House Democrats Introduce Legislation That Would Eliminate Scheduled Physician Payment Cuts, Provide Two Years of Positive Physician Payment Updates, and Repeal PQRI

July 24, 2007 - House Democrats introduced legislation that would eliminate the scheduled 10 percent cut in Medicare physician payments for 2008 and the scheduled five percent cut for 2009. The bill would replace the physician payment cuts with a 0.5 percent increase in reimbursement rates in each of the next two years. In addition, the bill would repeal the bonus fund for the Physician Assistance and Quality Initiative, but allow the program to continue on a voluntary basis.

These provisions are part of a larger health care package introduced by Representative John D. Dingell (D - MI), Chairman of Committee on Energy and Commerce, The bill, called the Children’s Health and Medicare Protection Act (H.R. 3162), would reauthorize the State Children's Health Insurance Program (SCHIP) and increase funding for the program by $50 billion over five years.

The bill is expected to cost about $90 billion over five years. Funding for the measure would come from a $.45 Federal tax on tobacco products and a reduction in subsidies to Medicare Advantage private insurance companies over the next four years – both of which are politically controversial. In addition, savings from reductions in select providers—home health agencies, nursing homes and long-term care hospitals—would also be used to fund the measure. These cuts are based on Medicare Payment Advisory Commission recommendations.

In addition to significantly expanding eligibility for the SCHIP program, the House bill includes several changes to the Medicare program. Of particular note are provisions that would:

• Replace the scheduled Medicare physician payment cuts of 15 percent over the next two years with positive updates of .5 percent for all physicians in 2008 and 2009.
  
  
• Provide a five percent bonus payment to physicians in areas with the lowest per capita Medicare spending.
  
  
• Establish six separate categories defined by type of service with their own target growth rates, replacing the Sustainable Growth Rate system.
  
  
• Effective in 2008, remove the cost of Part B drugs and lab tests from target growth rate calculations and increase target growth rates by requiring CMS to include new national coverage determinations.
  
  
• Establish an expanded medical home demonstration program for up to 500 medical practices.
  
  
• Adjust payment locality definitions in California and ultimately make similar adjustments in other states.
  
  
• Create an expert panel separate from the Relative-Value Scale Update Committee to help identify misvalued services to be included in the five-year review of relative values.
  
  
• Make significant changes in payments for imaging services.
  
  
• Establish a federally funded Center for Comparative Effectiveness Research in the Agency for Healthcare Research and Quality responsible for conducting research on the outcomes, effectiveness, and appropriateness of health care services.
  
  
• Eliminate the Practicing Physicians Advisory Council.
  
  
• Reduce the inpatient and outpatient hospital updates by .25 percent for 2008.
  
  
• Require the Secretary of HHS to designate a single organization, such as the National Quality Forum, to establish a national strategy for performance measurement, coordinate measure development, and endorse national consensus health care measures.
  
  
• Mandate a study and report on erythropoietin by the HHS Office of the Inspector General. The report would study anemia management dosing guideline and the extent to which such guidelines are consistent with the Food and Drug Administration’s label for anemia management drugs. Another erythropoietin-related provision provides for a “bundled payment” system for dialysis facilities to encourage proper dosage of anemia drugs to dialysis patients.
  
  
• Repeal the Physician Quality Reporting Initiative (PQRI), but allow physicians to continue to voluntarily report on performance measures. ASH will keep you apprised of developments.

Congressional committees are scheduled to “mark-up” this bill by July 27. In the Senate, last week the Finance Committee approved a different bipartisan version of the SCHIP bill that did not include Medicare physician reimbursement changes. In addition, Senate Republicans are planning to offer an alternative to the SCHIP legislation when the bill moves to the Senate floor for a vote. The Senate Republican version would cost less than the Senate Finance Committee and House proposals and would include provisions to increase the use of health savings accounts and small business health insurance purchasing pools while not expanding SCHIP.

Outlook: There is pressure on the Congress to pass legislation to reauthorize the SCHIP program by September 30 when the program is set to expire. However, the combination of a difficult vote for Senate Democrats, the prospect of controversy in the House and a presidential veto indicates the expanded House bill may not move forward. ASH will continue to keep members apprised of developments.