Party on SGR's grave may end in hangover -AND- Congress Repeals Medicare SGR Formula

Thu May 7 15:38:46 PDT 2015

April 15, 2015

Party on SGR's grave may end in hangover

Modern Healthcare

By Paul Demko

WASHINGTON —The permanent "doc-fix" deal that cleared the Senate by an overwhelming margin on Tuesday night ends a perennial fight over Medicare payments that's dragged on for more than a decade. 

The legislation repeals Medicare's loathed sustainable growth-rate formula for paying doctors and averts a 21.2% cut in payments that would have kicked in this month. It also sets up a two-track payment system that's designed to push physicians away from the traditional fee-for-service reimbursement model. 

“It's a watershed event,” said Bill Kramer, executive director for national health policy at the Pacific Business Group on Health. “We've been stuck with fee-for-service for almost 50 years. We've been stuck with this SGR formula for more than 15 years. This finally breaks the logjam.” 

Physicians have been the most significant holdout in the industry's movement away from the fee-for-service payment system, said Blair Childs, senior vice president of public affairs at Premier, an alliance of hospitals and other providers working on alternative payment models. “This makes it starkly clear. There's no question that everyone's being pushed to alternative payment models,” Childs said. “Physicians are going to start to engage in a way they haven't before.”

The bill, the most important piece of healthcare legislation since the 2010 passage of the Affordable Care Act, cleared the Senate by a 92-8 vote on Tuesday night. It previously cleared the House with more than 300 votes. The deal was cooked up by House Speaker John Boehner and Minority Leader Nancy Pelosi in a display of bipartisanship that's exceedingly rare, especially on healthcare matters.

The package also included a two-year extension of the Children's Health Insurance Program and $7.2 billion in funding for community health centers. In addition, numerous healthcare policy and finance provisions were stuffed into the bill, including a six-month delay of the controversial “two-midnight” payment policy for short hospital stays. 

But Kramer argues that the shift away from fee-for-service and toward alternatives such as accountable care organizations and bundled-payment initiatives is the most important development. Starting in 2019, doctors who have at least 25% of their patients in value-based payment models will be eligible for 5% bonus payments through 2024. After that they'll receive annual payment bumps of 0.75%, three times the level of increase for physicians that remain on the fee-for-service track. 

“The transition from fee-for-service to alternative payment models can't happen overnight,” Kramer said. “Many physician are not ready to do that. This is going to take a change in not only their business model, how they receive payments, but also in the way they provide care.”

Not everyone is so optimistic about how the new system will work. Skeptics of the deal question whether physicians will be satisfied with annual payment hikes that will almost certainly fail to keep pace with inflation and suggest that they'll be back on Capitol Hill soon seeking more money. 

“The idea that this is a permanent fix is false,” said James Capretta, a visiting scholar at the American Enterprise Institute who previously served as a top GOP healthcare staffer in both the House and Senate. “I just think that's total folly.”

But Paul Van de Water, a senior fellow at the left-leaning Center on Budget and Policy Priorities, points out that nothing is permanent in healthcare because the dynamics are constantly shifting. “I don't lose a moment's sleep over whether this formula is going to be the right formula in 2030 or not,” Van de Water said. “Getting off of this unfortunate annual treadmill is very important.”

Capretta is also extremely dubious that the overhaul of Medicare's physician payment system will succeed in creating more cost-effective, higher quality treatment models. Instead, he argues, it will simply force doctors into hospital-run ACOs with rules decreed by the federal government. “The bill is a massive CMS power grab,” Capretta said. “It's amazing to me frankly that Republicans went along with it.” 

Dr. Robert Berenson, a healthcare finance expert at the Urban Institute, shares that skepticism about how the new system will work in large part because of a lack of credible quality measurements for physicians. “I don't think the provisions that purportedly will produce value-based physician care will achieve that perfectly good, aspirational objective,” said Berenson, who previously served on the Medicare Payment Advisory Commission. “We have lousy measures that don't measure the core activities of what doctors do.”

Berenson supports scrapping the SGR, but argues that the specter of a 21.2% cut in payments to doctors caused Congress to act irrationally and embrace a system that there's no evidence will actually achieve the desired objectives. “They hold their noses and accept stuff that they otherwise wouldn't,” he said. 

Van de Water, though, counters that it's way too early to reach any such grim conclusions and that most healthcare policy experts think the framework makes sense for prodding physicians to embrace value-based payment model such as ACOs. “The federal government is hardly the only payer that's trying to push in this direction,” Van de Water said. “The private payers are looking to go down this road as well.”

