The American Medical Association has been the loudest voice in calling for the elimination of the broken Medicare physician payment formula. We know that the cycle of scheduled cuts it causes, and the short-term patches (14 so far) put in place by Congress to delay the cuts, only grow the problem and must end.

The AMA had an opportunity to start a dialogue recently with Congress about what can replace this failed formula. We responded to a request from the House Ways and Means Committee, who asked us to provide information about physician experiences with alternative payment models and to share our vision for replacing the current, flawed Medicare physician payment system. We are pleased that discussions on this topic are beginning now, as there is a need to plan ahead for the looming cut of about 30 percent that will occur if action is not taken this year.

The AMA has recommended a multipronged approach to reform the Medicare physician payment system. Step one is to eliminate the failed formula. The next step is to put in place a five-year transition period of predictable payments, with updates to account for inflation, to provide stability for physicians and protect access to care for patients. This is critical as Medicare physician payments have been nearly frozen for a decade, while the cost of caring for patients has increased by more than 20 percent. During this five-year transition period physicians can begin moving into, and testing the viability of, new payment and delivery innovations that improve patient care while lowering costs overall.  These can include familiar options such as ACOs, and also bundled and performance-based payments, medical homes and other options that facilitate keeping patients healthy, managing chronic conditions, coordinating care and lowering costs.

Once we know which innovations work, Congress should pass legislation – starting no later than the sixth year – to promote their widespread use while winding down the traditional fee-for-service system. The new system should not be one-size fits-all; physicians should be able to select from the innovations that work to determine the best fit for their practices. This is the way to move from a system that has failed to one that will provide long-term stability for the Medicare program and for physicians and the patients they serve.