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

AARP believes that the federal government must financially support the development of performance measures. Improving health care should be considered a public good and we will not be able to improve quality unless we have valid and reliable measures to assess what we are doing. Measures should be vetted through an open forum with meaningful consumer input (such as the National Quality Forum).

There are many gaps in our ability to assess health care quality. These gaps must be filled as quickly as possible. We need to improve risk adjustment methods to remove any incentives doctors may have to avoid patients with multiple chronic conditions, or inadvertently penalize providers in underserved communities.

Performance assessment must include resource use and efficiency. Researchers at the Dartmouth Medical School have found that regions of the United States with the highest health care spending do not appear to have sicker patients or better outcomes than regions with lower spending. They estimate that Medicare could reduce spending by at least 30 percent, while improving the outcomes of care, if the physicians whose practice styles are the most resource intensive (i.e., they order more diagnostic services and procedures) reduced then intensity of their practice. In its discussion of an outlier policy and measuring resources and providing feedback, MedPAC provides convincing arguments for why CMS should measure physicians' resource use over time and provide the results to physicians. AARP strongly recommends that CMS adopt this recommendation, especially if the SGR is eventually repealed. It is critically important that the Medicare program continue to focus efforts on ways to help physicians practice most appropriately. We would hope that the information could eventually be used to help beneficiaries identify those physicians who deliver high quality care. It could also eventually be used to help design paymentm policies.

Enhancing Care Coordination - Finally, we should focus again on the doctor-patient relationship, a relationship of great importance to most AARP members.

Under Medicare's current physician payment system, physicians who conduct procedures receive higher compensation than those who diagnose and manage complex problems. Doctors who spend time with their patients and their family members to discuss treatment options are reimbursed at much lower rates. For example, the national average Medicare reimbursement for placement of two coronary artery stents via cardiac catherization was $1,012 in 2002; a two-hour family meeting was reimbursed on average between $75 and $95. It should be noted that national comparisons conducted by Dartmouth researchers indicate that communities with more robust primary care provide lower cost, higher quality care. It is clear that the mix of physicians in a community has a direct impact on quality and cost. Moreover, patients report more care coordination problems the more specialists they see.

As the MedPAC report emphasizes, the Medicare program could improve the efficiency of health care delivery by increasing the use of primary care services and encouraging coordination of care. Coordination of care is important for individuals with multiple chronic conditions and especially as individuals move across care settings. AARP believes that Medicare's payment methods should be changed to create incentives in the fee-for-service system to better coordinate care so that beneficiaries receive the best care possible. In addition, other practitioners, such as nurse practitioners, physician assistants, and advanced practice nurses, might help fill this growing gap of primary care and needed care coordination.

Treatment of chronic illnesses accounts for the majority of health care expenditures, including those of the Medicare program, yet the traditional Medicare system is not designed to prevent complications. For example, a 2003 study by Elizabeth McGlynn of the quality of care delivered to adults in the U.S. found that only 24 percent of people with diabetes had their blood sugar appropriately monitored, and 45 percent of people presenting with myocardial infarction received the proper medications known to reduce deaths among patients suffering from this condition. Medicare beneficiaries - whether they choose managed care or traditional Medicare - should have access to better chronic care management.

Recently enacted Medicare legislation has expanded the number and type of Medicare demonstration projects to examine the impact of various strategies for improving the coordination of care for beneficiaries with chronic conditions in traditional Medicare, such as the Medicare Health Support demonstration, the Physician Group Practice demonstration, and the new Medical Home demonstration.

AARP supports developing comprehensive, coordinated approaches to financing and delivering a wide range of needed care to chronically ill people. We hope to see effective strategies of this kind applied to the broader Medicare beneficiary population soon.


In conclusion, millions of AARP members depend upon Medicare every day. They need access to the best quality care and the physicians who deliver it. And they need that care to be affordable. The SGR system has not successfully controlled physician spending. To help keep Medicare affordable for beneficiaries today and financially strong into the future, AARP believes the incentives in the current physician payment system need to be changed to promote quality and encourage efficiency. We look forward to working with you and your colleagues to address this challenge.

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