Medicare Debates Fairness of Pay For Primary Care and Specialists

A growing controversy in MedPAC and in physician organizations could spill over into how all health plans compensate doctors

Few topics roil doctors more than the pay, and arguments over Medicare rates are always among the most heated. To ward off scheduled cuts in federal rates, physicians each year mount an emotional coast-to-coast political blitzkrieg demanding congressional relief while raising the prospect that disenchanted physicians will turn away new Medicare patients.

This year the influential Medicare Payment Advisory Committee has opened a new front in conflict. MedPAC Chairman Glenn Hackbarth told Congress that the entire payment system has tilted so far in favor of specialists that the work of primary care doctors has begun to look financially unappealing, potentially upsetting the nation’s balance of primary care physicians and specialists while encouraging use of overpriced services. Hackbarth, along with some influential physicians in the primary care corner, wants to revamp the way payments are calculated in order to correct the imbalance.

Who’s overpaid?

“There has been a decline in the number of people entering primary care recently,” Hackbarth tells Managed Care. He’s careful to note that there’s no hard evidence to make a foolproof case that the payment system is responsible.

Nevertheless, MedPAC is calling for the creation of an expert panel to identify overvalued services and report to CMS, backing up its work with surveys of providers to better interpret the real value of what’s being done. This panel would be made up of economists and others who could be independent.

If MedPAC is successful, any resulting changes could swiftly ripple through the entire health system. Medicare’s payment rates are monitored carefully by private health plans, and often directly imitated. Any change in Medicare pay scales could quickly boost or depress pay from a host of payers, as MedPAC is well aware.

“Some private payers elect to use Medicare’s relative values, and to the extent they do [any changes] could affect more than Medicare,” Hackbarth acknowledges.

A number of primary care physicians are enthusiastically hoping it will. Leaders of the American College of Physicians (ACP) have had no reluctance blaming the payment system for the thinning supply of primary care doctors. The internists don’t just want to take money away from subspecialists and whoever else might be found to be overpaid. If anyone’s rates are reduced, the ACP says, the money should be reallocated to primary care.

Underpinning the entire system of Medicare payments lies an advisory group at the American Medical Association that has a direct hand in suggesting to Medicare exactly how much the agency should pay for about 8,000 carefully defined CPT codes.

Relative values

Payments are calculated according to the complex reckoning that goes into the resource-based relative value scale (RVS), which considers effort, skill, and time, and is measured in relative value units (RVUs). The higher the RVU, the higher the payment. Fifteen years ago, the AMA set up the AMA/Specialty RVS Update Committee (RUC), drawing on its own members and the members of specialist societies to advise Medicare on how payments should be updated.

“We think the existing process does a pretty good job of identifying codes that could be undervalued, but may not do a good job in identifying overvalued codes,” says Hackbarth. And that’s where the new, independent panel would step in. The MedPAC chief stresses that the new committee isn’t intended to replace the work of the RUC, but rather to supplement it with a fresh outlook.

No big surprise

Because the AMA committee draws directly from specialty societies for advice on the values assigned, says the ACP, it’s no big surprise that the system hasn’t been very good at recognizing overvalued services. The ACP adds that the RUC should be re-evaluated to make it more objective. ACP says the AMA should add primary care doctors to the committee. Rather than have the new panel imposed by MedPAC or Congress, says the primary care group, the RUC should act first.

“Primary care, the backbone of the nation’s health care system is at grave risk of collapse due to a dysfunctional financing and delivery system,” C. Anderson Hedberg, MD, immediate past president of the ACP, recently testified before Congress. “Unless the situation is corrected soon,” he added, “there will not be enough primary care physicians to take care of an aging population with increasing incidences of chronic diseases.” The result: Higher costs, lower quality and increasingly dissatisfied patients.

Meanwhile, studies show growing shortfalls in the number of physicians entering internal medicine and family practice. Last year, only 1 in 5 third-year internal medicine residents planned a career in general internal medicine, compared to 54 percent in 1998.

Debt may play a role. As more medical students shoulder larger debt loads, it is affecting their choice of practice. The higher the debt, says Hedberg, the more likely they are to choose high-paying specialties and less likely to choose primary care.

That overall imbalance in primary care has affected the entire health system. Primary care doctors play a leading role in reducing the cost of health care, he says, detecting ailments earlier and coordinating care more efficiently. Under the sustainable growth rate (SGR) formula used to calculate the amount that physicians should be paid by Medicare, some practitioners are offsetting scheduled cuts by billing higher priced services more frequently. Inflated values favor specialists unfairly while eroding primary care income and reducing any financial incentive there might be to becoming a primary care doctor.

Hedberg emphasized that any reductions in the overvalued RVS should be allocated to cover undervalued services, not maintained as a savings. The panel should include private payers, economists, and technology experts. Physicians on the panel should include people employed by private health plans and not paid directly by Medicare, he adds.

ACP also has little doubt that once the new committee gets to work, private payers will quickly adopt any changes in pay rates. “The belief is that they’re pretty diligent about maintaining that schedule, giving it a lot of thought and deliberation,” says Brett Baker, director of regulatory and insurers affairs at the ACP. “The private payers feel comfortable using that as well.”

More money, please

To cap it off, ACP wants the SGR done away with, and projected cuts in payment replaced with increases in pay. That would find widespread support among doctors angry at the annual prospect of a cut in Medicare pay. The AMA, which has been a vociferous critic of SGR, limited its response to the new panel to a prepared statement from J. Edward Hill, its president.

“The AMA and MedPAC agree,” said Hill. “Medicare reimbursements to physicians must reflect the cost of providing care. We encourage Congress to accept MedPAC’s recommendation to update physician payments to 2.8 percent in 2007 to help preserve seniors’ access to care. The AMA is pleased that MedPAC recognized the value of the RUC, which is constantly improving on its own process. If an additional expert panel is appointed to help identify services to be reviewed by the RUC, it should represent current practicing physicians.”

Right now, says Hackbarth, the fate of the new panel is in the hands of Congress and CMS. He’s hoping to see it come to reality “as soon as possible.”

John Carroll, a freelance writer living near Austin, Texas, has been a contributing editor of Managed Care for four years.

MANAGED CARE May 2006. ©MediMedia USA

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