House ‘Tri Committee’ Health Care Bill Will Fix Doc Pay

Yesterday, the House Committees on Ways and Means, Energy and Commerce, and Education and Labor released their “Tri-Committee Health Reform Draft Proposal,” an outline of essential components for a health care reform legislation.

Like the HELP bill, the House plan establishes a “new national health Exchange” to enroll Americans in affordable coverage, gives Americans the choice to enroll in a new public health insurance options, prohibits private insurers from excluding Americans with pre-existing conditions from coverage and offers sliding scale “affordability” credits to help middle class families afford health insurance. (Jonathan Cohn and Karen Tumulty break down the details here and here.)

The measure would also “replace Medicare’s ‘sustainable growth rate’ method of paying physicians, who face a 21 percent cut in January unless Congress takes action.” Congress created the so-called Sustainable Growth Rate (SGR) formula in 1997 to check rising health care costs. It states that “the amount Medicare pays doctors for an average Medicare patient can’t grow faster than the economy as a whole.” As the WSJ Health Blog explains, “it’s fine if total payments to doctors go up because the number of Medicare beneficiaries rises. And it’s fine if the average payment per beneficiary rises along with the economy. But if growth in payments per beneficiary grows more than the economy as a whole, the SGR says you have to lower payments to doctors across the board to keep costs under control.”

Democrats are hoping to use the SGR-fix to win-over physician support for reform. As Ways and Means Committee Chairman Charles Rangel (D-NY) explained it, “If we don’t have the doctors on board, we’re in trouble…We have to address this in this bill.”

In 2002, once medical inflation outpaced economic growth, physicians experienced a cut in reimbursement rates, and Congress has patched every cut since. Most health care researchers argue that the formula is ineffective in holding down physician expenditures because it “does little to counter the inherently inflationary nature of fee-for-service payment” (which encourages physicians to prescribe more care) and treats every physician in every region exactly the same. As MedPAC points out, “it neither rewards physicians who restrain volume growth nor punishes those who prescribe unnecessary services.” Policy makers and physicians agree that the SGR must be reformed. In March 2007, MedPAC issued the following recommendations:

1. Repeal the SGR and allow Congress to develop incentives for physicians and other providers to furnish higher quality care at a lower cost.

2. Refine the physician fee-for-service payments and replace the SGR with a new system of expenditure targets.

One proposal would break out the services physicians provide into so-called buckets of care. The Secretary of Health and Human Services would then establish a target — based on projections of increased volume and population growth — for every bucket. Exceeding the target would trigger a pay cut.

It’s still unclear which fix the Tri Committee is considering, but the goal is to reform Medicare payments to doctors in such a way as to discourage doctors from over prescribing treatments and lower overall health care spending.