions in the cost of operating a medical practice in the
different fee schedule areas meet the statutory requirements'' of
section 3102(b), Federal Register, November 29, 2010, Page 73254. I
strongly disagree.
When the current Medicare payment system was established, Congress
decided that geographic adjustments would be appropriate to equalize
physician payment by reflecting differences in physicians' practice
costs, and it established the geographic practice cost indices, GPCIs,
for physician work, practice expenses, and malpractice premiums.
Congress also mandated that HHS use the most recent data available
relating to practice expenses in calculating the geographic adjustments
for physician practice costs.
However, CMS has long relied upon proxy data sources that bear little
to no relevance to actual practice costs, such as using Housing and
Urban Development, HUD, apartment rental data to calculate physician
office rent. This doesn't have any connection with the cost of office
space, let alone a physician's office. Also, the current formula only
counts employee wages in four occupations: nurses, clerical personnel
and medical technicians but it should reflect employee wages more
accurately by also taking into account physician assistants, office
administrators, and other more highly compensated specialists commonly
employed in practices today. The third category, of ``other'' expense,
is considered to be a national market and not adjusted. It should
include expenses like office furniture and information technology that
cost the same, no matter where you live, but it doesn't. And the
weights used by CMS in their methodology are outdated and fail to
represent physician practice expenses accurately.
Unfortunately, the more accurate calculation of practice expense
costs that was intended to be achieved by my amendment also has been
jeopardized by a special interest provision that was added to PPACA
behind the closed doors of the majority leader during the Senate floor
consideration of health reform. It addresses geographic disparities in
Medicare payment but it helps just 5 States at the expense of the other
45 States. It is what I call the ``Frontier Freeloader'' provision. It
improves Medicare reimbursement in these frontier States by
establishing floors for the hospital wage index and the physician
practice expense GPCI. A frontier State is defined as one with 50
percent or more frontier counties, defined as counties with a
population per square mile of less than six.
This special deal will ensure that higher payments go to just five
rural States in 2011--North Dakota, South Dakota, Montana, Wyoming and
Nevada--at the expense of every other State. But the Frontier
Freeloader is even more egregious because Iowa and other States like
Arkansas and New Mexico that don't benefit from this provision are
paying for it! So, taxpayers in your State and mine all the other 45
States--will kick in to pay for this unfair $2 billion Frontier
Freeloader carve-out for five States that ends up harming all the other
rural States. And that is just the cost for the next few years. The
frontier States deal does not sunset, and it is not time-limited. It
will continue to benefit so-called ``frontier States'' forever while
taxpayers in your State and mine continue to pay the bills. It's
another example of how the lack of transparency and the deals made
behind closed doors to garner votes last year led to bad policies. And
it became law when the President signed the health care reform bill.
I introduced legislation to eliminate the inequitable frontier
freeloader provision in the last Congress and to improve Medicare
beneficiaries' access to care in all rural States. The Medicare Rural
Health Care Equity Act of 2010 would have eliminated this special
Medicare reimbursement rate for frontier States and provided additional
funds from its repeal to improve reimbursement in all rural States.
Iowa provides some of the highest quality care in the country but it
does not meet the definition of a frontier State. Certainly Iowa should
have been helped since Medicare reimbursement for hospitals and
physicians is lower in Iowa than in most of these so-called
``frontier'' States. Medicare also pays much lower rates in other rural
States, like Arkansas and New Mexico, but they don't benefit from the
Frontier Freeloader because they don't meet the definition of a
frontier State. We should improve physician payments for all rural
States, not just a select few. And it's unfair to improve hospital
payments for just a few States. My legislation would have eliminated
those special payments for just five States, and I will be
reintroducing that legislation again soon.
The Institute of Medicine, IOM, has been asked by HHS to evaluate the
accuracy of the existing geographic adjustment factors and whether the
current measures and data are representative of the costs. I have
prepared a statement for consideration by the IOM committee charged
with this review, the Committee on Geographic Adjustment Factors in the
Medicare Program. I urge the IOM to address the inaccuracy of the
current geographic adjusters used for physician practice expense, the
methodology and data used in their calculation, and the adverse effect
of the existing practice expense geographic adjustment factor on rural
access to care. I also urge IOM to review the frontier States provision
and provide HHS and Congress with recommendations on specific factors
that could be used to determine physician practice costs in those
States in lieu of the inequitable frontier States floor.
