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Testimony Before the Senate Finance Committee on Medicare Payment of Physician Services

Chairman Baucus, Ranking Member Grassley, and members of the committee, my name is Byron Thames. I am a member of AARP's Board of Directors and a physician. Thank you for inviting AARP to testify on reforms to Medicare's payment for physician services.

AARP believes that physicians are central to the delivery of health care, and that Medicare's payment system should encourage quality and affordable care.

Today's hearing focuses on the sustainable growth rate (SGR) system, which has been widely recognized as flawed. The SGR does not distinguish between those doctors who provide Medicare beneficiaries with high quality care and those who provide unnecessary or inappropriate services. Moreover, the SGR has not been effective at controlling the volume or intensity of services, which has led to higher Medicare spending and greater out-of-pocket costs for beneficiaries.

AARP believes that ultimately the SGR should be replaced with a system that encourages physicians to provide beneficiaries and the Medicare program with greater value for the health care dollar. Medicare beneficiaries need and expect their doctors to provide effective treatment. Payment incentives should encourage high quality, not unnecessary quantity. A truly sustainable payment system will be built on a foundation that emphasizes four key elements: information technology; greater use of comparative effectiveness research; performance measurement including physician resource use; and enhanced care coordination.

The Doctor-Patient Relationship: What AARP Members Say

AARP recently conducted a survey asking older Americans - current and future Medicare beneficiaries - about their experience with physicians. The vast majority of those surveyed report good access to and high levels of satisfaction with their physicians, but the cost of care remains a concern for people.

Medicare beneficiaries are beginning to feel the impact of the large Part B premium increases caused, in part, by the many legislative changes that have overridden the SGR. Of those surveyed, fourteen percent of beneficiaries said that they had to give up something to pay for an increase in their Medicare premium. Twenty one percent said they had to cut back on groceries.

The AARP members surveyed are among the over 43 million Americans who rely on Medicare for their health care. Physicians are central to the delivery of that health care. AARP believes physicians who treat Medicare patients should be paid fairly. But as we have learned from our members, the program must be affordable for beneficiaries as well. Determining how to balance these two needs is a complex, yet critical, policy problem that must be solved for the Medicare program to remain strong for future generations.

AARP supports long-term reform of the physician payment system. Annual short-term fixes simply exacerbate spending growth and only delay needed discussions about how to control rising expenditures. AARP believes the time has come to move toward a payment system that rewards physicians for providing greater value for health care spending. A recent Institute of Medicine report, Rewarding Provider Performance: Aligning Incentives in Medicare, concluded that "because the current basic payment systems reward overuse of services, use of high-cost complex procedures, and do not acknowledge the wide variations in quality across providers, … payment reforms are needed now to recognize care that is of high clinical quality, patient-centered, and efficient."

We couldn't agree more. All Medicare beneficiaries must have access to physicians who provide high quality care. At the same time, beneficiaries need to be protected from extraordinary out-of-pocket costs.

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