AMA victory on the road to permanent Medicare payment reform

The following is part of a series of original guest columns by the American Medical Association.

by J. James Rohack, M.D.

Physicians started this month with some good news from the White House. After intense AMA education and outreach, the administration announced that it would remove physician-administered drugs from the archaic formula used to determine Medicare physician payment rates.

This important development will significantly lower the costs of a permanent repeal of the current payment formula that projects yearly payment cuts to all physicians. This is key. There is no debate that the current formula is broken, but the cost of permanent reform has stood in the way of long-term action. Instead, Congress has stepped in at the eleventh hour for the last few years to stop yearly cuts to physician payments that would harm seniors’ access to care.

Over the years, spending on physician-administered drugs ballooned from $1.8 billion to $9.1 billion, growing three times faster than spending on actual physician services. When government number-crunchers add those figures into the physician payment formula, known as the Sustainable Growth Rate (SGR), overall physician volume appears to go up. The growth target in the formula is then reached sooner, sending payment rates down.

The irony is that physician-administered drugs should never have been part of the formula in the first place. Payment rates for drugs are not determined by the formula, and utilization is primarily driven by pharmaceutical advances and government policies. The AMA has long argued that it is not equitable or realistic to finance the cost of these life-saving drugs through cuts in physician payments.

Permanent Medicare physician payment reform must be part of comprehensive health reform this year. Medicare payments should cover the increasing cost of providing care so that seniors can be assured of continued access to physician care.

Members of Congress on both sides of the aisle have stated that the Medicare physician payment formula is broken and should be repealed. President Obama’s administration has helped clear the way to Congressional action by removing drugs from the formula.

J. James Rohack is President of the American Medical Association.

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