It is my hope that the IOM will carefully consider these comments as
it proceeds with its review and develops recommendations and a report
to be submitted to HHS and the Congress later this year. I ask
unanimous consent that my statement to the IOM be printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Statement of Senator Chuck Grassley
(Institute of Medicine, Committee on Geographic Adjustment Factors in
the Medicare Program, Jan 5, 2011)
As the senior senator from Iowa and the Ranking Member of
the United States Senate Committee on Finance in recent
years, I appreciate the opportunity to provide this statement
to the Institute of Medicine (IOM) on a study that the IOM
has undertaken at the request of the Secretary of the
Department of Health and Human Services (HHS) regarding the
accuracy of the geographic adjustment factors used for
Medicare payment.
For the last ten years, I served either as Ranking Member
or as the Chairman of the Senate Committee on Finance, which
has jurisdiction over Medicare. During this time, I led
congressional efforts to establish more accurate geographic
adjusters for Medicare physician payment and to realign
incentives in Medicare to promote higher quality and more
efficient care. This IOM committee has been asked to evaluate
the accuracy of the geographic adjustment factors and to
provide their recommendations as to whether the current
measures and data are representative of the costs. I would
like to address the inaccuracy of the current Medicare
geographic adjustment factors used for physician practice
expense, the methodology and
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data used in their calculation, and the adverse effect of the
existing practice expense geographic adjustment factors on
rural access to care. I offer these comments for
consideration by the committee as it proceeds with its review
and develops its recommendations and report to HHS and
Congress later this year.
Medicare's Flawed Geographic Adjustment Factors
Medicare's payment system for physicians is flawed in many
ways. One of those flaws is the unjustified geographic
disparities in payment that has for many years given unfairly
low payments to high quality areas like my home state of Iowa
and other rural states. Geographic equity in Medicare payment
has been a longstanding issue of major concern to me. The new
health care reform law, the Patient Protection and Affordable
Care Act (PPACA), includes a provision I authored that makes
some much needed changes in the calculation of the geographic
adjustment factors that is intended to provide more equitable
payments to physicians in rural areas and to improve access
to health care for Medicare beneficiaries in rural states.
Medicare payment differences from one area to another based
on the geographic adjustments known as the Geographic
Practice Cost Indices (GPCIs) are intended to equalize
physician payment by reflecting differences in physician's
practice costs but they do not accurately represent those
costs in Iowa or other rural states. They have been a dismal
failure, in fact. They discourage physicians from practicing
in rural areas because they create unfairly low Medicare
reimbursement rates.
I introduced legislation to correct these unwarranted
geographic payment disparities in the 110th Congress, the
Medicare Physician Payment Equity Act of 2008, as well as the
Medicare Rural Health Access Improvement Act of 2009 in the
111th Congress. In the fall of 2009, I also offered an
amendment in the Senate Finance Committee markup of health
reform legislation to reform the practice expense geographic
adjustment that has caused unduly low payments to physicians
in rural areas due to the inaccurate data and methodology
that is used.
My amendment was intended to provide more equity and
accuracy in calculating this adjustment as well as to provide
a national solution to the problems that have arisen from the
current unwarranted disparities in Medicare payment due to
these geographic adjustments. The amendment was accepted
unanimously by the Senate Finance Committee during markup of
Senate health reform legislation in September 2009. Section
3102(b) of the Patient Protection and Affordable Care Act
(PPACA) that passed the Senate and became law is based on
this amendment. It requires HHS to improve the accuracy of
the Practice Expense Geographic Practice Cost Index (PE GPCI)
data and methodology and to examine the feasibility of using
actual data or reliable survey data on office rents and non-
physician staff wages. These two PE GPCI inputs, which are
the only inputs adjusted to reflect local costs, currently do
not measure physician costs. Instead, they rely upon proxies.
The current input adjustments are not credible because of
their reliance on proxy data sources rather than actual
physician practice costs. As a result, some physicians are
paid more and others are paid significantly less for the very
same service with the same time, effort, and expertise needed
to furnish that service to a Medicare beneficiary.
I urge the committee to note the wide differences in
physician payment under the GPCIs as currently constructed.
At the beginning of calendar year 2010, before the
transitional adjustments required by PPACA, a 38.894%
difference in Medicare physician payment on average existed
between the highest paid and the lowest-paid Medicare Part B
payment locality (Alaska and Puerto Rico) for the same
Medicare service. The PE GPCI disparity for this same period
was even greater, ranging from 1.441 (San Francisco) for the
highest to 0.694 for the lowest (Puerto Rico) and 0.821 for
the second lowest (the rest of Missouri), with 1.0 being the
average. The PE GPCI for Iowa was 0.870. This means that
physicians in San Francisco received a PE GPCI adjustment
that was 144 percent of the average, while Iowa physicians
received an adjustment of just 87 percent.
