A few ideas of how to fix one of healthcare’s biggest problems
Enacting permanent solutions to complicated problems is often politically challenging and the ongoing legislative debate to reform Medicare’s sustainable growth rate (SGR) is no exception. Boiled down to its essence, SGR is the formula which determines how much care providers are reimbursed by the government for the treatment of Medicare patients. While the issue might seem straight forward, the SGR is one of the most complicated issues in healthcare today, and no clear solution is in the Congressional light of sight.
Enacted by the 1997 Balanced Budget Act, the purpose of the sustainable growth rate was to ensure that the increase of Medicare payouts did not exceed the national growth in gross domestic product (GDP). When the GDP was increasing on an annual basis, the doctor payment per beneficiary rose right along with the GDP and everyone was happy. But the recession has meant that according to the SGR regulations, payments to physicians must be cut across the board in order to keep healthcare spending under control according to the formula. What could be equated to a never ending story, the formula now calls for a sharp 23 percent reduction in doctor payments by Dec. 1, 2010 followed by an additional 6.5 percent cut on Jan. 1, 2011. The forced cut in physician payment is a politically treacherous and unfriendly move, but it’s faced on the opposite side with the outsized growth of the federal deficit. Elected officials are literally between the proverbial “rock and a hard place.”
The last time Congress managed to cut reimbursements was 2002. Since then, Washington has passed piece-by-piece extensions to avoid the cuts in physician payments. With the delays, the formula cuts are getting steeper and steeper. In fact, to meet the SGR formula, the reimbursement rate will need to be 40 percent. Such a steep decline would no doubt dramatically disrupt participation in the Medicare programs by America’s physicians. However, it is unlikely that any politician will be willing to compromise their career by taking on the physicians in the near future, especially given the apparent toxicity of the healthcare reform program amidst the current political atmosphere. There is the possibility that the lame-duck Congress – which will reconvene following the midterm elections – will pass a SGR cut. However, it is much more likely that an entirely new approach will need to be proposed that sets the ticking economic clock back to zero. Several ideas are floating around Washington.
Senator Blanche Lincoln (D-AR) earlier this month introduced a bill aimed at eliminating the SGR. Likely to face defeat in her reelection campaign, Lincoln’s bill bases physician payments on the Medicare Economic Index (MEI), which measures the annual increase in cost of a medical practice. Her proposal would create an allowance corridor tying physician reimbursement rates to the MEI, an idea supported by the American Medical Association. With the Medicare Payment Advisory Committee (MedPAC), the independent federal body tasked with advising Congress on issues related to the Medicare program, also advocating for a change in the approach to SGR, it seems Lincoln’s plan might have a chance of passing. But with her likely departure from Congress, the question is – who would pick up the mantle for the Medicaid Economic Index idea as the debate unfolds on Capitol Hill?
“The current insurance reform without the companion reimbursement reform is an unsustainable path forward.”
Other ideas include creating a temporary payment freeze (i.e. no increase or reduction in payments) while the reform-funded pilot programs for both accountable care organizations and medical homes take shape during the next several years. Bundling payments is another potential way to reform provider compensation. The support of this approach is that it moves us to an entirely new “accountable” – albeit, yet-to-be-defined – reimbursement model. These new models tie cost and quality of care together and should, ideally, result in better outcomes at reduced cost. Another option would be to give providers confidential feedback on their resource use for up to a year and then, if no changes are made in performance, to apply a penalty for overutilization of services. Such an approach would clearly promote individual provider accountability, but the complexity in creating a fair assessment process seems difficult. Also, the resulting savings might not be that great when applied across the nation.
As such, the SGR is begging to be replaced with a more effective method of paying for care delivery that does not exceed GDP growth. And clearly, the lack of reimbursement reform is become a glaring deficiency in the ongoing healthcare reform debate. The current insurance reform without the companion reimbursement reform is an unsustainable path forward.
If somehow Congress is able to push the reset button, a change of approach will allow for the consideration of a legislative solution without the political toxicity of trying to manage the current SGR regulations. Regardless, any change in SGR will certainly be a difficult journey for reforming Medicare payments, but the change is a desperately needed action. It’s an issue that will take much time and energy from our policymakers, and we in the healthcare community should work with them to solve the problem. Nothing worth doing is ever easy so let’s get to work! Send your perspective on what we need to do to your Representative or Senator.
Kevin Fickenscher, MD
The views and opinions expressed herein are my own and do not necessarily represent the views and opinions of Dell Services or its affiliates.
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