30 November 2010

SGR Fixed! Now we never have to worry about that again, right?

Maybe not:

The House passed a one-month, $1 billion “fix” to the Medicare physician payment formula Monday afternoon, two days before doctors were scheduled to take a 23 percent hit in Medicare payments. 

The House approved by voice vote the Senate’s plan to fund the fix through cuts to payments for certain therapy services. The bill, which had passed the Senate on Nov. 18, now awaits the president’s signature.

If signed into law, a 2.2 percent update in physician payments will be put in place through the end of the year. This will be funded by expected savings from a 20 percent reduction in payments for therapy services. 

I admit to being a little baffled as to why they enacted a ONE month fix -- this just kicks the ball further down within the lame duck session, as the new Congress does not take office until, what, Jan 5? So something further will be needed this session to prevent the 25% cuts from taking effect.

Background (for those new to the game): The SGR was a formula inserted by Republicans into the 1997 Medicare Modernization Act which was intended to provide a modest restraint on the growth in Medicare Part B payment to physicians: the original estimate was that it would save $12 billion over ten years. But they got the formula wrong -- badly wrong, and it soon began requiring deeper and deeper cuts in physician reimbursement, far beyond those intended by those who wrote the law. Congress never acted to fix the formula, only applying one- and two-year patches which allowed the mandated cuts to compound without ever letting them go into effect. But the cost of not fixing the SGR goes up with every time Congress punts, making it harder and harder to find new dollars to offset the ever-more-expensive "Doc fix." Apparently we are up to $1 Billion per month, now, which is more than I last heard. During the health care reform debate, when Congress again punted on this issue, the ten-year costs were estimated at something like $300 Billion. 

It's taken a political given that these cuts cannot ever be allowed to go into effect, as the result on the program would be catastrophic: Since Medicare is in most localities already a low-payment insurer, a 25% cut in reimbursement would cause a lot of docs to simply drop out of the program, or more likely to severely curtail the number of slots in their practice available for medicare patients. In our community, I know that it is extremely difficult for a new medicare patient to find a physician that will accept him or her as a patient. That will only get worse. This problem wasn't created by the SGR, but it has certainly be exacerbated by it: as Aaron Carroll at The Incidental Economist wroteThere’s nothing like the threat of a double-digit percentage payment cut to make a one or two percent increase look large. The SGR has in fact enabled Congress to slowly defund Medicare payments to physicians in this manner, with the effect that, according to the Center for Budget and Policy Priorities

The reimbursement rate for physicians next year will still be 17 percent below the rate paid in 2001, adjusted for subsequent increases in the costs that physicians incur in providing services as measured by the [Medicare Economic Index].

If Congress were to allow the cut to take effect in January, which it clearly will not do, the reimbursement rate would be 35 percent below its real 2001 level, an outcome that cannot be justified on policy grounds and one that would risk inducing large numbers of doctors to stop accepting Medicare patients.

While there is a sort of "cost containment" good news element to this -- some parts of Medicare expense can in fact be regulated -- it's been done in an accidental, jury-rigged fashion, under constant threat of catastrophe, and without a lot of benefit for patients for the amount of pain exacted from both patients and physicians. 

Put it another way: if physicians were forced to give up 17% of their inflation-adjusted revenue in a reform, I would expect this to come with some sort of sweetener, something which would improve the quality or efficiency or convenience of care. Because it will have consequences: currently, docs simply limit access and increase volume to make up the loss. What could policymakers have gotten in exchange for that 17% if it had been part of a carefully designed plan? But we (as patients and as physicians) got nothing of value for that concession.

Now, physicians will probably be asked to give up more, whether as part of bundling, P4P, or by being forced into vertically integrated ACOs. You can see from surfing around on the medical blogs how well that is going to be accepted on top of the previous decade's worth of cuts. It may be that the bunker mentality created among physicians by the SGR will play a significant role in inducing docs to reject further participation in payment reform.

Aaron Carroll summed it up well:

The part that makes me despair is the complete disconnect between what groups say they want, and their displeasure when they get it.  People seem to be upset that Medicare costs so much; but any attempt – even successful ones – to slow those cost increases is met with howls of rage and screams of rationing.  People don’t seem to realize that the money we spend in Medicare isn’t going into a pile somewhere.  It goes to doctors and nurses and hospitals and companies.  When you spend less, those people make less.  All of them.

You simply can’t have it both ways.  You either choose to spend less and piss people off or spend more and piss different people off.  Either way, you’re going to piss someone off.  A good system would try to make that decision rationally.  But at least it would make a decision.

Congress, as a body, doesn't seem very effective at making decisions these days.


  1. As the watermelon smashing artiste used to

    say CON is the opposite of PRO.

    So the opposite of PROGRESS IS


  2. Surely CMS should be running the Medicare budget and payments in a rationale - not rational - way.

  3. I don't have health insurance, because I think it's a ripoff. I'm convinced a big part of the problem with the medical system in the US is the Insurance Industry, like Michael Moore said. I'm debating skipping Medicare entirely when I turn 65, since its cost is deducted from SS payments. I will continue to depend on cash, and bargain down the resulting ripoffs from the billing departments. Think about it, Doc: cash in advance, no paperwork, no waiting for payment, nobody looking over your shoulder, 2nd-guessing your medical decisions.

  4. Roland,

    Good luck with that. Insurance may be a profit maker for the carriers, but it's still a necessity for individuals. Unless you plan to carry $50,000 in cash to mitigate the risk of a hospitalization, you're a sucker not to have insurance.

    As for medicare, it's the best deal for consumers if you qualify: cheap as hell, covers everything, at a time in your life when you are likely to get sick. Why on earth would you want to opt out?


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