MedPAC calls for changes to physician payment incentives

Medicare must change the way it pays its healthcare providers in order to achieve better care coordination and efficiency, the Medicare Payment Advisory Commission stated in its annual report to Congress.

"Current incentives reward volume instead of value and costly care instead of efficient, effective care," said Glenn Hackbarth, MedPAC chairman. "When providers don't work together, quality suffers and costs increase - which benefits neither the patient nor the Medicare program."

The Obama administration has also been pushing for an overhaul to the way physicians are paid under Medicare, with some sort of measures likely to appear in the comprehensive healthcare reform package expected to pass by Oct. 1, 2009. At a Monday speech before the American Medical Association's annual conference in Chicago, Obama assured doctors he would work with them on health reform.

In this year's annual June report, MedPAC urges more focus on graduate medical education as a way to support and promote new incentive programs for Medicare payment.

The report also explores how accountable care organizations could promote care coordination and potentially increase quality and lower cost growth.

In 2005, MedPAC recommended that that Medicare share information with physicians about the resources they use to provide patient care. Congress passed legislation directing CMS to begin measuring and reporting physician resource use in 2008. This new MedPAC report describes principles that should guide CMS as it implements this legislation.

The report also presented some new findings, including some on self-referral in imaging, follow-on biologics and on supplemental coverage.

On self-referring imaging, MedPAC found when physicians have a financial interest in imaging equipment, they are more likely to order imaging tests and incur higher overall spending on their patients' care.

MedPAC also said Medicare needs to issue regulations for follow-on biologics to create price competition among biologic products.  

In addition, MedPAC found that Medicare's significant cost-sharing requirements and its lack of catastrophic protection have spurred widespread use of supplemental coverage. Medicare's cost sharing can lead to higher use of services and Medicare spending, frequently without corresponding gains in quality of care, the Commission said. It recommended that Congress consider redesigning traditional Medicare benefit design.

As mandated by Congress, MedPAC also addressed in this report how to improve the Medicare Advantage program, which has come under fire recently from Democrats as a funding hog. Under the current system, in 2009 Medicare is paying about $12 billion more for the beneficiaries enrolled in MA plans than it would have spent if they were in traditional Medicare.

MedPAC offers several recommendations to level the difference between the two programs, including better chronic care management in the MA programs.

MedPAC is an independent Congressional advisory body of healthcare providers; payers; beneficiary representatives; employers; and individuals with expertise in biomedical, health services, and health economics research. In May, Sen. Jay Rockefeller (D-W.Va.) introduced legislation that would make MedPAC an independent executive branch agency.