Recently, the Senate Finance Committee and the House Ways and Means Committee released an unprecedented bipartisan and bicameral “discussion draft” proposal to repeal the Medicare sustainable growth rate (SGR) and reform the Medicare payment system. The committees asked health care organizations around the country to comment on its proposal. On Tuesday, November 12, the California Medical Association (CMA) sent its comments on the discussion draft to the leadership of both committees.

CMA supports many provisions in the draft, including: the permanent repeal of the SGR; retention of the fee-for-service program; streamlining of current reporting programs; and the addition of a new bonus pool (8-10 percent), incentives to participate in alternative payment models (5 percent), payment for complex chronic care management and funding assistance for small practices in rural or health professional shortage areas (HPSA) areas.

Most of CMA’s concerns with the House-Senate proposal are focused on the impact it would have on all small practices and their ability to transition and participate in the new payment systems.

“At no other time in our history has there been such a demand for physicians with health care reform covering the uninsured and the baby boomers becoming eligible for Medicare,” says CMA President Richard Thorp, M.D. “Without a bridge to new systems, CMA fears that many small practice physicians will chose to retire early or leave Medicare, causing an access to care crisis in California when physician services are needed the most.”

Payment Updates

The draft legislation would not provide automatic payment increases for the first two years. However, starting in 2016 physicians can choose to participate in new payment models (such as medical homes) and qualify for 5 percent annual bonuses. In 2017 and beyond, physicians remaining in the fee-for-service program can participate in a new “value-based performance payment program." It is essentially the same as the current fee-for-service program, but it consolidates the current PQRS quality reporting, value-based modifier and meaningful use programs and adds new clinical improvement activities. Under current law those programs no longer provide bonuses but applies penalties of up to 8 percent. The new proposal would provide a bonus pool of up to 10 percent, with penalties for non performance as well.

CMA is concerned that this proposal does not provide updates until the new payment systems start in 2016/2017 and is urging the committees to provide annual payment updates of at least 0.5 percent until those new models begin to help physician practices transition. CMA argued that many physician practices cannot survive at the current payment rates and make the investments in new payment models.

“The last decade of failed Medicare payment policy has taken its toll on small physician practices in California," wrote CMA in its comments. "Medicare SGR formula has frozen physician payments for the last decade, yet physician practice costs rose 25 percent during the same period."

Assistance for small physician practices

The proposed legislation includes $50 million to help small practices in rural or underserved areas improve performance and facilitate participation in alternative payment models. CMA is urging the committees to provide funding assistance to ALL small practices not just those in rural areas. CMA also asked the committees to set forth a longer transition timeline that gives small physician practices a realistic chance to succeed, including delaying implementation of the alternative payment models and the clinical improvement activities and extending the electronic health record subsidy program.

CMA also urged the committees to authorize a variety of alternative payment models, including some that do not initially require physicians to assume financial risk. "Small practices cannot accept full financial risk under the alternative payment model track as proposed," CMA wrote in its comments. "While it may be a worthy goal to encourage physicians to manage global budgets, small practices must develop the data systems and gain the expertise necessary to transition to such risk-bearing payment models." To help physicians manage effectively, CMA is also asking the Centers for Medicare and Medicaid Services (CMS) to release total cost of care data.

Geographic payment updates

Finally, CMA is urging the committees to include in this proposal the CMA-sponsored "GPCI fix," which would update the California county-based localities to the same Metropolitan Statistical Areas (MSAs) used to determine payment rates for hospitals and also hold the physicians in rural counties harmless from the corresponding cuts that would otherwise occur.

Updating the localities would ensure appropriate payments for many recently urbanized areas like San Diego, Monterey and Sacramento counties. These counties are currently designated as rural, causing some California physicians to be paid up to 10 percent below what they should be paid if the regional designation was correct. The Centers for Medicare and Medicaid Services already continuously updates the hospital MSAs, however, the physician payment localities have not been updated in 16 years.

Congress has a short window of opportunity to enact payment reform in this politically-charged austere fiscal environment. CMA was in Washington, D.C., last week meeting with Congressional and Committee leaders to urge them to take advantage of the reduced cost to repeal the SGR and pass comprehensive payment reform this year.

"We applaud the Senate and House for working together on a bipartisan basis to repeal the flawed Medicare SGR payment formula. This is an encouraging development and it could be a pivotal step to stabilizing Medicare," said Dr. Thorp. "With the drastically lower price tag and bipartisan support for the necessary policy changes, we must seize the opportunity to set Medicare on a more stable and predictable course for current and future generations of patients and physicians."

Contact: Elizabeth McNeil, (415) 882-3376 or emcneil@cmadocs.org.