Before you advocate, do your sensitivity analysis: The evidence for reforming the Medicare physician payment system
- Presenter:
Chair: Timothy McBride; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 309
Rationale: Even though physician practice costs continue to grow, the formulae for updating the physician fees for Medicare services are projected to cut the fees by about 5% annually for several years beginning 2006. These projected cuts have raised concerns about appropriateness of the system for updating physician fees and physicians’ continued participation in Medicare. As they have done many times, physician groups decried the projected cuts and advocated for revisions in the formulae. Surprisingly, apart from a mandated GAO report in 2004, there have been no published quantitative studies assessing the sensitivity of the formulae to proposed revisions. This study contributes by filling that gap.
Objectives: To assess the sensitivity of the Medicare physician reimbursement rate formulae to the revisions proposed by various stakeholders.
Methods: We specified a model that simulated calculation of the Medicare physician fee conversion factor. We used the model to check sensitivity of the fee conversion factor to changes in five main parameters: Evaluation and Management (E&M) weights, GDP, SGR, MEI, and target expenditures over 10 years.
Results: Changes in all five parameters tested had no lasting net effects on the fee schedule. Five percent increases in MEI averted physician fee cuts only in the short-run.
Conclusion: This study shows that: (1) It would require a replacement of the entire reimbursement system to avoid physician fee cuts. (2) There is superior value in rigorous assessment of proposed policies and sensitivity analysis before undertaking advocacy.
