AMA readies campaign for Medicare SGR repeal

Physicians are rallying for the remaining months of the legislative year to overhaul the formula and build a new payment system based more on quality.

By Charles Fiegl amednews staff — Posted Sept. 2, 2013

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Medicare needs to be transformed, and now more than ever is the time for Washington to act.

That is the message the American Medical Association and other physician organizations are carrying to Congress and the public as lawmakers return from their summer recess. The AMA is planning to continue its legislative work to eliminate the Medicare sustainable growth rate formula, with the price of repeal now at a bargain rate, and craft a new system that focuses on patient care.

The cycle of temporary patches to the SGR needs to stop, said AMA President Ardis Dee Hoven, MD, during an Aug. 26 interview with American Medical News. Physicians stand ready to move forward on new innovative pay models that best serve patients instead of strategies that continue to repeat the mistakes of the past, she said.

The AMA is launching a website,, scheduled for Sept. 3, to serve as a resource for patients, physicians and policymakers. Physicians hope to communicate how harmful Medicare payment policy has been on the program, especially for participating practices.

Physicians treating Medicare beneficiaries have been in a precarious position for years. The SGR first cut Medicare rates by 4.8% in 2002. In 2003, Congress enacted the first of 15 temporary patches to the Medicare payment system — some retroactive — that otherwise would have reduced pay for patient services. Short-term solutions to SGR cuts have stopped payments from falling off a cliff, but they also have contributed to ongoing uncertainty in the program.

2010 had been a tipping point of sorts for physicians as practices were destabilized under the constant threat of SGR cuts, Dr. Hoven said. Congress ultimately enacted five separate bills that year to avoid a 21.3% cut.

“We were hearing significant concerns about physicians leaving practice, limiting the time they would stay open, some of them having to take bridge loans, some agonizing over whether they had to let some of their staff go,” Dr. Hoven said. “There were concerns about 'I can't buy any more electronic health record equipment because I can't afford it.' So there were a lot of destabilization issues, and the plea came in all parts of health care from physicians to do something about this problem.”

Physicians face a 24.4% SGR cut in 2014 unless Congress overrides the decrease by Dec. 31. Lawmakers say a cut of that magnitude is unlikely and that they will act as they have done in previous years. But this time action could be in the form of more permanent reform.

House legislation is pending

For the first time in the debate, there has been bipartisan action to end the practice of temporary SGR patches and reform Medicare's payment system. Physicians note that Democrats and Republicans on the House Energy and Commerce Committee were unanimous in their vote to adopt legislation that eliminates the SGR.

The bill is a good first step, Dr. Hoven said. It contains the three main elements requested by the AMA and other organized medicine groups: It repeals the broken SGR formula, institutes a period of annual pay increases for five years and develops models that account for quality of care.

What's missing from the bill is a budgetary offset. The conversation about paying for the $139 billion cost to eliminate the SGR will occur later.

Rep. Fred Upton (R, Mich.), the Energy and Commerce chair, stated in an Aug. 15 online forum that he expects Medicare pay legislation “to be included in a larger bill later this year.” Upton's office declined to elaborate on the statement.

There are at least two more pressing issues that Congress will tackle early in the fall. Congress must pass and President Obama must sign a budget or continuing resolution to prevent a government shutdown on Oct. 1. Later that month, the U.S. Treasury will hit the nation's $16.7 trillion debt ceiling, and Congress will need to authorize the government to borrow money to pay its bills. Medicare would be affected adversely if the Republican-controlled House and Democratic-controlled Senate cannot agree to resolve both issues.

Congress is polarized, but the cost to repeal the SGR has not been this low in years, said American Academy of Family Physicians President Jeffrey Cain, MD. Just a few years ago, the price neared $300 billion. “We have a fire sale right now,” he said.

The 2013 legislative progress on SGR reform gives reason to be upbeat, Dr. Hoven said.

“I am optimistic, much more optimistic than I have ever been, around our ability to get the SGR repealed and replaced with something that is meaningful,” she said. “They should see this as a good pathway to do in fact what they want, which is to improve health outcomes and decrease costs.”