April 14, 2015

Congress Repeals Medicare SGR Formula

Medscape Medical News

By Robert Lowes

Done. Mission accomplished. Set off the fireworks.

After 17 previous Congressional holding actions going back to February 13, 2003, the Senate today clinched the approval of a bipartisan bill that finally repeals Medicare's sustainable growth rate (SGR) formula for physician compensation and averts a 21% pay cut this year.

The Senate vote was 92 to 8.

The House overwhelmingly approved the bill, called the Medicare Access and CHIP Reauthorization Act (MACRA), last month. Now the legislation goes to President Barack Obama, who has promised to sign it.

The bill will freeze Medicare rates at pre-April levels through June, and then raise them 0.5% in the second half of the year. They will continue to increase 0.5% each year from 2016 through 2019. At the same time, MACRA will shift Medicare compensation from fee-for-service to pay-for-performance.

The bill also extends the life of the Children's Health Insurance Program (CHIP) for 2 more years, in addition to approving other spending policies that benefit select providers, researchers, and low-income beneficiaries. It offsets $73 billion of the measure's $214 billion cost by making wealthier seniors pay more for their care and reducing payments for hospitals and nursing homes. The bill's authors opted not to offset the remaining $141 billion of the price tag, which roughly represents the cost of not cutting reimbursement rates by 21%. They reasoned that Congress would never allow that axe to fall, making the $141 billion cost more theoretical than real. However, some Republican budget hawks bristled at the idea of adding more red ink to the deficit.

The Senate vote was a nail biter, given the time crunch it faced: A 21% Medicare rate reduction triggered by the SGR formula took effect on April 1, applying to all services performed starting on that date. However, the Centers for Medicare & Medicaid Services (CMS) routinely waits 14 calendar days before paying an electronic claim, meaning that physicians would not see the massive cut until April 15. If Obama signs MACRA immediately, CMS can process all April claims at pre-April rates.

Some in organized medicine feared that various amendments promised by Democrat and Republican senators alike would delay passage of MACRA or make it unacceptable to the House. Six amendments came up for votes today, including one that would fund CHIP for 4 years instead of 2, but none of them passed.

For years, organized medicine warned that a rate reduction on the magnitude of 21% would drive physicians out of Medicare and leave seniors in a lurch. Likewise, medical societies constantly chastised Congress for postponing past SGR-triggered pay cuts — kicking the can down the road, they called it — instead of repealing the formula outright. Such "doc fixes," in Congressional parlance, caused the cuts to accumulate into the monster that came to life on April 1.

Organized medicine now has its SGR victory, but not everyone is sanguine about the future of Medicare reimbursement. Last week, the chief actuary of CMS issued a report saying that under MACRA, annual Medicare raises for physicians would not keep pace with rising practice costs in the long run. By 2048, the gap between payments and practice expenses would be greater than if Congress had let the SGR formula take effect, according to the report.

Doc Fixes Began With "The Biggest Backroom Deal"

Congress created the SGR formula in 1997 to put the brakes on Medicare spending for physician services. The formula sets annual spending targets based partly on changes in the gross domestic product. If Medicare spending comes under the target, physician payment rates go up the following year. But if spending exceeds the target, rates are reduced to make up the difference.

The formula became a definite nemesis of organized medicine in 2002 when SGR math yielded a 4.8% pay cut. Another 4.8% dip followed in 2003, and on February 13 of that year, Congress enacted the first of its doc fixes, replacing the 4.8% cut with a 1.4% raise.

The first doc fix was a backwater provision in an omnibus appropriations bill that one lawmaker called the "biggest backroom deal" in the history of Congressional spending, according to the New York Times. It was a 338 to 83 vote in that House that day, 76 to 20 in the Senate.

As they do now, Republicans controlled both chambers in 2003. Lawmakers at the time seemed more preoccupied with the threat — now seen as fictitious — of weapons of mass destruction in Iraq than the federal budget. The second Iraq war would erupt in less than 5 weeks.

Today's legislative action followed an eerily similar script: Senators were busy forging a bill allowing Congress to vote on any deal that the White House negotiates with Iran to keep it from developing nuclear weapons.

Bryan Sloane
Deputy Editor, CAL/AAEM News Service

Brian Potts MD, MBA
Managing Editor, CAL/AAEM News Service

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