Congressional Leaders Eye Pay Fix in 2006, Despite Looming Difficulties

WASHINGTON — A permanent fix to the Medicare physician fee schedule “will be a difficult bill to pass through Congress,” Mark Hayes, a majority spokesman for the Senate Finance Committee, said at a conference sponsored by AcademyHealth.

“It's an expensive proposition in the current budget climate we're in,” Mr. Hayes said, voicing the concerns of other Republican staff members who participated in a discussion on the 2006 health care agenda. This year's midterm congressional election also will play a role in shaping progress on this issue, he said.

Driving the cuts in pay is the sustainable growth rate (SGR), a component of the Medicare payment formula that ties medical spending to the ups and downs of the national economy and determines the conversion factor update each year. Errors made to the formula in 1998 and 1999 led to a 5.4% decrease in physician payments in 2002 and will continue to cause decreases until the process is changed.

In recent years, Congress has staved off additional reductions by providing small increases in pay. This year's Deficit Reduction Act provided another 1-year fix to the physician payment issue, a “0%” update, instead of a fee increase.

“Unfortunately, under the existing formula, physicians are expected to take another 4.4% reduction in 2007,” said Chuck Clapton, chief counsel for the House Energy and Commerce Committee's subcommittee on health.

“We have to make sure that beneficiaries continue to get access to physician services,” Mr. Clapton said. At some point, this will require yet another short-term fix for 2007, but for the long term, “it's my chairman's [Rep. Joe Barton (R-Tex.)] vote that we take more [systematic] steps to address some of the underlying problems that led to these recurring issues.”

Pay for performance should factor into this reform, Mr. Clapton said. “We should eventually move toward systems built on rewarding for high-quality services.”

Sen. Max Baucus (D-Mont.), ranking member of the Senate Finance Committee, agreed that the issue was complex and expensive. “We anticipate action on the issue this year,” said Carol Guthrie, an aide to the senator, in an interview. “Sen. Baucus feels that it's vital, given our country's limited pool of health care dollars, to recognize and encourage excellent provider care with pay-for-performance measures.”

Sen. Baucus will continue to work with Sen. Chuck Grassley (R-Iowa), chair of the Finance Committee, to approve the pay-for-performance legislation they wrote together, Ms. Guthrie said. “Sen. Baucus was very disappointed to see that most pay-for-performance provisions were stripped from the [Deficit Reduction Act].”

The panel also touched upon health savings accounts, with the Republican staffers supporting the approach as an affordable health care option that's already shown signs of success.

Congressional Democrats have historically criticized these plans for attracting only the young, healthy, and wealthy. This is what health care analysts call “adverse selection,” Sen. Baucus said in a recent statement. “Encouraging healthier Americans to choose these accounts and high-deductible plans will make health care more expensive for those who stay behind in traditional coverage,” he said. “These accounts will lead to a weaker health care system, not a stronger one.”

Other issues on the congressional health care agenda in 2006 include:

▸ Medicaid's waiver process. With the flexibility that the Deficit Reduction Act provided to the states, “we believe we will have a fresh look at [Medicaid's] 1115 waiver process,” Mr. Hayes said. The waivers give states the authority to make broad changes in eligibility, benefits, or cost-sharing in Medicaid, providing additional elbow room to test innovative coverage options.

Although it's been a necessary element for states to manage their Medicaid programs, it's still largely operating the way it did in 1965, he said. “We're looking for more transparency, more accountability between the states and the budget neutrality requirements, and also more examination about the lessons learned about those demonstrations, to really turn that program into the demonstration program it was intended to be.”

▸ State Children's Health Insurance Program. SCHIP is back on agenda this year, because a number of states are facing shortfalls in 2007 for the program, Mr. Hayes said. “We want to make sure that health coverage for children is protected.”

▸ Health information technology networks. The health care industry appears to be moving toward paperless systems, so it would be beneficial to come to some agreement on standards for an interoperable system, said Stephen J. Northrup, health policy staff director for the Senate Health, Education, Labor, and Pensions Committee.

▸ Affordable coverage for small businesses. The Senate Health, Education, Labor, and Pensions Committee is working on legislation to give small businesses newer and more affordable options to pool their resources, offering them more market value and relief from mandates, Mr. Northrup said.

