www.drsforamerica.org I. Health Care Cost Statistics: Health care costs are far higher in the United States than in any other advanced nation, whether measured in total dollars spent, as a percentage of the economy, or on a per capita basis. – In 2005, the U.S. spent $2 trillion on health care, which is16 percent of GDP and $6,697 per person. – Health care costs have grown on average 2.5 percentage points faster than U.S. gross domestic product since 1970. – Almost half of health care spending is used to treat just 5 percent of the population. – US ranks 25th in infant mortality and 23rd in life expectancy II. How physicians current get paid by Medicare: The current payment system compensates physicians principally on the basis of the volume of services they provide. Fee-for-service payments, which is how Medicare pays physicians, creates incentives for physicians to provide more services, not necessarily services that are most effective. Fee-for-service payment systems are credited with contributing to the lack of coordination of care across providers and settings and the provision of services that have little or no health benefits. Arriving at Medicare’s physician payment schedule: Resource Based Relative Value System (RBRVS): a system for describing, quantifying, and reimbursing physician services relative to one another. The RBRVS incorporates three components of physician services - physician work, practice expense, and professional liability insurance. Relative Value Unit (RVU): RBRVS assigns services performed by a physicians or other provider a relative value unit (RVU) adjusted by geographic region. This value is then multiplied by a fixed conversion factor, which changes annually, to determine the amount of payment. The Sustainable Growth Rate (SGR): mechanism is a formula that was enacted by Congress to control Medicare physician spending growth by reducing fees when spending exceeds a target amount. In recent years, it has produced a series of scheduled across-the-board physician fee reductions that have been superseded by legislation. Policymakers have proposed modifying or eliminating the SGR mechanism, but that would result in higher Medicare spending and an increased federal budget deficit. III. Payment Reform options: Goal: Change the way we pay for care to reward high quality, appropriate use of health care resources and encourage reorganization of care so that it is well-coordinated and responsive to patients' needs. Several reform options are currently being debated in Congress: 1. Increase payment for primary care 2. Bundle payments for acute care episodes 3. Align payments with value not volume 4. Adopt the medical home model of payment 5. Fix the Sustainable Growth Rate (SGR) formula 1. Increase payment for primary care by changing the RBRVS Medicare payment system. Research shows that primary care improves quality and restrains costs in the health care system. However, primary care is in crisis in the US as few doctors are entering the field. Our current payment system does not adequate reward the work done by primary care physicians and has created a payment divide. Currently, a primary care physician earns approximately 55 percent of the average earnings for all other non-primary care physician specialties. To correct this payment imbalance, there are several reform options advocated by groups such as the American College of Physicians and MedPAC. They include: - Provide immediate/short-term payment increases in the relative value units most often utilized by primary care physicians (evaluation and management codes). - Allow for payment for services provided outside of face-to-face encounters with the patient. Add new payment codes for such work. - Recognize the value of critical elements of chronic care delivery, such as disease self-management and follow-up, and the cost of providing these services and factor this into the ―relative value unit‖ for primary care. - Recognize the value of quality improvement and performance measurement on the basis of evidence-based quality, cost efficiency, and patient experience of care, and recognizing the cost of obtaining these data - Recognize and appropriately value the complexity, time, and costs associated with sicker-than-average patients, avoiding a potential disincentive for physicians to treat patients with more complex conditions 2. Bundle payments for acute care episodes to encourage integrated care. Bundled payment systems (also known as "case rates" or "episode—based payment") would make a single payment for all services related to a treatment or condition, possibly spanning multiple providers in multiple settings. - For example, a single payment could be made for coronary artery bypass graft (CABG) surgery, including presurgical services, facility and physician fees for the inpatient surgical procedure, and follow-up care, including monitoring and cardiac rehabilitation. Providers would assume the cost of services for a particular treatment or condition as well as costs associated with preventable complications. Since providers would receive a set payment covering the average cost of a bundle of services, there would be an incentive to reduce the number services that have no or minimal benefit. Bundled payments also encourages coordination of care by holding multiple providers in multiple settings jointly accountable, through shared payment, for the total cost of care for a given treatment or condition. 3. Align payments with value not volume. Pay for performance (P4P) uses financial incentives to stimulate improvements in the quality of care and, in some cases, reductions in costs. - P4P programs use a variety of performance measures, including clinical processes of care and health outcomes, patient safety, patient experience with receiving care, resource use (i.e., efficiency), and structural indicators such as information technology investment and use. The financial incentives are funded by withholding a portion of current payments (or future payment increases), adding new money to existing payments, or sharing the savings through reductions in expenditures. The financial incentives may take the form of an increased payment for each service delivered or a bonus. Payments are made based on a hospital having attained relative or absolute performance thresholds, having improved over the prior year's performance, participating in specific initiatives, or participating in some combination thereof. Moving away from fee-for-service and toward bundled payment encourages providers to take broader responsibility for patient care and outcomes control costs while maintaining or improving quality of care. 4. Adopt the medical home model to promote coordinated care. Medicare currently does not provide payment for many activities that facilitate the provision of patient-focused, longitudinal, coordinated care. A ―medical home‖ or ―health home‖ is a clinical setting that serves as a central resource for a patient’s ongoing care. A medical home delivery model allows for physicians to get paid for increased level of care coordination. Some of the services provided in a ―medical home‖ include (but are not limited to): - providing enhanced access (e.g., 24-hour coverage, timely appointments) - using information technology to improve patient care - offering a team approach to care management and care coordination services - reporting quality and patient experience measures Qualified providers who elect to participate in the program would receive a per member, per-month medical home fee, in addition to all currently covered fee-for service payments. The amount of the per-member, per-month payment would vary depending on the severity of illness of the enrolled patient. - The medical home delivery model would allow a new per-patient payment in addition to traditional fee-for-service payments to support increased access to primary care services, more time spent with patients, and a team approach to care. 5. Fix the Sustainable Growth Rate (SGR) formula: Every year since 2001, the current Sustainable Growth Rate (SGR) formula has threatened to impose steep cuts in Medicare physician fee schedule payments. Congress has acted each year to ―band-aid‖ the situation and avert payment reductions. Physician payments are scheduled to be cut—this time by 21 percent on January 1, 2010. Proposed solutions include: - Phasing out the Sustainable Growth Rate formula system to prevent the ongoing threat of deep physician payments cuts every 12 months. - Tailor the growth containment rate to individual fields of medicine instead of having a blanket rate for all physician payments. - Allow for saving appreciated in the physician payment silo of Medicare (Part B) to be realized in the context of the overall Medicare program spending (Parts A or D) IV. Understanding The “Payers” Individuals and businesses Taxes: Both individuals and businesses pay income taxes to the government. In addition, there is a payroll tax on employers and employees to finance Medicare. Premiums: Businesses pay all or most of the premium for employer-based insurance for employees, and employees pay the remainder. On the individual market, individuals pay for all premiums out of pocket. Employer-based insurance premiums and individual insurance premiums are collected by private insurers. Direct or out-of-pocket payments: This is a direct payment to a provider for health care services (e.g. a co-payment). Government Medicare, Medicaid, S-CHIP: The government uses money generated from taxes to reimburse providers who take care of patients enrolled in these programs. Public employees’ premiums: The government also uses tax dollars to pay private insurers a health insurance premium for federal employees and other public employees. Tax subsidy: There is a tax subsidy of employer-based insurance that represents a major cost to the government (on the order of $150 billion). Employees receive health insurance benefits as tax-free compensation, and employers are able to deduct health insurance benefits as a cost of doing business. The value of this tax subsidy is an estimated $150 billion a year.
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