Rapidly Evolving Physician-Payment Policy

Physician payment reform holds the potential to improve quality of care while controlling costs.

Since 2002, the rates that physicians are reimbursed for Medicare-provided services have largely stayed the same or increased only slightly with Congress regularly blocking rate cuts specified by the sustainable growth rate (SGR) formula. For example, a 23 percent cut scheduled for December 1, 2010 was deferred a month. While Congress does not want large rate cuts to go into effect, it also does not want to be responsible for the huge increases in spending that would result from terminating the SGR. Medicare physician payment rates are closely followed since private insurers and state Medicaid programs often incorporate similar changes.

The recently passed health care reform act contains several provider-payment reforms, seeking to broaden the unit of payment beyond fee-for-service and incorporate quality into the payment system. With $10 billion in funding over 10 years, the act established the Center for Medicare and Medicaid Innovation to test delivery models that reduce costs while preserving or enhancing quality of care.

Permanent solutions need to be crafted to address rising costs. Paul Ginsburg of the Washington-based Center for Studying Health System Change is less than optimistic that will happen soon. “Congress probably will continue to enact short-term fixes until it addresses the long-run budget situation comprehensively, perhaps not until 2013, after the next presidential election,” he writes.