WASHINGTON — A permanent fix to the Medicare physician fee schedule “will be a difficult bill to pass through Congress,” Mark Hayes, a majority spokesman for the Senate Finance Committee, said at a conference sponsored by AcademyHealth.

“It's an expensive proposition in the current budget climate we're in,” Mr. Hayes said, voicing the concerns of other Republican staff members who participated in a discussion on the 2006 health care agenda. This year's midterm congressional election also will play a role in shaping progress on this issue, he said.

Driving the cuts in pay is the sustainable growth rate (SGR), a component of the Medicare payment formula that ties medical spending to the ups and downs of the national economy and determines the conversion factor update each year. Errors made to the formula in 1998 and 1999 led to a 5.4% decrease in physician payments in 2002 and will continue to cause decreases until the process is changed.

In recent years, Congress has staved off additional reductions by providing small increases in pay. This year's Deficit Reduction Act provided another 1-year fix to the physician payment issue, a “0%” update, instead of a fee increase.

“Unfortunately, under the existing formula, physicians are expected to take another 4.4% reduction in 2007,” said Chuck Clapton, chief counsel for the House Energy and Commerce Committee's subcommittee on health.

“We have to make sure that beneficiaries continue to get access to physician services,” Mr. Clapton said. At some point, this will require yet another short-term fix for 2007, but for the long term, “it's my chairman's [Rep. Joe Barton (R-Tex.)] vote that we take more [systematic] steps to address some of the underlying problems that led to these recurring issues.”

Pay for performance should factor into this reform, Mr. Clapton said. “We should eventually move toward systems built on rewarding for high-quality services.”

Sen. Max Baucus (D-Mont.), ranking member of the Senate Finance Committee, agreed that the issue was complex and expensive. “We anticipate action on the issue this year,” said Carol Guthrie, an aide to the senator, in an interview. “Sen. Baucus feels that it's vital, given our country's limited pool of health care dollars, to recognize and encourage excellent provider care with pay-for-performance measures.”

Sen. Baucus will continue to work with Sen. Chuck Grassley (R-Iowa), chair of the Finance Committee, to approve the pay-for-performance legislation they wrote together, Ms. Guthrie said. “Sen. Baucus was very disappointed to see that most pay-for-performance provisions were stripped from the [Deficit Reduction Act].”

The panel also touched upon health savings accounts, with the Republican staffers supporting the approach as an affordable health care option that's already shown signs of success.

Congressional Democrats have historically criticized these plans for attracting only the young, healthy, and wealthy. This is what health care analysts call “adverse selection,” Sen. Baucus said in a recent statement. “Encouraging healthier Americans to choose these accounts and high-deductible plans will make health care more expensive for those who stay behind in traditional coverage,” he said. “These accounts will lead to a weaker health care system, not a stronger one.”

Other issues on the congressional health care agenda in 2006 include:

▸ Medicaid's waiver process. With the flexibility that the Deficit Reduction Act provided to the states, “we believe we will have a fresh look at [Medicaid's] 1115 waiver process,” Mr. Hayes said. The waivers give states the authority to make broad changes in eligibility, benefits, or cost-sharing in Medicaid, providing additional elbow room to test innovative coverage options.

Although it's been a necessary element for states to manage their Medicaid programs, it's still largely operating the way it did in 1965, he said. “We're looking for more transparency, more accountability between the states and the budget neutrality requirements, and also more examination about the lessons learned about those demonstrations, to really turn that program into the demonstration program it was intended to be.”

▸ State Children's Health Insurance Program. SCHIP is back on agenda this year, because a number of states are facing shortfalls in 2007 for the program, Mr. Hayes said. “We want to make sure that health coverage for children is protected.”

▸ Health information technology networks. The health care industry appears to be moving toward paperless systems, so it would be beneficial to come to some agreement on standards for an interoperable system, said Stephen J. Northrup, health policy staff director for the Senate Health, Education, Labor, and Pensions Committee.

▸ Affordable coverage for small businesses. The Senate Health, Education, Labor, and Pensions Committee is working on legislation to give small businesses newer and more affordable options to pool their resources, offering them more market value and relief from mandates, Mr. Northrup said.

