Impacts of the 2007 SCHIP Bill to reform the Medicare physician services payment method

Objective:

To assess the possible impacts of proposed legislation in the 2007 SCHIP Bill to reform the Medicare Physician Services Payment Method.

Methods:

The main elements of proposed legislation in the 2007 SCHIP Bill to reform the Medicare Physician Services Payment Method was: (1) replacement of the current payment method with one that retains the essential formulae but substitutes six spending targets based on procedures/services; (2) a mechanism for retiring the $54 billion Medicare Part B deficit. Using CBO projections of key variables and our econometric model (published elsewhere) we simulated the main elements of the proposed legislation, and assessed its impact on the Medicare reimbursement rate, patients, and providers, from 2008 – 2018.

Findings:

The Medicare Conversion Factor (CF) for all six spending target groups will decline 38% until 2018. The primary care and prevention group could realize continued growth if held to an alternate set of spending targets or if spending target groups separately hold expenditure growth to 5% (the average for last 10 years). Spreading the $54 bullion deficit proportionately to all 6 target groups will result in a continuous decline in the CF, irrespective of whether it is spread out over 5 or 10 years.

Conclusions:

A new mechanism for holding CF groups accountable or otherwise govern expenditure growth will need to be found as the current SGR leads to significant payment cuts across all CF groups (except primary and preventive care without debt financing), accumulated debt, continued political strife, or all three.