Deliberations present opportunity, risks in Medicare physician pay

posted 08.23.11

Out of last month’s debate on the U.S. debt ceiling and the resulting legislation, the Budget Control Act of 2011, comes a charge to substantially reduce the nation’s deficit. A “supercommittee” comprised of 12 U.S. senators and representatives must formulate a plan to cut at least $1.2 trillion in spending over the next 10 years. As lawmakers move forward to meet the charge, they will inevitably turn their eyes to one of the country’s biggest expenses: Medicare. Federal spending for fiscal year 2010 totaled $3.5 trillion; Medicare comprised 15 percent of the total amount.

However, with crisis comes opportunity, and experts believe a convergence of factors could make this the time to address a structural deficit in how the country pays physicians and other providers for the services they provide to Medicare beneficiaries.

Under the debt deal, the bipartisan Joint Select Committee on Deficit Reduction led by U.S. Sen. Patty Murray, D-Washington, and U.S. Rep. Jeb Hensarling, R-Texas, has until Nov. 23 to develop legislation to achieve the $1.2-trillion target. Then, the committee’s plan must go before Congress and pass without amendments by a simple majority in both chambers by Dec. 23.

If the committee can’t agree on cuts or Congress fails to pass them, a process known as sequestration would come into play, making across-the-board reductions. One reduction cuts pay to Medicare providers by up to 2 percent starting in 2013, which the Congressional Budget Board estimates would mean a “savings” of around $12 billion.

While a reduction of any amount hurts, there is a bigger problem on the horizon: the Medicare physician payment formula, known as the Sustainable Growth Rate or SGR. Under the SGR, an across-the-board 29.5-percent cut would take effect on Jan. 1, 2012.

Since 1997, every congressional budget cycle has included a reduction in Medicare payments that has eventually been modified. Since 2002, Congress has stepped in 12 times to stop the cut, an action nicknamed the “doc fix,” including four times last year. And each year that Congress provides a temporary patch, the price tag gets steeper. According to the American Medical Association, the cost of a fix currently stands just under $300 billion. If Congress were to wait until 2016 to eliminate the SGR, the combined price of providing temporary patches and fixing the structural problem would approach $600 billion.

Now the argument shifts to one on deficit reduction; if Congress doesn’t address the broken SGR in some way, it will continue adding to the deficit. This gives the case to repeal the SGR urgency that it hasn’t had in previous years.

According to AAFP leaders, the real value of the supercommittee is that there are no restrictions on what they can recommend to cut or how it scores savings; its jurisdiction gives the 12 members the ability to find offsets for other spending in all areas of government. By virtue of normal committee jurisdiction, fixing the SGR-a Medicare Part B issue-would usually mean finding offsets only within Medicare Part B. With the cost of the fix growing each year, that hasn’t been feasible without harming patient benefits and access to care. Similarly, the supercommittee could recommend federal medical liability reform and score those savings toward deficit reduction.

Late last month, AMA, AAFP, and nine other specialty societies sent a video to Congress on the need for full repeal of the SGR. At just over two minutes long, a combination of text and eerie techno-classical music sets the scene: “By acting now, Congress can preserve access to care for people on Medicare and reduce Medicare spending by hundreds of billions of dollars. Or it can put off a solution … again.” Weaving through charts and graphs, they make the deficit-reduction argument, ending with the final statement: “Stop digging the hole. Pay the bill. Repeal the SGR.”

The AMA proposes a three-pronged approach: repeal the SGR; provide five years of stable payments with positive annual updates; and transition to a broad array of payment and delivery innovations.

AAFP outlined its tasks in a letter sent to supercommittee members last week. First, stabilize Medicare payments to physicians by repealing the SGR, and specify a payment rate for the next three to five years with a 3-percent higher rate for primary care physicians delivering primary care services. Second, avoid making reductions in graduate medical education, especially GME payments for primary care education and training, to protect the physician workforce.

AAFP and AMA will continue ramping up their efforts to reach out to supercommittee members and engage the full membership. As an AMA advocacy document states, “The Joint Committee process may be the best opportunity for SGR repeal for the foreseeable future. Budget offsets needed to pay for SGR repeal will be in short supply after the Joint Committee completes its work.”