Legislation in House and Senate Links Physician Payment to Quality

New legislative proposals are being discussed in both the House of Representatives and Senate to fix the sustainable growth rate (SGR) formula and add link higher physician payments to improvements in health care quality.

Senate Finance Committee Chairman Charles E. Grassley (R-IA) and committee ranking minority member Max Baucus (D-MT) have introduced legislation, the “Medicare Value Purchasing Act of 2005” (S. 1356) that would establish a two-phase implementation of paying providers bonuses for delivering high quality care to patients. In the first phase, providers’ reimbursement would be tied to reporting quality data in much the same way hospitals were required to do under the MMA. In the second phase, Medicare providers would voluntarily participate in “value-based purchasing,” under which a portion of their payments would be set aside to create a quality pool. These funds would be given to providers meeting quality standards or those making progress toward meeting them. This phase would begin in 2008 for physicians.

Pay-for-performance (P4P) payments would begin at 1 percent of Medicare payments for each provider group, rising to 2 percent within five years. The P4P fund would be valued at about $2.5 billion initially, increasing to $7.5 billion annually by 2013. CMS would be charged with developing the quality measures, working with a new quality organization established under the bill, health care providers, and other organizations. The bill also includes a “sense of the Senate” resolution that changes need to be made to the Medicare physician payment system to prevent future reimbursement cuts, including the 4.3% reduction scheduled for next year.

In the House of Representatives, Representative Nancy Johnson (R-Conn) who chairs the Health Subcommittee of the Ways and Means Committee is planning to introduce legislation that would make significant changes to the way doctors are paid by Medicare, but also link higher payments to improvements in health care quality. Her bill could be introduced before Congress leaves for its August recess.

Earlier this spring, Senators John Kyl (R-AZ) and Debbie Stabenow (D-MI) introduced legislation in the Senate (S. 1081) and Representatives Clay Shaw (R-FL) and Ben Cardin (D-MD) introduced legislation (H.R. 2356) aimed at fixing the Sustainable Growth Rate (SGR). 

The increased attention to P4P legislation comes at a time when physician concerns about the scheduled pay cut in 2006 are mounting. Advocates for P4P argue that better quality will mean lower costs, which has appealed to the Congress’s interest in controlling Medicare expenditures. Although many medical societies generally support P4P, they have serious reservations about the impact P4P could have on physicians’ income. Linking P4P to reforms of the payment system could be a way for Congress to pressure physicians to support legislation despite the concerns they have expressed.

ASH has joined other medical societies in lobbying both William H. Frist, Majority Leader in the Senate, and J. Dennis Hastert, Speaker of House of Representatives, to avert the scheduled physician fee cuts. The Society also is very interested in developing appropriate quality measures for hematology and its Pay-for-Performance Task Force is working on developing viable performance measures to be used by CMS for practicing hematologists. 

For more information, please contact ASH Director of Government Relations & Practice Mila Becker at 202-776-0544.