Survey findings of the American Medical Association (AMA)
and others challenge this significant range in payment
disparity by showing little measurable distinction in
physician practice expenses throughout the country. The AMA
PPIS is based on actual physician data, rather than the proxy
data upon which CMS relies. Geographic distinctions in
physician practice expense payment in rural areas should be
supported by accurate and reliable data and calculations. I
urge the committee to address this discrepancy between
credible surveys, based on real physician cost data, and the
PE GPCI range established by CMS.
Section 3102(b) requires a transitional two-year period of
limited relief to reduce the impact of the current,
inequitable practice expense formula in rural areas while a
broader analysis of the methodology and evaluation of the
data is conducted by HHS. The Secretary is mandated to limit
the impact of the existing adjustments by reflecting only one
half of the geographic differences in employee wages and
rents in the PE GPCI adjustment for 2010 and 2011 and to hold
harmless those localities that would otherwise see a
reduction as a result of this adjustment. The provision
requires that a longer-term solution be implemented in 2012,
at which time the Secretary must make appropriate adjustments
to the formula to ensure accurate geographic practice expense
adjustments. These statutory adjustments were intended to
moderate the negative effects of the existing inaccurate GPCI
disparities on low-paid Medicare regions while allowing time
for a focused, in-depth study by the Centers for Medicare and
Medicaid Services (CMS) on the inputs, weights, and data used
in the PE GPCI to support a revised formula that would be
implemented as of January 1, 2012.
Congress agreed at the inception of the current Medicare
payment system that, to the extent physicians practicing in
the various Medicare payment localities face higher or lower
practice expense burdens, reasonable distinctions in Medicare
payment would be appropriate, and it established the
Geographic Practice Cost Indices (GPCIs) for physician work,
practice expenses, and malpractice premiums to do so. To
support the PE GPCI, Congress directed the Department of
Health and Human Services to ``use the most recent data
available relating to practice expenses . . . in different
fee schedule areas.'' (Social Security Act, Section
1848(e)(1)(D)). The statutory requirement makes it clear that
there must be a nexus between data sources and actual
physician practice expenses as represented by the inputs of
the PE GPCI.
However, CMS has long relied upon proxy data sources that
bear little to no relevance to actual practice costs.
Furthermore, the weights used by CMS are outdated and fail to
represent accurately the relativity in expenses in this
dynamic and ever-changing field. It is my understanding that
the PE GPCI, in particular, is currently supported by data
that is neither relevant to physician practices nor credible
to physicians. Physicians who serve the Medicare population
must bear the burden of their true practice costs while the
Medicare payment system upon which they rely fails to reflect
those same practice expense costs fairly and accurately.
The goal of Section 3102(b) is to assure that the statutory
mandate of the Social Security Act is met and that the most
recent and relevant data is used for these geographic
adjusters. The language of Section 3102(b) is very specific
in its directions but so far CMS has failed to make
significant changes in the methodology or data used in
calculation of the PE GPCI. The final CMS CY 2011 Medicare
physician payment rule sets forth the results of CMS' sixth
3-year GPCI review. Although CMS acknowledged its obligations
for an additional PE GPCI study under Section 3102(b) of
PPACA, they stated that their ``analysis of the current
methods of establishing PE GPCIs and [their] evaluation of
data that fairly and reliably establish distinctions in the
cost of operating a medical practice in the different fee
schedule areas meet the statutory requirements'' of Section
3102(b) (Federal Register, November 29, 2010, Page 73254).
The most recent CMS review and analysis does not provide a
new analysis and evaluation of data but merely treads old
ground, looking at the PE GPCI underlying data and its
weights along the lines of what other studies have already
examined. For example, CMS continues to rely, with little
justification, on Housing and Urban Development (HUD) section
8 apartment rent data as a proxy for physician rent even
though Section 3102(b) directs CMS to evaluate ``the
feasibility of using actual data or reliable survey data
developed by medical organizations on the costs of operating
a medical practice, including office rents and non-physician
staff wages in different fee schedule areas.'' If no suitable
nationwide data on rental rates for physician office space
currently exist, the IOM should recommend other approaches
for CMS to use in studying this issue to come up with more
reliable data than HUD apartment rents.
