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Subject: qotd: What will replace SGR?
Date: Thu, 7 Feb 2013 11:38:11 -0800
From: Don McCanne <email@example.com>
To: Quote-of-the-Day <firstname.lastname@example.org>
Medscape Medical News
February 6, 2013
SGR Repeal Bill Favors Primary Care
By Robert Lowes
Two members of Congress today reintroduced an ambitious bill that would
repeal Medicare's sustainable growth rate (SGR) formula for setting
physician pay and gradually phase out fee-for-service (FFS) reimbursement.
One major difference this time around for the bipartisan bill,
originally introduced in May 2012, is that its price tag appears
considerably lower, making passage more likely.
When Reps. Allyson Schwartz (D-PA) and Joe Heck, MD (R-NV), proposed
this legislation last year, the Congressional Budget Office (CBO) had
estimated that repealing the SGR and merely freezing current Medicare
rates for 10 years would cost roughly $320 billion.
Since then, the CBO has reduced that 10-year estimate on the basis of
lower than projected Medicare spending on physician services for the
past 3 years. In a budget forecast released yesterday, the agency put
the cost of a 10-year rate freeze at $138 billion.
The immediate effect of the bill from Schwartz and Heck, titled the
Medicare Physician Payment Innovation Act, would be to avert a Medicare
pay cut of roughly 25% on January 1, 2014, that is mandated by the SGR
formula. Instead, the bill maintains 2013 rates through the end of 2014.
After 2014, Medicare would begin to shift from FFS to a methodology that
rewards physicians for the quality and efficiency of patient care. From
2015 through 2018, the rates for primary care, preventive, and care
coordination services would increase annually by 2.5% for physicians for
whom 60% of Medicare allowables fall into these categories. Medicare
rates for all other physician services would rise annually by 0.5%.
Meanwhile, the bill calls on the Centers for Medicare & Medicaid
Services (CMS) to step up its efforts to test and evaluate new models of
delivering and paying for healthcare (experiments with medical homes,
accountable care organizations, and bundled payments are already
underway). By October 2017, CMS must give physicians its best menu of
new models to choose from. Two menu options would allow some physicians
unable to fully revolutionize to participate in a modified FFS scheme.
The year to transition from FFS to "high quality, high value care" will
be 2019 under the legislation. Physicians will either operate in a new,
CMS-approved delivery and payment model of their choosing or traditional
FFS Medicare. The government would keep FFS rates in 2019 at 2018 levels.
After 2019, physicians still embracing traditional FFS Medicare would
see their rates reduced until 2024, when they would be permanently
frozen at 2023 levels. Physicians operating in the new models, in
contrast, would have the opportunity to earn raises for high-quality,
A summary of the MEDICARE PHYSICIAN PAYMENT INNOVATION ACT OF 2013 can
be downloaded by clicking on the link at the bottom of Rep. Allyson
Schwartz's press release:
Comment: The Medicare sustainable growth rate (SGR) formula seemed to
be an equitable method of slowing the non-sustainable increases in
Medicare spending. What happened?
Health care spending continued to increase at very high rates, and these
increases were funded by private commercial insurance plans. The funds
paid pumped up the supply side in health care while having very little
ameliorating impact on the demand side. As our health care system
continued to be richly funded (too richly, when compared to other
wealthy nations), the Medicare SGR formula fell further behind each year
in meeting this ever-increasing demand for more funds.
It soon became apparent that if the SGR rates were imposed, physicians
would likely restrict their participation in the Medicare program, first
by not accepting new patients, and eventually many of them would drop
out of the program altogether. For that reason the SGR reductions were
deferred most years, and now they have grown to a deficit of about 26
When physicians are already dissatisfied with Medicare payment rates
(cumulative increases have been less than the medical inflation rate), a
further abrupt reduction of 26 percent would surely cause many
physicians to bail - either limiting their practices to privately
insured patients, or retiring early if the reductions wipe out net income.
Members of Congress do support Medicare, even if some would want to
shift costs from the federal budget to the beneficiaries themselves.
They do understand that the guillotine effect of imposing these
reductions would likely severely impair access for patients due to a
lack of willing providers. They know that they have to do something.
In defining this problem, members off Congress think in terms of the
federal budget. By postponing the reductions, the money has already been
spent, yet it is carried on the books as a deficit. What can Congress do
to remove this deficit from the budget without having to increase
Quite simply, they need to find other ways to reduce the projected
increases in spending. If you download the summary of the Medicare
Physician Payment Innovation Act of 2013 (link above), you will see some
of the schemes proposed. Most are already familiar, though many are
unproven, and some ideas are innovative. Regardless, they are all
methods of slowing the growth in Medicare spending while doing very
little that would control spending in the private sector. We will still
be faced with the same problem that we have now under SGR. In comparison
with private insurance payments, Medicare will continue to trail, and
the physicians will grow evermore restless.
Rather than taking one program - Medicare - and trying to make it comply
with budget austerity, we need to have a financing system in which the
entire health care delivery system complies with a single, universal
global budget - a single payer national health program. Yes, there would
continue to be turf issues between the factions competing for the funds
and the public stewards of the funds, but at least the distribution
would be equitable and adequate, which was the intent of SGR in the
There are those who contend that we could never adhere to a budget, that
it is impossible to fund all of the care that we need if we are limited
by a budget. We need only to look at other nations to see that they,
with their publicly supervised global or quasi-global budgets, have been
able to provide quality care for everyone at an average of half of what
we are spending. We can do it, and with a very rich budget at that.