American Academy of Dermatology Health System Reform Update

Medicare Payment Freeze Passes Congress: 21% Cuts Delayed for Now

December 21, 2009

Last week, both the House and Senate passed legislation to freeze Medicare physician payment levels through February 28, 2010. This halts the 21% cut that was scheduled to take effect on January 1, and buys organized medicine two months additional time to seek a full repeal of the flawed “Sustainable Growth Rate” (SGR) formula, which will otherwise lead to more than 40% reductions in physician payments over the next five years. The 60-day freeze was included in the Defense Appropriations bill which has been sent to the President for his signature.

The House has already passed a bill to fully repeal the SGR formula and eliminate the cuts in future years, but the Senate has yet to do so. At the request of physician groups, including the AADA, the Senate removed a proposed one-year SGR fix from the recently amended Health System Reform bill. There was widespread concern throughout organized medicine that a one-year fix would make it too easy for Congress to avoid the issue and delay a full repeal. This shorter 60-day fix keeps the pressure on Congress to address the SGR with a permanent Medicare payment solution.

Senate Debates Amended Health Reform Bill:

Cosmetic Procedures Tax Removed, Replaced with Tanning Tax

On Saturday, Senate democrats unveiled a large package of amendments to their health system reform bill. Early this morning, the Senate cleared the first hurdle, when it invoked cloture on the amendment package by a straight party line vote of 60-40. It is currently expected that the Senate will clear the two remaining cloture votes and pass the bill on Christmas Eve.

One bright spot, our AADA was able to negotiate behind-the-scenes to secure the inclusion of a 10% tax on artificial tanning using UV light as a replacement for the proposed elective cosmetic procedures tax. An exemption was included to ensure that physician-ordered phototherapy would not be taxed. And thank you to the grassroots efforts of dermatologists and others around the country, their efforts supported our negotiations. While there are still several concerning provisions in the bill, which the AADA continues to oppose, this change is clearly a victory for dermatology and was made possible by the relationships that our specialty has built in Washington.

The Amended Senate Bill: Several Improvements, but Significant Problems Remain

The amended version of the Senate’s health system reform bill contains numerous changes. There have been some meaningful improvements, several of which were made in direct response to pressure from the AADA and the rest of organized medicine. On the other hand, there are other provisions in the Senate bill which do not conform to AADA principles.

The following are a few of the changes most relevant to the practice of medicine:

Positive Changes

1. The public option and the proposal to expand Medicare eligibility to individuals ages 55-64 have both been eliminated.

2. The proposal to pay for primary care bonuses with reductions from specialty physician payments has been eliminated – instead, the primary care bonuses are now paid for with new funds.

3. As noted above, the proposed tax on elective cosmetic surgery has been eliminated and replaced with an indoor tanning tax. There is an exemption to prevent taxation of physician-ordered phototherapy.

4. In the amendment, the Comparative Effectiveness Research Institute is now prohibited from issuing practice guidelines or payment recommendations.

5. The amended bill requires that insurance companies use most of the money they collect to actually pay doctors and hospitals for health care. It would mandate that at least 80-85% of collected premiums be spent on providing health care (rather than administration or CEO salaries), and that excess premiums be refunded to enrollees.

Negative Changes

1. The disturbing proposal to create an Independent Medicare Advisory Board (IMAB) remains in the bill. IMAB is still tasked with reducing the cost of the Medicare program, but unfortunately, it must do so solely on the backs of physicians, as hospitals are exempted from review. In addition, the recommendations of IMAB will be fast-tracked and implemented with limited congressional oversight.

2. There are new provisions in the amendment which require Medicare to rate physician quality on a public “Physician Compare” Web site by 2013. In addition, outside non-governmental entities could obtain Medicare claims data to do their own physician ratings. We are extremely concerned about the risk of inaccurate methodologies being utilized, and seriously doubt that Medicare will be able to risk-adjust individual physician quality ratings by 2013. The risk is that inaccurate and misleading data profiling physicians will be released to the public.

3. There is still no identified pathway toward long-term Medicare physician payment reform.

In summary, we are quite pleased that the Senate leadership has responded to several of our concerns with some meaningful changes, particularly the removal of the cosmetic procedures tax, the lack of Medicare age expansion, the removal of specialty payment reductions to pay for primary care bonuses, and the deletion of physician enrollment fees.

However, several of our most significant concerns remain. We strongly oppose the IMAB proposal, and the physician profiling and public reporting provisions in their current form. In addition, physicians will be entirely unable to implement meaningful health system reform unless the flawed SGR payment formula is fully repealed, removing the specter of impending payment cuts of more than 40%.

If the Senate passes the amended bill this week, Congress will then have to convene a conference committee to reconcile the House and Senate bills in an attempt to find a proposal that can pass in both chambers. During the conference process, your AADA will continue to work aggressively in Washington to eliminate or improve those remaining provisions which threaten to limit patient access to care and harm the physician-patient relationship. We will soon activate a new grassroots campaign and encourage you to contact your member of Congress about the remaining provisions in the bill that may adversely affect the care of our patients. Thank you for your actions to date. Your individual voices are important in communicating the AADA’s continued concerns with provisions in this bill.

Visit AADA Health System Reform Resource Center

Please visit AADA’s Health System Reform Resource Center to find the most up-to-date version of proposed legislation, AADA position statements, and a comparative document of the provisions in the House and Senate health system reform legislation. As always, we welcome your feedback at govtaffairs@aad.org.