CMS acknowledged in the final physician payment rule for CY
2011 that there is much ongoing analysis of the PE GPCI data
that could form the basis of future GPCI changes. They stated
that they would ``review the complete findings and
recommendations from the Institute of Medicine's study of
geographic adjustment factors for physician payment'' along
with other HHS activities and continue to study the issues as
required by Section 3102(b) (Federal Register, November 29,
2010, Page 73256). CMS will consider the GPCIs for CY 2012
again in the context of their annual physician fee schedule
rulemaking beginning in CY 2011 based on information that is
available then.
A significantly more comprehensive analysis and detailed
evaluation should be conducted for the PE GPCI study mandated
by Section 3102(b) than what has been detailed by CMS in its
final CY 2011 Medicare physician payment rule. New studies,
data, and other approaches must exist or be developed to
facilitate reliability and accuracy in identifying actual
physician practice expenses and setting weights among those
expenses. That is why a two-year transition was provided: to
ensure that CMS would have sufficient time to do additional
studies, if needed, and come up with more meaningful data
than, for example, continuing to use apartment rental data
which bears no relation to the cost of a physician's office.
I urge the committee to provide CMS with specific
recommendations for more accurate methodology that could be
used to determine the PE GPCIs and obtain more reliable
actual or
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survey data sources to be used in these calculations.
The Inequitable Frontier States Provision
Unfortunately, the more accurate calculation of practice
expense costs that was intended to be achieved by Section
3102(b) has been jeopardized by a special interest provision
that was added to PPACA behind closed doors during the Senate
floor consideration of health reform. The ``frontier states''
provision addresses geographic disparities but helps just
five states at the expense of the other 45. It improves
Medicare reimbursement in the so-called frontier states by
establishing a permanent 1.0 floor for the PE GPCI as well as
for the hospital wage index, effective January 1, 2011. A
frontier state is defined as one with 50 percent or more
frontier counties, defined as counties with a population per
square mile of less than six. The frontier states provision
ensures that higher Medicare physician payments resulting
from a higher PE GPCI adjustment go to just five states in
2011--Montana, Wyoming, North Dakota, South Dakota, and
Nevada.
Iowa provides some of the highest quality care in the
country but it does not meet the definition of a frontier
state. Yet Medicare reimbursement for hospitals and
physicians is lower in Iowa than in most of these so-called
frontier states. Medicare also pays much lower rates in other
rural states that do not meet the definition of a frontier
state.
The frontier states provision is even more egregious
because taxpayers in all 50 states will help pay the
estimated $2 billion cost for a provision that benefits just
five states. That amount is the Congressional Budget Office
cost estimate of the frontier states provision for the next
ten years. A practice expense floor for rural states may be
warranted but it should not be an adjustment for just a few
select states. This automatic pay increase for frontier state
physicians could result in reduced access for Medicare
beneficiaries in nearby rural states that do not have the 1.0
PE floor if physicians migrate to those rural areas where
Medicare payment has been significantly increased.
Last spring I introduced legislation, the Medicare Rural
Health Care Equity Act of 2010, to eliminate the special
Medicare reimbursement rates for frontier states. It is
imperative to reduce unwarranted geographic disparities and
base physician practice expense costs on actual or reliable
survey data, not by legislative fiat that improves physician
payments for just a few states. Although legislative action
would be required to make changes in this regard, I urge the
IOM to review this situation and provide recommendations to
HHS on whether specific factors should be considered to
determine physician practice costs in frontier states if such
a floor did not exist.
Conclusion
The practice expense geographic adjustment factor has a
significant impact on the health care workforce in rural
areas, because it plays a major role in the ability to
recruit and retain physicians in rural areas who see more
patients and work longer hours for correspondingly lower pay.
This in turn can result in Medicare beneficiaries in rural
areas having reduced access to physicians and other health
care practitioners. Twenty percent of the population lives in
rural America yet only nine percent of physicians practice
there. Shortages of primary care and specialty physicians
currently exist in many rural areas yet unwarranted
geographic payment disparities make it difficult to improve
access for rural Medicare beneficiaries and other patient
populations.
The existing inaccurate geographic adjustments by CMS
result in unwarranted and unduly low rural reimbursement
rates. More current, relevant, and accurate data sources
exist and should be used by CMS to make geographic
adjustments to Medicare payments, especially in the area of
physician practice expense. The current geographic
disparities in payment are not based on actual or reliable
data, and they put rural Medicare beneficiaries at risk. I
urge the committee to recommend that CMS use actual practice
cost data rather than the current inaccurate proxies to
ensure that Medicare payment reflects true geographic
differences in physician practice costs.
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