Medicare Physician Payment - Current Scenario and Short Term Alternative

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1 Issue Summary: Medicare Physician Payment The current Medicare physician payment system, especially the sustainable growth rate (SGR), is characterized by instability, inequity and a failure to account for the actual cost of providing medical care. This marks the tenth consecutive year that physicians face dramatic reductions in their Medicare payments. In fact, physicians participating in the Medicare will have their Medicare payments cut 29.5 percent in 2012, unless Congress intervenes. Physician payments have remained static since 2001, while practice costs have increased over 30 percent. Furthermore, the structure of the current system emphasizes volume over quality and impedes the development of strong, continuous physician-patient relationships. It is clear that these policies have a compounding impact upon physicians, discouraging participation in the Medicare program and threatening access to care for our nation s seniors. The sustainable growth rate (SGR) methodology should be repealed and replaced with a payment system that eliminates fragmentation in care delivery, encourages greater coordination of care, promotes quality, and reflects increases in physicians practice costs.

2 Issue Brief: Medicare Physician Payment AOA Policy The American Osteopathic Association (AOA) believes that the United States Congress should take advantage of this historic opportunity to enact significant meaningful reforms to the Medicare physician payment system that will ensure all patients have access to quality, comprehensive, physician-directed health care. The Problem The current Medicare physician payment system, especially the sustainable growth rate (SGR), is characterized by instability, inequity and a failure to account for the actual cost of providing medical care. On January 1, 2010, physicians face a 21 percent reduction in Medicare reimbursements unless Congress intervenes. In addition, every commercial insurer bases their payments upon the Medicare payment formula. This marks the eighth consecutive year that physicians have faced reductions in payments. While physician payments have remained static since 2001, practice costs have increased over 25 percent. Furthermore, the structure of the current system emphasizes volume over quality and impedes the development of strong, continuous physician-patient relationships. It is clear that these policies have a compounding impact upon physicians, discouraging participation in the Medicare program and threatening access to care for our nation s seniors. Congressional Action on the Medicare Sustainable Growth Rate (SGR) Year Formula Update Actual Update Legislation % -4.8% % 1.4% Consolidated Appropriations Resolution % 1.5% Medicare Modernization Act (Public Law ) % 1.5% Medicare Modernization Act (Public Law ) % 0.2% Deficit Reduction Act of 2005 (Public Law ) % 0% Tax Relief and Health Care Act of 2006 (Public Law ) 2008 January to June -10.1% 0.5% Medicare, Medicaid, and SCHIP Extension Act of 2007 (Public Law ) 2008 July to December -10.6% from June 30, 2008 level 0% (0.5% above 2007) Medicare Improvements for Patients and Providers Act of 2008 (Public Law ) % 1.1% Medicare Improvements for Patients and Providers Act of 2008 (Public Law ) 2010 January to February -21.3% 0% Department of Defense Appropriations Act (Public Law )

3 2010 March -21.3% 0% Temporary Extensions Act (Public Law ) 2010 April to May -21.3% 0% Continuing Extensions Act (Public Law ) 2010 June to November -21.3% 2.2% Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (Public Law ) December 2010 to December % 0% (it extends the previous 2.2%) Medicare and Medicaid Extenders Act of 2010 (Public Law ) Cost of Congressional Action on the Medicare Sustainable Growth Rate (SGR) Year 10 Year Freeze 10 Year MEI Update 2004 $95 billion 2005 $48.6 billion $154.5 billion 2006 $127.2 billion $218.2 billion 2007 $170.8 billion $252.2 billion 2008 $177.7 billion $262.1 billion 2009 $220.1 billion $288.1 billion 2010 $285 billion $344 billion 2011 $370 billion?? The Solution Create a fair and equitable Medicare physician payment policy Implement a comprehensive Medicare payment formula that eliminates the continued use of the flawed sustainable growth rate (SGR) methodology. Establish stable and predictable updates and a realistic baseline that reflects the higher rate of inflation in health care relative to other industries. Provide meaningful reform of the physician payment formula that ensures all physicians receive annual payment updates that reflect increases in practice costs, and the economic strains of added regulations such as electronic health records. Remove items such as drugs and laboratory services not paid directly to practitioners from spending targets. Retain Congressional authority over the setting of Medicare physician payments to ensure accountability and a transparent process. Create a health care system that promotes the patient-physician relationship Establish a patient-centered medical home (PCMH) model based on a physiciandirected medical practice in which the personal physician leads a team of individuals at the practice level who collectively take responsibility for the ongoing care of patients. Provide incentives and logistical support to encourage adoption of the medical home by physicians. The coordination of care across all elements of a complex health care system requires considerable practice expense. Care coordination payments should be set accordingly.

