Dive Brief:
- The Senate Finance Committee is considering policies to create more stability in Medicare payments for doctors, an update cheered by physician groups that have long lobbied for reforming how the insurance program reimburses clinicians.
- Committee Chair Ron Wyden, D-Ore., and Ranking Member Mike Crapo, R-Idaho, released the white paper on Friday proposing Medicare adjust payments to account for inflation, a key goal for physicians that argue government reimbursement hasn’t kept pace with rising costs.
- The Senate Finance Committee is also interested in exploring ways to use incentives to increase provider participation in alternative payment models, and potential changes to Medicare’s budget neutrality requirements, which require the CMS to cut payment to certain specialties to raise it for others.
Dive Insight:
Medicare reimburses outpatient physicians through an annual payment rule called the physician fee schedule, or PFS. The PFS determines how much to pay doctors for specific services by starting with relative value units — measures of the resources needed to perform a service — adjusting them for a physician’s geographic area, and multiplying that by a conversion factor.
However, that calculation doesn’t include an annual adjustment for inflation, unlike other Medicare payment systems. As a result, doctors slam the PFS for not reimbursing them enough to account for increasing costs, threatening the sustainability of their practices.
Physicians aren’t the only groups that are worried. In a recent report, the Medicare trustees — a group that includes the secretary of the HHS — said that access to physicians in the program could become a “significant issue in the long term” due to the growing gap between price updates and doctors’ costs.
Congressional advisory group MedPAC has raised similar concerns that inadequate payment could threaten seniors’ access to Medicare-covered care, especially as more Americans age into the program.
In the Friday white paper, the Finance Committee said it was interested in policy options to update the conversion factor in a more predictable way, while taking into account rising costs. That could include tying the annual conversion factor update to the Medicare Economic Index, an annual measure of cost inflation for clinicians.
MedPAC, for example, has suggested annual conversion factor updates linked to 50% of MEI. However, the American Medical Association and other clinician groups argue Congress should adopt an 100% MEI update, resulting in significantly higher payments.
Lawmakers also want to find ways to improve incentives for participation in alternative payment models meant to pay for healthcare services by value, not volume, according to the white paper. Any incentives should increase independent physician participation in accountable care organization models, the Finance Committee said, citing recent research finding that saves Medicare more money.
The Finance Committee also said it’s interested in Medicare’s budget neutrality provision, which is unpopular with physicians.
The CMS is required by law to adjust the PFS to be budget neutral if changes to the RVUs will increase annual spending by more than $20 million. That means when some specialties see increases to their payment adjustments, that necessitates decreases to others.
Physician organizations have lobbied for a higher threshold, along with annual increases. According to the white paper, lawmakers are interested in exploring “refinements” to budget neutrality requirements to provide more flexibility in determining pricing adjustments for services, while maintaining fiscal integrity.
In a statement, the Medical Group Management Association said the white paper is encouraging, especially the Finance Committee’s focus on annual physician payment update that’s equal to inflation and modernizing Medicare’s “antiquated” budget neutrality policies.
The National Association of ACOs also said it supports lawmakers’ consideration of alternatives to the current bonus structure in value-based care models, along with better updates to payment than the current conversion factor.
