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

Changing the Incentives to Promote High Quality

AARP also believes Congress needs to change the incentives in Medicare's physician payment system to promote quality and encourage efficiency. We recommend Congress focus its efforts on four key areas: encouraging widespread adoption of health information technology; expanding the use of comparative effectiveness research; utilizing performance measurement including physician resource use; and enhancing care coordination.

Information Technology - AARP believes health information technology (HIT) has enormous potential to both improve quality and eventually lead to lower costs throughout our health care system. Yet the United States lags far behind most industrialized nations in maximizing its potential benefits. According to the Commonwealth Fund, only about one-fourth of U.S. primary care physicians report use of electronic medical records, compared with nine of ten primary care physicians in the Netherlands, New Zealand and the U.K.

Among the many advantages of HIT, it could: help providers coordinate care across settings, reduce errors and duplicative services, support clinical and patient decision making, improve communications between doctors and patients, and help to foster patient management of their health conditions through ready access to their personal information. Finally, HIT could create "virtual" integrated delivery systems without requiring formal mergers or affiliations.

Expand Comparative Effectiveness Studies and the Clinical Evidence Base - Consumers, providers, and purchasers need objective, credible, evidence-based information to help them make good health care decisions. Congress recognized this need in section 1013 of the Medicare Modernization Act of 2003 by authorizing $50 million for head-to-head comparisons of treatment options. To date, the Agency for Healthcare Research and Quality (AHRQ) has received only $15 million for 2005 and $15 million for 2006 - far below the authorized amount. Congress should provide AHRQ, at a minimum, with $50 million in FY 2007 for comparative effectiveness research and begin to look at expanding the opportunities for both financing and using this research.

Comparative effectiveness research is a way to compare drugs within a therapeutic class, similar procedures, or drugs versus procedures to determine which treatments are most effective. In addition, as the MedPAC report notes, comparative effectiveness research could also be used to help "prioritize pay for performance measures, target screening programs, or prioritize disease management initiatives." This type of research could improve the overall quality of health care delivery and patient outcomes while reducing inappropriate, inefficient, and ineffective care. There is a clear need for a significant government role in paying for this important evidence, since Medicare and other federal programs stand to benefit (over 40 percent of health care is paid by the federal government) from having a stronger base of evidence on which to make payment and other decisions.

Performance Measurement - We applaud Senators Baucus, Grassley and other members of the Committee for their hard work in ensuring that bonus incentive payments to physicians who report on quality measures were included for 2007. These quality reporting efforts begin to move Medicare in the important direction of providing better quality and more value for beneficiaries.

Pay-for-reporting represents a first step and the initial Centers for Medicare and Medicaid Services (CMS) list of quality measures for the Physician Voluntary Reporting Program - now referred to as the Physician Quality Reporting Initiative - is a starting point for a discussion. However, there is still substantial work to be done on the quality measures themselves so that when we actually pay for performance there will be rigor in the process to justify spending Medicare resources on this initiative.

For pay-for-performance to be successful in improving care for beneficiaries, AARP believes Medicare should focus first on high cost, highly prevalent conditions for which valid, reliable measures exist (such as for diabetes and congestive heart failure) as well as on efficiency and resource use and care coordination. While it is important that all physicians participate in the program eventually, this should not be CMS's first priority. The top priority should be improving health care for Medicare beneficiaries and giving them value. Let's start with good measures that can effectively assess performance across the high priority areas that have been identified.

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