4 Explore additional options for expanding integrated care models at the state level through grants and other incentives to promote the inclusion of PCMH models in state Medicaid and SCHIP programs. Implement fair and equitable reimbursement policies for primary care physicians and general surgeons Make permanent primary care and general surgery bonus payments established through the Patient Protection and Affordable Care Act (Public Law ). Permanently raise the Geographic Practice Cost Index (GPCI) floor to 1.0. Make permanent the policy that raises Medicaid payments for primary care physicians to 100% of Medicare payments. Reform the payment system to reward quality care and a strong physician-patient relationship rather than volume. Fee for service payments for primary care physicians should be competitive in the market with other specialties. Eliminate geographic discrepancies in Medicare payments.

5 Issue Brief: Use of Flexible Spending Accounts for the Purchase of Over-the- Counter Medications The American Osteopathic Association (AOA) opposes the provision of the Protection and Affordable Care Act (Public Law ) that eliminated consumers ability to use flexible spending accounts (FSA), health savings accounts (HSA s), and other tax preferred accounts for the purchase of most overthe-counter (OTC) medications unless they obtain a physicians prescription effective January 1 of this year. The AOA believes this requirement, as mandated by the Affordable Care Act, will impede efforts to improve the quality and efficiency of health care provided to patients. This new administrative requirement is creating great confusion for patients and physicians alike. Patients have begun calling their physicians and instructing them on what to prescribe such as herbal supplements, nasal spray, vitamins, heartburn medication, etc. In most cases, the Food and Drug Administration has determined that OTC products are safe for broad distribution and therefore do not require a physician s prescription. This requirement adds a new burden on top of the numerous administrative requirements physician practices already face. Physicians may require patients to come in for an office visit before issuing the prescription, taking time, attention, and resources away from more serious cases. While some practices have the staff to handle the extra requests, smaller practices do not. This discrepancy places an undue burden on certain consumers who choose to use a FSA or HSA for their health care purchases. Consumers purchasing these products in other manners are not required to obtain a prescription. The AOA also is concerned about the medical liability that could result from this new requirement. Physicians may not be familiar with all of the OTC medications that their patients request and they are placed in a difficult situation of possibly refusing to issue the prescription, which creates friction with their patients. Previously, patients assumed the risk of side effects and adverse reactions to the OTC products. Now that physicians are required to issue prescriptions for these OTC medications and provide information about the potential for side effects, etc., there is concern that physicians could be held liable for any adverse events. The provision also places new requirements on pharmacies and pharmaceutical distributors Such entities must now document the sale of such products prior to allowing a consumer to purchase certain products with a FSA or HSA account.

6 Issue Brief: Physician Workforce and Graduate Medical Education Experts have reached consensus that the United States will face a shortfall in its physician supply over the next twenty years. While academic and policy experts debate the best approaches to sustain the physician workforce in the long term, the AOA recognizes that we must begin to educate and train a larger cadre of physicians now. While increasing the overall supply of physicians is important, it is imperative that policymakers facilitate a rapid growth in the number of physicians in underrepresented specialties such as family physicians, general internists, pediatricians, and general surgery. Experts predict that the country faces a shortage of 45,000 primary care physicians, in addition to shortages in other medical specialties, by This shortage comes at a time when it is estimated that the population of the US will grow by 25 million people over the next decade. The number of Medicare beneficiaries will double within the next 20 years and by 2030, individuals over the age of 65 will account for over 20 percent of the population. According to a 2007 government survey, more than 1.3 million Medicare beneficiaries have difficulty finding a new primary care physician. On average, Medicare beneficiaries use significantly more health resources than those people under 65. More specifically, access to primary care and general surgery is declining at an alarming rate. Over 50 million people in the United States live in areas designated as health profession shortage areas. An estimated 56 million people lack adequate access to primary care physicians. A recent white paper by the American College of Physicians said the number of U.S. medical graduates entering residencies in family medicine and internal medicine has decreased by half in the last decade. We must begin to educate and train a larger cadre of physicians now. The Balanced Budget Act of 1997 froze the number of residents that a hospital could claim Medicare payment for based on the number of residents that each hospital trained in 1996, thus creating an arbitrary limit on training capacity of new physicians. We urge Congress to eliminate this cap on full-time equivalent (FTE) residency slots. More so, Congress should specify that increases in funded FTE s be limited to primary care, general surgery, and other medical specialties most in need.

