AMA Gives Recs for Fixing Failed Medicare Formula

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In recognition of the dire need to fix the failed Medicare physician payment formula, the House Ways & Means Committee asked the AMA to provide feedback about alternative payment models.

Everyone knows that our federal health programs consume a significant budget. Medicare and Medicaid alone account for $835 billion, or 23 percent, of the $3.6 trillion in 2011 U.S. budgeted expenditures. The cost for these programs is growing at a pace that leaves them to compete with, and possibly crowd out, such national priorities as infrastructure, defense, education and the arts. Add to that the growing cost of health care in our nation – including both public programs and the overall cost of providing care – and it’s easy to see that healthcare spending reform is intrinsically tied to our national economic crisis.

Change is certainly needed, to provide long-term stability for patients and the physicians who care for them, and a foundational piece of the solution is fixing our flawed Medicare payment formula. This formula, as many physicians know, regularly schedules dangerous cuts to physician payment.


To that end, the Ways & Means Committee of the U.S. House of Representatives recently asked the AMA and other physician groups to provide comments about physician experiences with alternative payment models that could replace the failed Medicare physician payment formula.

In response to the committee’s request, the American Medical Association submitted comments about new payment initiatives for the Medicare program. In these comments, the AMA first made clear that the fatally flawed Medicare physician payment formula must be eliminated and a multi-year period of transition with predictable payments must be instituted to provide stability and test and move into new payment and delivery innovations.

The AMA also said that the new innovative payment models can and must give physicians the resources and flexibility to re-design care to keep patients healthier, better manage chronic conditions, improve care coordination, reduce duplication of services and prevent avoidable admissions in ways that will control costs for the Medicare program. A diversity of approaches, rather than a one-size-fits-all system, will be necessary to address the complexity of health care delivery and to improve health care value and quality, while containing costs.


Improved clinical outcomes measures, harmonization of private and public payer quality measurement, medical liability reform, anti-trust relief and elimination of confusing and/or conflicting federal regulatory burdens are all essential elements to the success of future Medicare payment programs. In its 26-page comment letter, the AMA explores each of these topics in more detail and provides examples of current efforts underway to address these challenges directly and boldly. I encourage you to read the comment letter to get a sense of the complexity associated with many of the reform proposals currently under consideration.

In light of the untenable nature of our healthcare spending, substantial changes to health care delivery and finance in the U.S. become unavoidable. As physicians, we have the responsibility to proactively engage in the creation of a viable future that better serves patients and fosters sustainable physician practices.

As an emergency physician and former ED medical director, it is not yet clear to me exactly how these changes will impact emergency medicine. Many in society continue to misunderstand the value our specialty provides and the role it serves in bridging many disparate and otherwise poorly coordinated facets of our health care system. As ACEP has pointed out, for only about 2 ½ cents of every health care dollar spent, emergency departments provide care 24/7/365 for over 130 million annual patient visits by every man, woman or child who comes through the doors. Even so, many in health care continue to deride EDs as over-priced, inefficient and a prime target for cost savings – despite the critical roles they fill not only for emergencies, but also as a principle safety net for our sadly fragmented and inequitable health system.

As physicians, we may choose to either hang together or hang separately, while our health system continues to evolve. By itself, emergency medicine cannot sufficiently address the seemingly insurmountable challenges that lie ahead. In collaboration with the larger physician community, however, our specialty can have a prominent voice in the future of health care delivery and payment that will impact us dramatically.


The AMA will continue our work on behalf of physicians and the patients we serve. As a fellow physician, I actively encourage each of you to become more involved in the creation of a brighter and more sustainable future for our patients and our profession. Together, we truly are stronger.

To truly appreciate the challenges facing the U.S. and its health system, consider the following about healthcare spending:

  • Health care costs consume nearly 18 % of the nation’s entire gross domestic product (GDP).
  • Our nation spends approximately two times more per capita on health care than is spent on average by Canada, the United Kingdom, France, Germany and Australia.
  • From 1999 to 2010, the total annual premium cost to provide private health insurance to a family in the U.S. rose from about $5,800 to about $13,800 – a 237 & increase in just 12 years.  (Kaiser Family Foundation). When non-premium costs are included, the 2012 Milliman Medical Index calculates that total annual medical costs for the average family of four covered by a private PPO plan are about $20,700.
  • The number of Americans with private health insurance declined from about 74 percent to 64 percent between 1999-2010 ( Meanwhile, the median household income has remained flat or slightly declined to about $49,400 (
  • In 2009 there were nearly 51 million (16.7 percent) uninsured Americans (, and the U.S. ranks near the bottom globally in terms of health care quality, access, efficiency and equity (Commonwealth Fund and OECD).


1 Comment

  1. Bill Bass, MD on

    Apparently the US spends enough processing the bill to buy insurance for every uninsured personin America. The bureaucratic intrusions on our practice are costing a fortune while providing little benefit to the patient or physician

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