The House Budget Committee’s budget resolution for Fiscal Year 2010 includes a reserve fund for reforming the Medicare payment system for physicians. Included in the Reserve Fund for Medicare Improvements is more than $87 billion of additional Medicare spending for a five-year period starting in 2010. The additional spending over a ten-year period is almost $285 billion. The budget resolution anticipates that Medicare physician payment reform will require additional funding to:
· encourage efficiency and higher quality care;
· improve payment accuracy to ensure that primary care is compensated appropriately;
· coordinate care across all appropriate settings; and
· hold providers accountable for their utilization patterns and quality of care.
While the Reserve Fund for Medicare Improvements represents a significant amount of additional spending, it is 40 percent less than the amount included in the President’s budget for the same five year period and it is about half of the Congressional Budget Office (CBO) five-year estimate of the cost of replacing the Sustainable Growth Rate (SGR) system. CBO estimated that, over a ten-year period, an additional $556 billion would be needed to update Medicare physician rates based on the Medicare Economic Index (MEI).
The five-year amount of reserve funds in the House budget resolution is similar to the CBO’s five-year estimate for a proposal which would use the MEI to update rates for evaluation and management (E&M) services, while maintaining the SGR for the other four categories of services, including those related to major and minor procedures, anesthesia, and imaging and testing. CBO estimates that this approach would result in a reduction in payments for minor procedures and imaging and testing procedures.
The budget resolution language makes it clear that the Medicare physician “fix” is likely to be linked to payment reforms which are designed to change how healthcare services are delivered and will, by necessity, encourage the formation and diffusion of new organizations such as patient-centered medical homes, bonus eligible organizations and accountable care organizations or systems.