7 Issue Brief: The Help, Efficient, Accessible, Low-Cost, Timely, Healthcare (HEALTH) Act of 2011 (H.R. 5) Rep. Phil Gingrey (R-GA) The American Osteopathic Association (AOA) requests your support for the Help, Efficient, Accessible, Low-Cost, Timely, Healthcare (HEALTH) Act of 2011 (H.R. 5). This legislation includes significant reforms to the nation s broken medical liability system that will both lower the cost of care and increase access to medical care. Limits attorney contingency fees. Sets statute of limitations at 3 years after the proof of injury date or 1 year after the claimant discovers the injury, whichever comes first. Allows for the full recovery of economic damages. However, the bill places limits on the recovery amount of non-economic damages to $250,000, regardless of the number of defendants or the number of separate claims or actions brought with respect to the alleged injury. Authorizes the award of punitive damages only when: It is proven by clear and convincing evidence that a person acted with malicious intent to injure the claimant or deliberately failed to avoid unnecessary injury the claimant was substantially certain to suffer. Compensatory damages are awarded. Limits punitive damages to the greater of two times the amount of economic damages or $250,000. Prohibits punitive damages and/or the naming of a health care provider who prescribes or dispenses pursuant to a prescription an FDA-approved medical product as a party in a product liability suit or as part of a class action lawsuit against the manufacturer, distributor, or seller of an FDA-approved medical product. Allows for the periodic payment of damages, at the request of any party, in accordance with the Uniform Periodic Payment of Judgments Act. Protects effective state laws Protects any state laws not covered by the Act (e.g., state standards for negligence). Protects substantive and procedural federal and state laws that provide greater protection for health care providers and organizations. Protects existing and future state laws that specify a specific amount of compensatory damages or punitive damages or the total amount of damages that may be awarded in a health care lawsuit regardless of whether the amount is greater or lesser than $250,000.

8 Issue Brief: The Healthcare Truth and Transparency Act of 2011 (H.R. 451) Reps. John Sullivan (R-OK) and David Scott (D-GA) The American Osteopathic Association (AOA) requests your support for the Healthcare Truth and Transparency Act of 2011 (H.R. 451). This legislation would empower consumers by ensuring that they have access to information on the education and training of those individuals providing their care, thereby aiding all Americans in becoming better consumers of health care. Makes it unlawful for any person to: Make any deceptive or misleading statement, or engage in any deceptive or misleading act that misrepresents whether such a person holds a State health care license Misrepresent such person s education, training, degree, license, or clinical expertise. Requires any person who is advertising health care services provided by such person to disclose the applicable license under which such person is authorized to provide those services Such misrepresentation is a violation of the Federal Trade Commission (FTC) Act and subject to FTC enforcement in the same manner as all other unfair or deceptive acts handled by the FTC. Directs the FTC to report to Congress on health care misrepresentation under this Act one year after enactment. Background Recent studies confirm increasing patient confusion regarding the many types of health care providers - including physicians, technicians, nurses, physician assistants and other allied providers - engaged in providing services in health care settings. Consumers are often unaware of the differences in, and seek more information about, the qualifications, training, and education of their health care professionals. Ambiguous provider nomenclature and related advertisements and marketing are exacerbating patient uncertainty. Evidence exists of patient confusion resulting from ambiguous health care nomenclature and related advertisements and marketing products. Nationwide surveys conducted in 2008 and 2010 revealed the depth of confusion regarding the education, skills, and training of health care professionals and indicated strong support for regulating the advertising and marketing claims of health care professionals.