WASHINGTON — A permanent fix to the Medicare physician fee schedule “will be a difficult bill to pass through Congress,” Mark Hayes, a majority spokesman for the Senate Finance Committee, said at a conference sponsored by AcademyHealth.

“It's an expensive proposition in the current budget climate we're in,” Mr. Hayes said, voicing the concerns of other Republican staff members who participated in a discussion on the 2006 health care agenda. This year's midterm congressional election also will play a role in shaping progress on this issue, he said.

Driving the cuts in pay is the sustainable growth rate (SGR), a component of the Medicare payment formula that ties medical spending to the ups and downs of the national economy and determines the conversion factor update each year. Errors made to the formula in 1998 and 1999 led to a 5.4% decrease in physician payments in 2002 and will continue to cause decreases until the process is changed.

In recent years, Congress has staved off additional reductions by providing small increases in pay. This year's Deficit Reduction Act provided another 1-year fix to the physician payment issue, a “0%” update, instead of a fee increase.

“Unfortunately, under the existing formula, physicians are expected to take another 4.4% reduction in 2007,” said Chuck Clapton, chief counsel for the House Energy and Commerce Committee's subcommittee on health.

“We have to make sure that beneficiaries continue to get access to physician services,” Mr. Clapton said. At some point, this will require yet another short-term fix for 2007, but for the long term, “it's my chairman's [Rep. Joe Barton (R-Tex.)] vote that we take more [systematic] steps to address some of the underlying problems that led to these recurring issues.”

Pay for performance should factor into this reform, Mr. Clapton said. “We should eventually move toward systems built on rewarding for high-quality services.”

Sen. Max Baucus (D-Mont.), ranking member of the Senate Finance Committee, agreed that the issue was complex and expensive. “We anticipate action on the issue this year,” said Carol Guthrie, an aide to the senator, in an interview. “Sen. Baucus feels that it's vital, given our country's limited pool of health care dollars, to recognize and encourage excellent provider care with pay-for-performance measures.”

Sen. Baucus will continue to work with Sen. Chuck Grassley (R-Iowa), chair of the Finance Committee, to approve the pay-for-performance legislation they wrote together, Ms. Guthrie said. “Sen. Baucus was very disappointed to see that most pay-for-performance provisions were stripped from the [Deficit Reduction Act].”

The panel also touched upon health savings accounts, with the Republican staffers supporting the approach as an affordable health care option that's already shown signs of success.

Congressional Democrats have historically criticized these plans for attracting only the young, healthy, and wealthy. This is what health care analysts call “adverse selection,” Sen. Baucus said in a recent statement. “Encouraging healthier Americans to choose these accounts and high-deductible plans will make health care more expensive for those who stay behind in traditional coverage,” he said. “These accounts will lead to a weaker health care system, not a stronger one.”

Other issues on the congressional health care agenda in 2006 include:

▸ Medicaid's waiver process. With the flexibility that the Deficit Reduction Act provided to the states, “we believe we will have a fresh look at [Medicaid's] 1115 waiver process,” Mr. Hayes said. The waivers give states the authority to make broad changes in eligibility, benefits, or cost-sharing in Medicaid, providing additional elbow room to test innovative coverage options.

Although it's been a necessary element for states to manage their Medicaid programs, it's still largely operating the way it did in 1965, he said. “We're looking for more transparency, more accountability between the states and the budget neutrality requirements, and also more examination about the lessons learned about those demonstrations, to really turn that program into the demonstration program it was intended to be.”

▸ State Children's Health Insurance Program. SCHIP is back on agenda this year, because a number of states are facing shortfalls in 2007 for the program, Mr. Hayes said. “We want to make sure that health coverage for children is protected.”

▸ Health information technology networks. The health care industry appears to be moving toward paperless systems, so it would be beneficial to come to some agreement on standards for an interoperable system, said Stephen J. Northrup, health policy staff director for the Senate Health, Education, Labor, and Pensions Committee.

▸ Affordable coverage for small businesses. The Senate Health, Education, Labor, and Pensions Committee is working on legislation to give small businesses newer and more affordable options to pool their resources, offering them more market value and relief from mandates, Mr. Northrup said.