21st Century Medicare
Physician Payment Reform
Stephen Zuckerman
The Urban Institute
2009 AcademyHealth ARM
Chicago, IL
June 28, 2009
Background
• Fee-for-service payment
• RBRVS Fee Schedule in 1992
– Volume performance standards
• Resource-based practice expense
payments started in 1998
• Sustainable growth rate replaced VPS in
1998
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Growth in Physician Volume per
Beneficiary, 2002-2007
Source: MedPAC Report to the Congress, March 2009
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Shifts in RVU Volume distribution
by BETOS
Source: Maxwell, et al. NEJM, May 3, 2007; MedPAC RTC, March 2009
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Medicare Policy Perspective
• FFS creates the volume problem
• Spending can only be controlled by
reducing fees and physician don’t like that
– Potential access problems for beneficiaries
• SGR cut allowed to go into effect in 2002,
but has been avoided since then
– Still looking for $300 to 600 Bil to fix SGR
• “I can't think about that right now … I'll
think about that tomorrow” – S. O’hara
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Getting Away from simple FFS
• Episode-based payments
– Physician resource use measurement and feedback
forms may be the first step
• Accountable Care Organizations
– Shared savings if physicians and hospitals join
together to take responsibility for quality and costs;
Physician Group Practice Demo
• Other Demos – care coordination, disease
management, medical homes, health care
quality
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Recognize the Reality of FFS
• New House draft bill a good place to start
– Misvalued codes (e.g., high growth services,
codes performed together, PE RVU changes,
new technologies); reform SGR (E&M, other)
• Obama budget recognizes that SGR cuts
are routinely side-stepped by Congress
• Savings require that not everything be
budget neutral – CBO scoring
• Primary care fees may need to go up
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High-Growth Services
• 2008 Rand/Urban study funded by ASPE
– http://aspe.hhs.gov/health/reports/08/medicarevolume/index.shtml
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10 high-cost, high growth services
What drives the growth?
Clinical factors (Implantable defibrillators)
Diffusion - patient and provider (Less-invasive
prostate procedures, back injections)
• Coverage (ICDs and Polysomnography)
• Prices (Prostate and Electrodiagnostic nerve
tests)
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2007 Limits on Imaging Fees
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Fees (with TC) limited to Hospital OPPS
GAO studied the effects of this policy
Almost all MRIs and CTs affected
3 most common MRIs cut 21 to 40 percent
– 2000-2006 => spending grew 11.4% annly.
– 2006-2007 => spending fell by 12.7%
• Volume growth fell (5.9 to 3.2), but was 4
times greater for OPPS services (7.4 vs 2)
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Getting Medicare Prices Right
• Problems finding a new physician (2008)
– Primary care => 28 percent
– Specialist => 11 percent
– Follow MedPAC and increase primary care fees
• Beyond OPPS limits, correct utilization
assumptions in fee schedule
• RUC/CPT physician times estimates seem to be
overstated (2006 RTI studies)
– Consider interaction with new practice expense data
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Mixed evidence on Volume Offset
• Standard actuarial and CBO assumption is
for a 30 percent offset (aggregate data)
– This varies by specialty, but not officially
• New evidence based on individual
services suggests a conventional supply
response (Hadley, Reschovsky, Corey and
Zuckerman)
• GAO imaging study shows an offset, but
still suggests savings
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A Sensible Path Ahead
• Recognize that new approaches will take
time to develop and implement
– ACOs, episode payment, medical homes, etc.
• Getting the Medicare prices right is
important under FFS and for use as
building blocks
• ACOs need a better specialty balance to
attract physicians
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