WASHINGTON WIRE
March 2, 2007
Issue 123
MedPAC Report Provides Options for Physician Payment Reforms
Governors, Congress Discuss SCHIP Funding
CBO Offers Congress Options for Medicare Savings
Top Story
MedPAC Report Provides Options for Physician Payment Reforms
On Thursday, the Medicare Payment Advisory Commission (MedPAC) released its highly-anticipated report on potential changes to Medicare's physician payment formula.
The current Sustainable Growth Rate (SGR) formula attempts to control Medicare spending by tying physician payments to "expenditure targets" and comparing that to the volume of services provided. The SGR formula has been responsible for a number of scheduled physician payment cuts over the last several years, although Congress has repeatedly pass legislation to prevent such cuts. Without legislative action, the formula will require a 10 percent cut in physicians' Medicare payments this year, and a 40 percent decrease over the next four years.
MedPAC's recent report, required under the Deficit Reduction Act of 2005 (DRA), does not provide a specific recommendation, but rather outlines two options for Congressional consideration.
MedPAC's first option calls for the repeal of the SGR formula and recommends creating a new formula based on physicians' quality and efficiency of care.
The second option offered by MedPAC would maintain the framework of the current formula but allow for adjustments to reimbursement rates on a regional basis. Several studies have found that physicians' costs vary widely among different parts of the country.
Congressional hearings to discuss MedPAC's report were held in both the House and Senate on Thursday. Focusing on the costs of payments changes, Senate Finance Committee Chairman, Max Baucus (D-MT), pressed the Congressional Budget Office (CBO) for direction in terms of lowering the score of SGR reform proposals. Prior to the hearing, Chairman Baucus questioned whether a complete overhaul of the payment system will happen this year.
Health Care News
Governors, Congress Discuss SCHIP Funding
The urgent need for additional funding for the State Children's Health Insurance Program (SCHIP) was a central focus of the National Governors Association's (NGA's) winter meeting held this week. In a letter to legislators, the group urged Congress to make coverage of SCHIP funding shortfalls a priority and to begin working toward reauthorization of the program.
SCHIP is a joint federal-state healthcare program, currently serving 6 million children nationwide. The program is expected to be reauthorized this year.
In his fiscal year (FY) 2008 budget proposal, President Bush recommends an increase of $5 billion, or $25 billion over five years, to help fund the program. However, the Congressional Budget Office (CBO) has projected that states could experience an estimated $13.4 billion in shortfalls over the next five years with the President's proposed level of funding. Some states could see shortfalls in their SCHIP programs as soon as March 2007. At the governors' meeting, Congressman Frank Pallone (D-NJ) stated that SCHIP would need $50 billion over five years to be an effective program.
In an additional effort to control costs, the Administration has proposed scaling back enrollment for the program to include only children with families earning 200 percent of the federal poverty level. States are currently allowed significant flexibility in setting their own eligibility standards and many have expanded enrollment to include children from families earning up to 350 percent of the federal poverty level as well as some adults.
The President has not requested supplemental SCHIP spending, but according to Congressman Pallone, Congress will likely attach funds for SCHIP to a supplemental spending bill for the wars in Iraq and Afghanistan. Congressman Pallone also stated at the NGA meeting that the President's proposal to scale back SCHIP enrollment is "dead on arrival."
Representatives Rahm Emanuel (D-IL) and Jim Ramstad (R-MN) are working toward introduction of the "Health Kids Act of 2007" which would reauthorize SCHIP and provide $60 billion in funding over five years. The bill would also include a tax credit to help families purchase health insurance coverage for their children. Funding for the program would be offset by closing the gap on the capital gains tax, according to the bill's sponsors.
CBO Offers Congress Options for Medicare Savings
In its "Budget Options" document released last week, the Congressional Budget Office (CBO) offers the House and Senate Budget Committees various options for potential Medicare savings.
The CBO estimates that $64.8 billion could be saved between 2008 to 2012 by equalizing payments for managed care plans and fee-for-service providers. Other cost-saving options include reducing Medicare payments for "indirect" medical education costs, saving $21.6 billion over five years; lowering the payment increase for hospitals' inpatient care, saving $17.8 billion over five years; and increasing the portion of Part B benefits paid by beneficiaries, saving $42.2 billion over five years.
With Congress operating under a pay-go budget rule, requiring all new mandatory spending to be offset, many of the savings offered by the CBO could become attractive for funding legislative priorities such as reauthorization of SCHIP and changes to the Medicare physician payment formula.
Upcoming Events
Hearings Conditions at Walter Reed Army Medical Center
Tuesday, March 6, 2007
Senate Armed Services Committee
9:30 a.m., 106 Dirksen
Child Nutrition in Schools
Senate Agriculture, Nutrition and Forestry Committee
9:30 a.m., 216 Hart
Fiscal 2008 Budget
House Budget Committee
10 a.m., 210 Cannon
Fiscal 2008 Appropriations: HHS, Education and Related Agencies
House Appropriations - Subcommittee on Labor, Health and Human Services, Education, and Related Agencies
10 a.m., 2359 Rayburn
Formula for Adjustment of Medicare Reimbursement Rates
House Ways and Means - Subcommittee on Health
2 p.m., 1100 Longworth
Wednesday, March 7, 2007
Policy Implications of Pharmaceutical Importation
Senate Commerce, Science and Transportation - Subcommittee on Interstate Commerce, Trade, and Tourism
9:30 a.m., 253 Russell
Thursday, March 8, 2007
Indian Health Care
Senate Indian Affairs Committee
9:30 a.m., 485 Russell
Biotech Drugs
Senate Health, Education, Labor and Pensions Committee
10 a.m., 430 Dirksen
Medicare Program Integrity
House Ways and Means - Subcommittee on Health
Subcommittee Joint Hearing
10 a.m., 1100 Longworth
For More Information
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