MedPAC Ponders SGR Alternatives

WASHINGTON – Multiple options exist to permanently fix the Medicare Sustainable Growth Rate formula, but each has its cost to physicians, patients, and the program, according to staff analysts for the Medicare Payment Advisory Commission.

Among the options MedPAC staff presented to commissioners at their Feb. 23 meeting were adjusting the SGR's spending targets so that they are no longer cumulative, but are calculated on an annual basis and allowing some flexibility in the target. Both of those options would forgive any excess over the target, removing the annual pay cut threat doctors have endured since 2002 under the SGR, according to Cristina Boccuti, a principal policy analyst for MedPAC. However, forgiving any overage will lead to higher costs for the Medicare program. Neither option would leave any room to offer incentives for improved quality and efficiency, she added.

In the past, MedPAC has recommended setting target growth rates – and payment rates – according to particular service categories; the commission is looking in this direction again. For example, separate categories could be established for primary care, imaging, minor procedures, and anesthesia, allowing rates to more closely track volume of services. But the system might also provide incentives for physicians to order higher-volume (and more highly paid) services, according to Kevin Hayes, another MedPAC principal policy analyst.

Two options that seemed to pique commissioners' interest: exempting certain providers (such as accountable care organizations) from the current SGR target but holding them accountable for other targets, and using penalties for physicians who are outliers in terms of resource use.

MedPAC currently has two contractors working on projects to better determine the valuation of providers' time and resource use; more information will be available at the next commission meeting, Ms. Boccuti said.

Every year since 2002, Medicare has failed to meet the SGR targets, causing physician pay, by law, to be reduced. However, pretty much every year, and more recently, two or three times a year, Congress has stepped in to legislate a way to avoid those cuts. Cumulatively, the avoided cuts are becoming an ever-growing debt being carried on the federal ledger.

The White House, in its fiscal 2012 budget proposal, is proposing to reduce that debt over the next 10 years, at a cost of $370 billion.

But the administration has figured out only how to pay for that fix for the first 2 years. The reality is that there's a declining pool of Medicare-specific offsets – required by law – to pay for fixing the SGR, Glenn Hackbarth, MedPAC chairman, said at the meeting.

"We're in a deteriorating situation here; we're spiraling down," said Mr. Hackbarth. "This isn't going to get better; it's going to get worse."

Mr. Hackbarth said that he envisions a future where lawmakers will have to take money from education or roads or some other non–health-related area of the budget to pay for the Medicare fix. "And that bothers me," he said.

MedPAC in 2001 saw trouble down the road with the SGR and recommended at that time that it be scrapped. Now, the commission is looking again at ways to overhaul the formula so that physicians do not have to face a constantly shifting landscape. The uncertainty is undermining physicians' confidence in Medicare and leading some to stop seeing beneficiaries, Mr. Hackbarth noted.

He said that the time might be right to work out a "quid pro quo" with physicians: an end to the yearly exercise to avert the SGR cuts in exchange for a payment system that has volume constraints and rewards efficiency and improved quality, or, alternatively penalizes those who fail to meet such targets.

WASHINGTON – Multiple options exist to permanently fix the Medicare Sustainable Growth Rate formula, but each has its cost to physicians, patients, and the program, according to staff analysts for the Medicare Payment Advisory Commission.

Among the options MedPAC staff presented to commissioners at their Feb. 23 meeting were adjusting the SGR's spending targets so that they are no longer cumulative, but are calculated on an annual basis and allowing some flexibility in the target. Both of those options would forgive any excess over the target, removing the annual pay cut threat doctors have endured since 2002 under the SGR, according to Cristina Boccuti, a principal policy analyst for MedPAC. However, forgiving any overage will lead to higher costs for the Medicare program. Neither option would leave any room to offer incentives for improved quality and efficiency, she added.

In the past, MedPAC has recommended setting target growth rates – and payment rates – according to particular service categories; the commission is looking in this direction again. For example, separate categories could be established for primary care, imaging, minor procedures, and anesthesia, allowing rates to more closely track volume of services. But the system might also provide incentives for physicians to order higher-volume (and more highly paid) services, according to Kevin Hayes, another MedPAC principal policy analyst.

Two options that seemed to pique commissioners' interest: exempting certain providers (such as accountable care organizations) from the current SGR target but holding them accountable for other targets, and using penalties for physicians who are outliers in terms of resource use.

MedPAC currently has two contractors working on projects to better determine the valuation of providers' time and resource use; more information will be available at the next commission meeting, Ms. Boccuti said.

