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MedPAC annual report calls for 1 percent pay increase for physicians

The Medicare Payment Advisory Commission released its annual recommendations to Congress on Tuesday, calling for a 1 percent pay increase for physicians.

The report comes as Medicare physicians face a 25 percent pay cut on Jan. 1, 2012.

[See related story: Congress approves temporary Medicare pay cut reprieve.]

MedPAC Chairman Glenn Hackbarth said the recommendations take into account payment adequacy for physicians, along with beneficiaries' access to care, the quality of the care they receive, supply of providers, providers' costs and Medicare's payments. The report also reviews the Medicare Advantage and prescription drug programs.

"The commission's goal is to achieve a Medicare program that assures beneficiary access to high-quality care, pays healthcare providers and health plans fairly, and spends tax dollars responsibly," Hackbarth said.

The commission also recommended no Medicare payment updates for home healthcare services because the number of home health agencies has increased to "an all-time high" and Medicare's payments have exceeded their costs by nearly 18 percent. This is the 10th consecutive year they have been in this range, Hackbarth said.

MedPAC found that Medicare's current payment system for skilled nursing facilities appears to pay providers more for patients who need therapy services than for patients with complex care needs. MedPAC recommended that Congress modify SNF payments to ensure that Medicare pays providers appropriately for all types of SNF-eligible patients. MedPAC also recommended – as it has in the past – that Congress create a quality incentive program for SNFs.

"These changes in the payment system would make payment more equitable among providers, and improve  beneficiary access and quality of care," Hackbarth said.

The commission also recommended that the Health and Human Services Secretary review counties with aberrant home health use and suspend provider enrollment and payment in counties with widespread fraud.

Hackbarth said the commission recognizes that managing updates and relative payment rates will not solve the fundamental problem with current Medicare FFS payment systems.

"Providers are paid more when they deliver more services without regard to the quality or value of those additional services," he said. "Therefore, these update recommendations should be considered in the context of the commission's many prior recommendations to move beyond FFS to more comprehensive payment systems that would cross sectors and pay for higher quality."

MedPAC supports the use of medical homes, readmissions penalties and pilot testing of bundled payments, he said.

The commission also reviews the status of the Medicare Advantage program each year. In 2010, MA enrollment increased to 11.4 million beneficiaries (24 percent of all Medicare beneficiaries). Enrollment in HMOs, the dominant form of MA plan, grew by 7 percent. According to MedPAC, virtually all Medicare beneficiaries now have access to an MA plan and 99 percent have access to a network-based coordinated care plan. Ninety percent of beneficiaries have access to an MA plan that includes Part D drug coverage and has no premium (beyond the Medicare Part B premium).

Beneficiaries can choose from an average of 12 plans, including eight coordinated care plans. The commission supports private plans in the Medicare program because they allow beneficiaries the option to choose between the traditional FFS Medicare program and the alternative delivery systems that private plans can provide.

"Private plans have greater potential to innovate and to use care management techniques and, if paid appropriately, would have more incentive to do so," the MedPAC report said.

The commission's report also found that most Medicare beneficiaries continue to participate in Part D and, on average, beneficiaries have more than 30 stand-alone drug plans to choose from, in addition to many MA plans that have drug benefits. The Centers for Medicare and Medicaid Services estimates the average monthly premium in 2011 will be $30, a $1 increase over the 2010 average.

The American Medical Association and 130 other medical organizations have expressed their frustration with the Medicare payment system. "Last year, Congress was required to act five times to pass short-term measures to stop Medicare physician payment cuts scheduled for 2010," the groups said in a March 10 letter. "On three occasions, Congress failed to act before cuts were implemented, causing disruptions in processing Medicare payments. These payment uncertainties and delays created serious problems for many physician practices and jeopardized seniors' access to care."

[See also: Obama's FY12 budget includes money for Medicare doctor payments.]

The full MedPAC report is available online here.

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