Congress is poised
to entangle Medicare doctors in even more bureaucratic red tape. In
its version of the budget reconciliation bill, the Senate voted to
establish new reimbursement reporting and compliance rules for
physicians practicing in the Medicare program.
Enacted as part of
the Deficit Reduction Omnibus Reconciliation Act of 2005, Section
6110 of the Senate bill creates a "values-based purchasing"
provision in the Medicare program. This provision would tie
Medicare physician payment, as well as the payment of other medical
professionals, to new "quality" reporting and compliance
requirements, reducing a doctor's payment by 2 percent for certain
services if the doctor did not report "quality-related" data. The
Senate bill further specifies that services to be included under
the "values-based" purchasing provision would also include hospital
inpatient services and the services of home health agencies and
skilled nursing facilities.
payment reduction (1 percent in the first year and 2 percent
thereafter) from non-compliant physicians and providers would
establish a funding pool to be redistributed the following year to
physicians and other medical providers that do comply. The
Congressional Budget Office (CBO) estimates that the provision
would reduce total Medicare spending by $4.5 billion over the
Evidence. When learning how to treat patients, doctors are
taught that they are first to "do no harm." Lawmakers should follow
suit. While federal lawmakers are rushing to implement
"values-based purchasing" in Medicare, they ought to take a closer
look at the professional literature on the topic, including the
limited uses of "evidence-based medicine" underlying this approach.
For example, Harvard University's Meredith B. Rosenthal and her
colleagues recently published "Early Experience with Pay for
Performance from Concept to Practice" in the Journal of the
American Medical Association
in an attempt to fill the void of published research on this
physician payment strategy. Curiously, the accompanying JAMA
editorial rightly notes that in health care there have been "only
nine randomized controlled trials of Pay For
Performance…reported in the literature."
In reviewing those studies, we note that the review by the Agency
for Healthcare Research and Quality (AHRQ) concluded that "little
unequivocal data" supported this approach.
interest, in Dr. Rosenthal's study, a group of Pacific Northwest
physicians who were not operating under a pay for
performance bonus system scored higher than the California
physicians who were.
Clearly, beyond the absence or presence of financial bonuses, other
factors have been affecting the care of these patients. In fact,
such financial bonuses are likely a superfluous source of
motivation when compared to the other factors motivating typical
physicians treating patients. These other motivators include the
desire to help another human being who is suffering, pride in one's
work, use of one's skills to meet the challenge of the individual
medical case, and the desire to maintain a sterling reputation in
one's community. And if these are not strong enough motivators,
medical malpractice attorneys are looking over doctors' shoulders
as they treat their patients.
Problems. When one reviews the professional literature relating
to the medical "pay for performance" scheme, as we have recently
done in a Heritage Foundation analysis, study after study suggests
that there are various problems with this approach, including
limitations on evidence-based medicine, an overemphasis on process
in the payment system, the subversion of physicians' professional
judgment on individual patient care, the undermining of
personalized health care, an inhibition of medical innovation, the
threat of unproductive "gaming" in the payment system, and a
weakening of the traditional doctor-patient relationship.
Change. As enacted, the provisions of the Senate bill would
establish, in effect, government guidelines for the practice of
medicine and tie Medicare payment to physician compliance with
those guidelines. Senior and other citizens should know that this
is a radical break from the original Medicare policy that
traditionally prohibited federal officials from interfering in the
practice of medicine.
The irony of the
recent Senate action is that with all of the rhetoric on the
importance of "evidence-based medicine," the Congress is poised to
implement a Medicare "pay for performance" system that is, in fact,
short on evidence and pregnant with perverse incentives. The
physicians will have every incentive to enroll in "obedience
school" and carefully tend to the bureaucracy's paperwork and
government guidelines to secure higher reimbursement in a tight
fiscal environment, which will soon get tighter as the baby-boom
generation starts to retire. By diverting "the focus" of doctors
and other medical professionals from appropriate patient-centered
medical care, the Medicare "values-based purchasing" provision will
likely create new incentives to game the system in unproductive
ways. While doctors are fulfilling their reporting requirements,
giving the government the data the government wants, real quality
could decline even while the measured indicators are looking
The Senate has
enacted a new system of Medicare payment that ties physician
reimbursement to compliance with government reporting requirements.
While this approach, sometimes called "values-based purchasing" or
"pay for performance," is superficially attractive, it has the
potential to create more perverse incentives in the Medicare
program without substantively improving the quality of patient
reform the flawed physician payment system, which is driven by
outdated administrative formulas, and introduce changes that
reflect the real market conditions of supply and demand for medical
services. In the provision of services, there is no greater
mechanism than a free market in rewarding quality and providing
benefit. In a new Medicare system, driven by consumer choice and
competition, patients themselves could pick a health plan that
imposed "quality reporting" requirements on doctors. But that would
be a matter of consumer choice, not government edict. Meanwhile,
Congress should cool its hot regulatory passion and not make the
irrational Medicare physician payment system even worse than it
Dolinar, M.D., is a practicing physician and a Senior Fellow in
Health Care Policy at the Heartland Institute.
On the Medicare
"values-based purchasing" concept, see Richard Dolinar, M.D., and
S. Luke Leininger, "Pay for Performance or Compliance? A Second
Opinion on Medicare Reimbursement," Heritage Foundation
Backgrounder No. 1882, October 5, 2005, at www.heritage.org/research/healthcare/bg1882.cfm.
On the unresolved
problems of the Medicare physician payment update formula, see
Robert E. Moffit, Ph.D., "Why Doctors Are Abandoning Medicare and
What Should Be Done About It," Heritage Foundation
Backgrounder No. 1539, April 22, 2002, at www.heritage.org/research/healthcare/bg1539.cfm.
R. Adams Dudley, M.D., "Pay for
Performance Research: How to Learn What Clinicians and Policy
Makers Need to Know," JAMA, Vol. 294, No. 14 (October 12,
2005), pp. 1821-1823.
U.S. Department of Health and Human
Services, Public Health Service, Agency for Healthcare Research and
Quality, "Strategies to Support Quality-Based Purchasing: A Review
of the Evidence," 04-P024, July 2004, at www.ahrq.gov/clinic/epcsums/qpurchsum.pdf
(August 30, 2005).