A conversation on future pay updates

During the past decade, Medicare payment updates have not kept up with the cost of running a practice, according to statistics kept by the AMA. Physicians received an average annual update of just under 0.3% from 2001 to 2013, but practice expenses have risen 25%.

Doctors appreciate the work by the Energy and Commerce panel on the SGR bill, said Eugene Sherman, MD, American College of Cardiology Advocacy Steering Committee chair. Though it would end the mistakes of temporarily delaying cuts, he thinks the 0.5% annual updates are low.

“I doubt many federal contractors, in the defense or service industry, would be happy to sign a contract with a fixed 0.5% increase, regardless of changes in the economy, over the next five years,” Dr. Sherman said.

Furthermore, the 0.5% updates would continue in 2019 and beyond, but a quality update incentive program could reduce payments to physicians. Other potential penalties from the value-based modifier, physician quality reporting system and EHR meaningful use program also would remain.

The AMA will work with Congress to address the update figure as legislation moves forward, Dr. Hoven said. The updates must represent real money to physician practices, as pay has been inadequate for years. “That is going to need further conversation,” she said.

Correcting quality measurement

The House bill's proposed quality update incentive program, or QUIP, would replace PQRS measures even though penalties in that reporting program would remain.

Performance in QUIP would be a factor in how much doctors receive. Physicians with scores in the top third of their peer cohort would receive a 1% incentive payment, and those in the bottom third would receive a -1% adjustment. Pay for doctors in the middle would not be adjusted.

The new system would create a tournament, pitting physician against physician, Dr. Sherman said. It could penalize doctors even though they provide high-quality care. For instance, physicians have improved treatment for heart attacks so that 99% of cardiologists receive outstanding quality scores. The QUIP still would find a way to penalize a third of those physicians, he said.

Dr. Hoven said she favors improving PQRS instead of introducing a new program for physicians.

“So rather than layering on another complicated, cumbersome, difficult-to-maneuver reporting system, I think the best thing is to start talking about improving on what we already have out there and making it work better,” she said. “That foundation has already been laid, and there has been a great deal of work around it. Let's build on that.”

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More professionals enrolling in Medicare

The Centers for Medicare & Medicaid Services has detected a slight uptick in physicians opting out of Medicare, but those leaving have been more than offset by increasing numbers of health professionals enrolling. More than 650,000 physicians and 330,000 nonphysician practitioners participate in Medicare today.

Year Participating Billing Medicare Participation rate
2007 871,865 931,579 93.6%
2008 883,316 930,474 94.9%
2009 912,578 956,271 95.4%
2010 932,737 973,299 95.8%
2011 981,644 1,022,909 96.0%

Note: Figures include limited-license and nonphysician practitioners.

Source: “Medicare Participating Physician Program,” Data Compendium, Centers for Medicare & Medicaid Services, 2007-2011 editions (link)

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The mystery of slower Medicare spending growth

The Congressional Budget Office has attempted to determine what caused a recent slowdown in Medicare spending growth. Much is still unknown, as researchers could not explain most of the 3.2 percentage point difference between spending in years 2000-05 and 2007-10. Factors such as the age of the beneficiary population and growth in average pay accounted for a small portion of the difference.

Potential contributors 2000-05 2007-10 Percentage point difference
Growth in average pay rate 2.7% 2.5% -0.2
Changes in patient age and health status 0% -0.3% -0.3
Growth in proportion of beneficiaries enrolled in Part A only -0.1% -0.3% -0.2
Higher use of prescription drugs -0.5% -0.6% -0.1
Unexplained contributions to growth -2.4
Overall growth 7.1% 3.8% -3.2

Source: “Why Has Growth in Spending for Fee-for-Service Medicare Slowed?” Congressional Budget Office, August (link)

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External links

“Medicare Participating Physician Program,” Data Compendium, Centers for Medicare & Medicaid Services, 2007-2011 editions (link)

“Why Has Growth in Spending for Fee-for-Service Medicare Slowed?” Congressional Budget Office, August (link)

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