How Premium Support in Medicare can help solve the Physician Payment Problem and Expand Patient Choice

The challenge of reimbursing physicians for services done in Medicare has been a long and ongoing problem. In the late 90s and early 2000s, Congress attempted to control healthcare spending by lowering reimbursement payments under the Sustainable Growth Rate (SGR) mechanism, but this proved politically challenging.

From 2002 to 2015 Congress avoided these cuts by passing multiple “doc fixes” – 17 to be exact at a cost of $150 billion. In April of 2015, Congress passed the Medicare Access and CHIP Reauthorization Act (MACRA) in an attempt to stabilize physician fee schedules and improve the formula for how physicians are reimbursed for services, among other things. The impact of this legislation has yet to be determined, but physicians are already experiencing multiple difficulties.

As most health care professionals know, one of the more significant standards for which a physician’s work is measured is the relative value unit (RVU). The problem with RVU’s is that they are largely set by the federal government through the Medicare program. This is problematic because the federal government is not particularly skilled at determining value, especially when it comes to measuring physician performance. This problem is not limited just to RVU’s but to the Medicare program as a whole.

One of the best ways to address physician reimbursement issues while also improving quality of care and patient choice is for Congress to expand defined contribution financing that already characterizes the Medicare Advantage and Medicare Part D programs. A transition to a premium support model in Medicare would limit the federal government’s role in determining the value of a physician’s performance and therefore restrict the government’s ability to set market prices. In the end, physician payments would align more closely with their performance as determined by the patient in a freer healthcare marketplace.

Failure to inject a healthy dose of competition, choice, and physician independence into the Medicare program will continue to drive doctors out of the marketplace and prices up. As members of Congress continue to debate Obamacare replacement ideas, premium support in Medicare must be a part of the conversation.

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