The sustainable growth rate (SGR) is the method that Medicare uses to calculate payments for physician services. It was devised in 1997 to prevent the yearly increase in the cost for each Medicare beneficiary from exceeding the growth of our gross domestic product. The Payment Advisory Commission receives a yearly calculation from CMS about the yearly expenses and projections on the coming year expense targets. If payment for one year exceeds projections, the payment for the next year is reduced to keep expenses in range. Conversely, if one year’s expenses were lower then physician reimbursement would be increased.
Since expenses have gone up every year since 1997, there has been no increase in physician fees but yearly threats of decrease in doctor reimbursement occur. Most recently, there was a threat that payment for the coming year would be reduced by 27.2%. Each year we live with the specter of pay cuts only to have Congress enact stopgap legislation to freeze the cut at the last minute. The net effect of this process has been to keep payments near 2001 reimbursement levels.
On January 1, 2013, Congress enacted legislation to again freeze reimbursement and avoid a pay cut until January 1, 2014, in the hope of a solution to this “kick the can down the road” process. This one year patch will cost 7 billion dollars. The question we all have now is whether Congress can put aside partisan politics to find a permanent solution to the crisis of healthcare funding.
The alternative to crafting a solution is to have physicians withdraw from Medicare and leave millions of Americans to pay all of their healthcare costs out of pocket. Mixed in with this dilemma is the implementation of Obamacare, which may have no true funding as the bill was written. Since no solution to funding was provided in the past, it appears now that all forms of healthcare may not be funded. Pennsylvania recently chose not to expand Medicaid funding leaving 700,000 citizens without healthcare. If not dealt with, we will all be forced to pay for the healthcare for the needy with physicians providing billions in unpaid care.
This looming dilemma has necessitated government consideration of alternative healthcare solutions to control the cost of care. Most parties agree that a transitional framework needs to be developed to pay for our healthcare services. A number of specialty and state societies, including the Pennsylvania Medical Society, have endorsed new payment models that reward physicians for controlling cost while improving healthcare quality. These societies promote rewards for meeting quality standards while eliminating penalties. Also, new models must not punish doctors for factors beyond their control. Government must support shared saving models and accountable care organizations that reward physicians for controlling costs.
U.S. Representatives Allyson Schwartz and Joe Heck introduced legislation entitled “The Medicare Physicians Payment Innovation Act” which could eliminate the 27% Medicare pay cut of January 1, 2014, and keep 2013 rates through the end of 2014. Thereafter, a shift towards rewarding quality from the present fee for service methodology would be instituted. A 2.5% rate increase for primary and preventive care would occur yearly through 2018. Under this act all other services would rise by 0.5% yearly. By 2019, CMS would have transitioned to alternative health delivery systems as accountable care organizations or bundled care. There would be emphasis on home health care. After 2019, rates would decrease for those still in the fee for service model. While the AMA has yet to endorse this proposal, they have supported it in an effort to get rid of the SGR model.
It is clear there will be much debate over funding in the next two years as we search for affordable health care and try to solve our funding dilemmas. Organized medicine must join the fight to reform our health system. If we are not vocal players in this debate, we and our patients will be the victims of ill-conceived policies that will benefit none of us.
Harvey B. Lefton, MD, is President of the Philadelphia County Medical Society.