Physicians are the linchpin of the Medicare program. Without them, Medicare would not be the success it is today, so fair and reasonable compensation for physicians in the program is essential. Physician payments, however, are predicted to decline from 2006 onward, even with recent adjustments to the physician payment formula. This situation would undoubtedly cause more physicians to leave Medicare and reduce access to physician care.

We can tinker with the existing formula to make improvements to Medicare either administratively or legislatively, and I believe we should certainly take this interim step. But we also need to re-evaluate the current formula to ensure that physicians are adequately and appropriately compensated for the care of their Medicare patients. I suspect there is no perfect formula, but we must find a better way to address this situation.

One significant obstacle toward improving this situation is cost. With little room for increased government spending, authorizing tens of billions of extra dollars for physician services seems out of the question. The alternative, however, will be a steady decline in available medical care and the reversal of forty years of progress in improving health for seniors and individuals with disabilities.

I believe there is a way to defray some of these costs. Instead of overpaying HMOs and private insurance plans to induce them to participate in Medicare, we could better use that money to help offset the cost of any increased spending on physicians. According to the Medicare Payment Advisory Commission, without accounting for the fact that HMOs tend to enroll healthier beneficiaries, Medicare is paying private plans on average 107 percent of fee-for-service costs -- and in some instances much, much more.

Rather than spending billions on overpaying insurance companies to prop up a program that only covers 11 percent of seniors, we could take this money and offset the cost of increasing physician payments, making it a first step toward preserving access nationwide. This access to physicians is particularly critical for those who live in rural areas and other parts of the country that have few or no HMOs. By moving in this direction, we will also help to preserve one of the most important elements in the Medicare program that all seniors and individuals with disabilities depend upon -- the ability to choose their doctor.

I look forward to hearing from the witnesses today on this important subject.