Every year since 2002, Medicare has failed to meet the SGR targets, causing physician pay, by law, to be reduced. However, pretty much every year, and more recently, two or three times a year, Congress has stepped in to legislate a way to avoid those cuts. Cumulatively, the avoided cuts are becoming an ever-growing debt being carried on the federal ledger.

The White House, in its fiscal 2012 budget proposal, is proposing to reduce that debt over the next 10 years, at a cost of $370 billion.

But the administration has figured out only how to pay for that fix for the first 2 years. The reality is that there's a declining pool of Medicare-specific offsets – required by law – to pay for fixing the SGR, Glenn Hackbarth, MedPAC chairman, said at the meeting.

"We're in a deteriorating situation here; we're spiraling down," said Mr. Hackbarth. "This isn't going to get better; it's going to get worse."

Mr. Hackbarth said that he envisions a future where lawmakers will have to take money from education or roads or some other non–health-related area of the budget to pay for the Medicare fix. "And that bothers me," he said.

MedPAC in 2001 saw trouble down the road with the SGR and recommended at that time that it be scrapped. Now, the commission is looking again at ways to overhaul the formula so that physicians do not have to face a constantly shifting landscape. The uncertainty is undermining physicians' confidence in Medicare and leading some to stop seeing beneficiaries, Mr. Hackbarth noted.

He said that the time might be right to work out a "quid pro quo" with physicians: an end to the yearly exercise to avert the SGR cuts in exchange for a payment system that has volume constraints and rewards efficiency and improved quality, or, alternatively penalizes those who fail to meet such targets.

WASHINGTON – Multiple options exist to permanently fix the Medicare Sustainable Growth Rate formula, but each has its cost to physicians, patients, and the program, according to staff analysts for the Medicare Payment Advisory Commission.

Among the options MedPAC staff presented to commissioners at their Feb. 23 meeting were adjusting the SGR's spending targets so that they are no longer cumulative, but are calculated on an annual basis and allowing some flexibility in the target. Both of those options would forgive any excess over the target, removing the annual pay cut threat doctors have endured since 2002 under the SGR, according to Cristina Boccuti, a principal policy analyst for MedPAC. However, forgiving any overage will lead to higher costs for the Medicare program. Neither option would leave any room to offer incentives for improved quality and efficiency, she added.

In the past, MedPAC has recommended setting target growth rates – and payment rates – according to particular service categories; the commission is looking in this direction again. For example, separate categories could be established for primary care, imaging, minor procedures, and anesthesia, allowing rates to more closely track volume of services. But the system might also provide incentives for physicians to order higher-volume (and more highly paid) services, according to Kevin Hayes, another MedPAC principal policy analyst.

Two options that seemed to pique commissioners' interest: exempting certain providers (such as accountable care organizations) from the current SGR target but holding them accountable for other targets, and using penalties for physicians who are outliers in terms of resource use.

MedPAC currently has two contractors working on projects to better determine the valuation of providers' time and resource use; more information will be available at the next commission meeting, Ms. Boccuti said.

Every year since 2002, Medicare has failed to meet the SGR targets, causing physician pay, by law, to be reduced. However, pretty much every year, and more recently, two or three times a year, Congress has stepped in to legislate a way to avoid those cuts. Cumulatively, the avoided cuts are becoming an ever-growing debt being carried on the federal ledger.

The White House, in its fiscal 2012 budget proposal, is proposing to reduce that debt over the next 10 years, at a cost of $370 billion.

But the administration has figured out only how to pay for that fix for the first 2 years. The reality is that there's a declining pool of Medicare-specific offsets – required by law – to pay for fixing the SGR, Glenn Hackbarth, MedPAC chairman, said at the meeting.

"We're in a deteriorating situation here; we're spiraling down," said Mr. Hackbarth. "This isn't going to get better; it's going to get worse."

Mr. Hackbarth said that he envisions a future where lawmakers will have to take money from education or roads or some other non–health-related area of the budget to pay for the Medicare fix. "And that bothers me," he said.

MedPAC in 2001 saw trouble down the road with the SGR and recommended at that time that it be scrapped. Now, the commission is looking again at ways to overhaul the formula so that physicians do not have to face a constantly shifting landscape. The uncertainty is undermining physicians' confidence in Medicare and leading some to stop seeing beneficiaries, Mr. Hackbarth noted.

He said that the time might be right to work out a "quid pro quo" with physicians: an end to the yearly exercise to avert the SGR cuts in exchange for a payment system that has volume constraints and rewards efficiency and improved quality, or, alternatively penalizes those who fail to meet such targets.