In response to a warning that the Medicare trust fund is in financial trouble, the Bush administration recently proposed legislation that would tie physician payments to quality, cap medical liability damages, and encourage nationwide adoption of electronic health records.
Health and Human Services Secretary Mike Leavitt submitted the proposed legislation to Congress last month, in response to the Medicare Trustees' warning for the second year in a row that general federal revenue would be needed to pay for more than 45% of program expenditures. Mr. Leavitt was required to submit the proposal under a cost-saving measure included in the Medicare Modernization Act of 2003.
“The Medicare program is on an unsustainable path, driven by two principal factors: projected growth in its per-capita costs, and increases in the beneficiary population as a result of population aging,” Mr. Leavitt said in a letter to House Speaker Nancy Pelosi (D-Calif.). “Excess cost growth will not be brought under control until there is comprehensive reform changing Medicare's underlying structure.”
Under the proposal, the HHS secretary would design and implement a system to tie a portion of the Medicare payment to providers to performance on quality and efficiency measures. Implementation would start in areas with well-accepted measures for example hospitals, physician offices, home health agencies, skilled nursing facilities, and renal dialysis facilities.
The legislation also would limit the length of time individuals have to sue for medical malpractice; cap noneconomic damages at $250,000 and punitive damages at $250,000 or twice the economic damages (whichever is greater); and limit contingency fees paid to plaintiffs' attorneys. The HHS estimates defensive medicine raises the cost of care in Medicare, Medicaid, and Veterans Affairs by about $28 billion a year.
Starting in 2009, the administration's proposal would also increase premiums for Part D prescription drug coverage for single beneficiaries earning more than $82,000 a year and also for couples earning more than $164,000. HHS said the change could save more than $900 million in 2009 and nearly $3.2 billion over 5 years.
The legislative proposal also requires the HHS secretary to develop a system to encourage the nationwide adoption and use of interoperable electronic health records and to make personal health records available to Medicare beneficiaries.
Mr. Leavitt urged Congress to adopt the proposed changes in conjunction with the administration's fiscal year 2009 budget proposal, which includes legislative and administrative proposals that would cut $12.8 billion from the Medicare program in fiscal year 2009 and about $183 billion over the next 5 years.
But the administration may have trouble getting its proposals through Congress.
Sen. Edward Kennedy (D-Mass.), chair of the Senate Health, Education, Labor, and Pensions Committee, said “The administration has trumped up a phony crisis in Medicare to justify proposing deep cuts in quality health care for seniors while giving massive subsidies to HMOs and other insurance companies.”
Physicians' groups were also critical of the plan. Dr. James King, president of the American Academy of Family Physicians, said he was disappointed that the Medicare proposal failed to address the approximate 10% Medicare payment cut facing physicians this summer. He also questioned the administration's proposal to move ahead with “value-based” payments to physicians under a plan that appears not to include additional money for incentives. Any pay-for-performance system should use a bonus payment, not withhold payments, he said.
Though the AAFP supports the proposed cap on noneconomic damages in medical liability suits, Dr. King said he doubted the proposal would gain any traction in the current Congress.
'Excess cost growth will not be brought under control until there is comprehensive reform.' MR. LEAVITT