Congress seeks permanent doc fix

June 1, 2012

Congress wants to get serious about fixing the Medicare formula for reimbursing physicians, an initiative that would affect healthcare rates and expenditures more broadly.

The most recent temporary fix for the Medicare sustainable growth rate (SGR) expires Jan. 1, 2013. Without any action, Medicare payments to physicians would drop almost 30%. Many doctors say they won't treat seniors if such a draconian cut goes into effect.

The SGR was established in 1997 to better control Medicare costs by mandating reductions in doctor fees under certain conditions. Congress, however, has repeatedly overridden the planned cuts with temporary SGR remedies, running up a $300 billion liability in the process.

New legislation proposed by Reps. Allyson Schwartz (D-Pa.) and Joe Heck (R-Nev.) would accomplish this by replacing the SGR with short-term adjustments in physician rates. Additional payment reforms would reimburse clinicians in the future based on efficiency, quality and patient outcomes. Those goals attract strong support, particularly from doctors who are eager to avoid continued threats of steep Medicare rate cuts, followed by short-term remedies. The American Academy of Family Physicians, the American College of Physicians and several specialty societies have lined up behind the bill, praising its shift toward new reimbursement models that align payment with value.

The controversial issue is how to cover the huge cost of replacing the current SGR policy. Schwartz and Heck propose to tap into an "overseas contingency operations" fund that contains savings from the military pull-out from Iraq and Afghanistan. Many Republicans oppose this strategy as a budget-balancing gimmick; intense pressure to cut federal government spending makes it doubly difficult to find a way to offset the SGR liability.

Additional solutions might come from the Senate, where Finance Committee Chairman Max Baucus (D-Mont.) has launched a series of roundtable discussions with an eye to developing bipartisan legislation that establishes an alternative reimbursement scheme for physicians. At the first forum last month, former Medicare directors agreed that the SGR should be dropped and replaced by a new system for reimbursing physicians, but did not specify how to pay for it.

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Gail Wilensky, Medicare chief from 1990 to 1992, backed strategies that relate payments to the ability of physicians to provide quality care and to manage multiple services for treating chronic diseases. Her successor, Bruce Vladeck, proposed replacing the SGR with an alternative update formula similar to those implemented by Medicare for hospitals, home care agencies and others.

While it's "essential" to drop the SGR, according to Tom Scully, Medicare chief from 2001 to 2004, he wants to retain controls on spending through bundled payments for episodes of care and to ultimately shift all seniors to Medicare Advantage plans. Scully's successor at the Centers for Medicare and Medicaid Services (CMS), Mark McClellan, cited work by physician specialty groups to devise bundled payments for specific conditions and treatments, along with care coordination models for their clinical areas. The goal is for such payment reforms to lead to improvements in care as well as cost savings that can support increases in total physician compensation.