Physician Reimbursement Is Stumbling Block to Reform

The Democrats stubbed their toes in the U.S. Senate when a proposal to rescind scheduled cuts in doctors’ Medicare reimbursement was blocked by a bipartisan vote. What was particularly striking about this vote is that-except for Republican Senator Olympia Snowe’s vote for the Senate Finance Committee reform bill-this is the first time Democrats and Republicans have agreed on anything related to healthcare reform.

What galled many senators of both parties is that the $247 million measure was proposed as part of a Medicare bill rather than as part of healthcare reform. Since no additional revenues or spending cuts were proposed to offset the cost, the proposal would have increased the federal deficit. Yet Senate Majority Leader Harry Reid and other bill proponents continue to claim that the reform legislation they plan to bring to the Senate floor will not raise the deficit. House leaders, similarly, plan to authorize $228 billion in extra payments to physicians, but don’t want it to count as part of the cost of their supposedly budget-neutral reform bill.

While there is no doubt that the Medicare formula for paying doctors is broken, this is not the right way to fix it. Instead of pandering to the AMA and other physician groups, the Democrats in Congress should face the truth that the fee-for-service system itself is broken.

Earlier in the legislative process, Sen. Max Baucus and his colleagues on the Senate Finance Committee discovered that the Congressional Budget Office would not score proposed structural reforms because their financial impact was unclear. That was a reasonable position for the CBO to take, but it yoked reform to the status quo in the healthcare delivery system. While the House and Senate bills include some demonstration projects to try out new methods of provider reimbursement, they will take years, and it is unclear whether Congress will adopt any of those models later, even if they show they can hold down costs.

Many health-policy experts believe that fee-for-service reimbursement of physicians encourages the provision of too much health care. In fact, the reason why Medicare started using the “sustainable growth rate” formula to pay physicians years ago is that they were increasing the number of services they provided to compensate for Medicare’s relatively low fees. The best way to counter that incentive is to make physicians and hospitals financially responsible for care, perhaps as part of “accountable care organizations.” Short of that, Medicare could at least gear a large chunk of provider compensation to quality, rather than volume.

But don’t count on any of that to happen. The majority party would rather play political games, apparently, than face inconvenient facts.