Former Medicare chiefs say SGR must be eliminated

Past leaders of the agency overseeing the program call on lawmakers at a Senate hearing to approve health reforms that fix Medicare’s broken pay system.

By Charles Fiegl amednews staff — Posted May 21, 2012

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Four former Medicare administrators told a panel of senators that the sustainable growth rate budget mechanism and fee-for-service payment system must be replaced.

Unfortunately, however, there is no replacement plan for the current system, which is scheduled to cut Medicare rates by more than 30% in 2013 if Congress doesn’t prevent it. “There is no alternative ready for prime time right now,” said Gail Wilensky, PhD, who led the Medicare agency during the George H.W. Bush administration.

The Senate Finance Committee heard testimony from past leaders of the Centers for Medicare & Medicaid Services and its predecessor agency, the Health Care Financing Administration, on May 10. Senators questioned the witnesses on how the SGR and fee-for-service came about and how Congress should act to move past a broken system.

The SGR was created in the late 1990s as a budget control mechanism. The formula since has produced irrational, counterintuitive results, said Bruce Vladeck, PhD, a HCFA administrator during the Clinton administration. He urged senators to abolish the SGR and start over.

Instead, Congress has elected to use 14 temporary patches to avert SGR cuts since 2002, said American Medical Association President Peter W. Carmel, MD, in a statement on the Senate hearing. The time has come for a permanent fix to ensure access to care for patients, he said.

“Eliminating this problem is especially important as we work to enhance the way health care is delivered in our nation, with an increased focus on care coordination that ensures quality care for patients while addressing rising costs,” Dr. Carmel said. “These changes require physician practices to be financially stable, which is difficult due to payments that are well below increases in practice costs and the ongoing threat of drastic cuts, such as the one of about 30% now scheduled for Jan. 1,” 2013.

A tremendous amount of legislative effort is devoted to stopgap measures to patch or plug the SGR each year, said Mark McClellan, MD, PhD. He was CMS administrator during the George W. Bush administration. These efforts should be focused instead on improving the system, he said.

Lawmakers and the physician community have shown leadership to move beyond the current situation, Dr. McClellan said. He cited efforts by primary care doctors to form patient-centered medical homes and cardiologists taking steps to identify high-quality care for cardiovascular diseases as examples of physicians moving beyond the traditional pay system.

“Clearly bundling of services is the future,” said Thomas Scully, PhD, who was appointed by President George W. Bush. Scully served as HCFA’s administrator from 2001-03, during which the agency became CMS. “Pure fee-for-service reimbursement simply can’t be expected to change behavior or to drive better results.”

Scully also blamed the process used for valuing and setting rates for physician services in the Medicare program as a reason for problems with the current system. The process has been politicized and pits specialists against primary care physicians in deciding how much the government will pay for individual services. He urged Congress to restructure the process, which includes recommendations to CMS from the American Medical Association/Specialty Society Relative Value Update Committee, or RUC.

However, new research shows that a link between that process and a payment gap between primary care physicians and specialists is unclear. CMS has agreed with 87.4% of the committee’s recommendations between 1994 and 2010, according to a study in the May issue of Health Affairs. But the CMS process for updating relative values for services is more likely to penalize specialists, who largely perform procedures, than primary care physicians, who bill more evaluation and management services.

“The agency is more likely to decrease recommended work values for medical specialty, surgical and radiologic services than for evaluation and management services,” the study concludes. “This is encouraging for providers in primary care and other specialties that bill the greatest proportion of these services.”

There is no clear explanation why there has not been a reduction in the income gap between specialty and primary care physicians, the researchers say.

New bipartisan bill to replace the SGR

Reps. Joe Heck, DO (R, Nev.), and Allyson Schwartz (D, Pa.) have introduced Medicare reform legislation that repeals the SGR by using unspent war funds to pay for higher physician rates. Eliminating the SGR is estimated to cost more than $300 billion over a decade.

“This bill replaces the flawed sustainable growth rate used for physician reimbursements, providing long-overdue certainty for physicians and ensuring that Medicare beneficiaries have access to their physicians,” Dr. Heck said.

The legislation would implement positive pay updates for all physicians, including temporarily higher annual increases for primary care services. Physicians can choose to remain in a fee-for-service system, but rates under that model would be reduced after 2018.

The AMA praised the new effort to repeal the SGR, but the Association said it was concerned that the legislation still would expose some physicians to deep cuts under fee-for-service in future years. “Failure to ensure that physicians would have the ability to avoid sharp reductions in FFS payments could have the unintended consequence of encouraging them to leave the Medicare program,” the AMA stated in a May 9 letter.

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Key features of SGR repeal bill

The Medicare Physician Payment Innovation Act of 2012 would repeal the sustainable growth rate formula and attempt to stabilize the current pay system. The legislation proposes:

  • Using $300 billion in savings from the reduction in military operations in Iraq and Afghanistan to pay for SGR repeal.
  • Increasing Medicare doctor pay rates by 0.5% annually for four years.
  • Raising fees for primary care services by 2.5% annually between 2014 and 2017.
  • Testing and evaluating new payment and care delivery models by 2016.
  • Creating an alternative fee-for-service system that relies on quality measures or a value-based purchasing modifier.
  • Rewarding physicians in approved health care delivery models with stable payments beginning in 2018.
  • Reducing payments for those remaining in traditional fee-for-service by 2% in 2019, 3% in 2020, 4% in 2021 and 5% in 2022.

Source: Medicare Physician Payment Innovation Act of 2012 (link)

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