New York Times Editorial: The Doctor Payment Follies

New York Times Editorial: The Doctor Payment Follies
Copyright by The New York Times
Published: June 4, 2010
http://www.nytimes.com/2010/06/06/opinion/06sun1.html?th&emc=th


The formula that is used to pay doctors who treat Medicare patients is producing increasingly absurd results. If it were to be followed this year, doctors would face a 21 percent cut in payments for the tests, procedures, office visits and other services they provide to elderly Americans.

That would be a disaster, driving many doctors to stop accepting Medicare patients. Luckily, nobody is seriously contemplating that. As it has done repeatedly in recent years, Congress is readying a short-term fix that would provide a modest increase in physician fees for the next 19 months.

There will likely be no real solution until the American health care system moves away from unfettered fee-for-service payments that encourage doctors to perform unnecessary and costly tests and procedures and pays them instead for better management of a patient’s care over time.

The flawed reimbursement formula predates the new health care reform law by more than a decade. But its problems are a reminder that even with reform there is a lot of work ahead to rein in the cost of health care.

When first enacted in 1997, the “sustainable growth rate” formula looked liked a reasonable way to restrain Medicare spending. It set annual limits for the total amount of money to be paid to doctors in the traditional Medicare program. It also included allowances for inflation in the cost of operating a medical practice, for growth in the elderly population, and even a little extra money to pay for increases in the volume and complexity of services performed.

It worked well for the first five years. Starting in 2002 it began to hit a variety of problems. The fatal flaw in the formula was that it had no way to limit the array of services doctors provided or distinguish between valuable and needless treatments.

If doctors in the aggregate drove expenditures above the limit, the formula called for fees in the following year to grow more slowly than medical inflation or be reduced. That aggregate punishment was not enough to persuade individual doctors to change behavior.

When Medicare doctors were faced with the prospect of actual rate cuts, they screamed for help. Congress provided repeated relief. Each time it postponed a scheduled cut, the meter kept ticking and the required cuts accumulated. That is why the system was due to cut doctors’ reimbursement by 21 percent on June 1.

The Obama administration is holding off, the House has approved a 19-month fix, and the Senate is expected to concur this week. The bill would raise doctors’ payments, in the aggregate, by about $1 billion over current rates — and $23 billion over what they would get if the required cuts were imposed. That is probably the best that can be done for now.

Meanwhile, the experience suggests that there could be problems with at least one key element of the new health care reform law. To hold down the cost of Medicare, it sets target levels for per capita Medicare spending beginning in 2015.

Once again the formula sets targets that may be hard to reach — and will require Medicare to find savings in the following year if they are not. The encouraging news is that a new independent board will have the power to recommend a much broader range of potential savings, not just cuts in doctor payments, to make up the difference. Congress will have the final say.

The reform law also tries to cut costs by emphasizing primary care and setting up pilot programs to find better ways to organize and deliver high-quality care at lower cost and move the system away from fee-for-service payments. If these work well, they could finally put a real brake on Medicare spending.