The Sustainable Growth Rate formula. Few aspects of Medicare have been more problematic for physicians.
Designed to control Medicare costs, Congress has spent more since 2003 to delay SGR cuts than it would cost to fund current repeal legislation.
Passed as part of the Balanced Budget Act of 1997, the SGR was designed to make sure Medicare expenditures did not grow faster than the Gross Domestic Product based on four factors: estimated change in physician fees, estimated number of Medicare fee-for-service beneficiaries, estimated 10-year average change in GDP, and estimated changes in expenditures due to law or regulation.
It was not, however, designed to keep up with the Baby Boom. Because it does not adjust for the influx of boomers, it guarantees to produce pay cuts just as demand for physician services grows.
The next pay cut – 21% this time – is slated for April 1.
For doctors, the constant specter of lower payments simply makes it hard to do business.
“Each year, when there is supposedly a cut, it is a consideration for practices that they have to create some contingency thinking, ‘if this were actually to take place, how will I continue to maintain my practice?’ ” Dr. Robert Juhasz, president of the American Osteopathic Association, said in an interview. “If they have a high Medicare population that they take care of, and certainly if there was that kind of a cut, they could not sustain that and would have to make changes.”
Dr. Blase Polite, chair of the American Society of Clinical Oncology Government Relations Committee, agreed. “Ever since the flawed formula was put in place, it has created yearly uncertainty. In recent years, we have had it to the point where the SGR cuts went into effect and then we had to do things like hold bills for a month or 2 months to resubmit them when the SGR would get patched. It became an absolute nightmare from a small business operating standpoint.”
But the tyranny of the SGR may have outgrown itself. In January, the U.S. Department of Health & Human Services announced a major expansion of its efforts to base physicians’ Medicare pay on value instead of volume, calling for half of all Medicare payments to be out of the fee-for-service system by 2018.
“This is the first time in the history of the program that explicit goals for alternative payment models and value-based payment models have been set for Medicare,” HHS Secretary Sylvia Burwell said in an editorial Jan. 26 in the New England Journal of Medicine (doi:10.1056/NEJMp1500445).
The goal is “to move away from the old way of doing things, which amounted to, ‘the more you do, the more you get paid,’ by linking nearly all pay to quality and value in some way to see that we are spending smarter,” Ms. Burwell said in a blog post on the HHS website.
As part of that effort, the department aims to have 30% of Medicare payments tied to quality or value through alternative payment models by the end of 2016.
Further, real efforts to repeal the SGR took hold in the last Congress, with strong support to pass legislation among lawmakers of both parties in the House and in the Senate. H.R. 4015, SGR Repeal and Medicare Provider Payment Modernization Act of 2014, passed the House but was not taken up by the Senate.
“We were cautiously optimistic that this 17th year of trying to repeal the SGR might have been the successful one,” Dr. Patrick T. O’Gara, president of the American College of Cardiology, said in an interview. He said that the sticking point seemed to be that “there was no politically viable way to pay for it.”
Dr. David A. Fleming, president of the American College of Physicians, noted in a statement that finding the money had hung up what otherwise was huge progress: a bill that members of the House and Senate, Republicans and Democrats had put together, and that ultimately passed the House.
Renewed efforts at repeal are underway in the current Congress. The House Energy and Commerce Committee’s Health Subcommittee held 2 days of hearings in January, hearing from doctors and health economists on how to cover the $140 billion cost of SGR repeal. Although experts presented their thoughts on where the health care sector could come up with the money, Rep. Fred Upton (R-Mich.), chairman of the full committee, recently suggested that the funding might come from outside the health care sector, such as from his proposal to legalize Internet poker.
But with time running short, some believe that another SGR patch is in the cards and that repeal will come attached to a broader piece of legislation at the end of the year.
“I don’t think there is any way it gets fixed by the March deadline because the payment offsets are just far too complicated. I think that it has to wait to be incorporated, my guess, in a larger bill,” ASCO’s Dr. Polite said. “That’s how I would do it. You want to include it in a much bigger package of tax reforms, perhaps other entitlement reforms where there’s a lot of pluses and minuses of money flow and the $140 billion for SGR is easy to take care of in that.”
He also cautioned that if it is not taken care of this year, it could be at least another 2 years before the window for repeal is opened.
“There is some talk about it getting delayed 18 months,” Dr. Polite said. “I hope that doesn’t happen because if you kick this can down the road 18 months, you basically put us in the 2016 election cycle and nobody’s coming up with $140 billion during that time. Eighteen months basically means we will see you after the 2016 presidential election. And it would be a shame.”
