Last month’s debate on the U.S. debt ceiling brought to light the ugly side of how we finance the nation’s operations, and as lawmakers move forward on a deal to reduce the deficit, they will inevitably turn their eyes to one of the country’s biggest expenses: Medicare. Federal spending for fiscal year 2010 totaled $3.5 trillion and Medicare comprised 15 percent of the total amount.
However, with crisis comes opportunity and a convergence of factors may make this the time to address a structural deficit in how the country pays physicians and other providers for the services they provide to Medicare beneficiaries.
Under the debt deal, a 12-member joint committee has until Thanksgiving to formulate a plan to cut at least $1.2 trillion in spending over the next 10 years. Then, recommendations made by the so-called “supercommittee” must go before Congress and pass by a simple majority in both chambers by Christmas. If the committee can’t agree on cuts or Congress fails to pass them, a series of across-the-board reductions would be triggered. One cuts pay to Medicare providers by up to 2 percent starting in 2013, which experts estimate would add up to around $12 billion.
While a reduction of any amount hurts, there is a bigger problem on the horizon: the Medicare physician payment formula, known as the Sustainable Growth Rate or SGR. Under the SGR, a across-the-board 29.5-percent cut would take effect on Jan. 1, 2012.
Every congressional budget cycle since 1997 has included a reduction in Medicare payments that has eventually been modified. Since 2002, Congress has stepped in 12 times to stop the cut, including four times last year. And each year that Congress provides a temporary patch, the price tag gets steeper. According to the AMA, if Congress were to wait until 2016 to eliminate the SGR, the combined price of providing temporary patches and fixing the structural problem would approach $600 billion.
Now it boils down to deficit reduction; if Congress doesn’t address the broken SGR in some way, it will continue adding to the deficit. This gives the argument to repeal the SGR strength it hasn’t had in previous years.
The real value of the supercommittee is that there are no restrictions on what they can recommend to cut or how it scores savings; its jurisdiction gives the 12 members the ability to find offsets for other spending in all areas of government. By virtue of normal committee jurisdiction, fixing the SGR—a Medicare Part B issue—would usually mean finding offsets only within Medicare Part B, and that hasn’t been possible without hurting the program. Similarly, the supercommittee could recommend federal medical liability reform and score those savings toward deficit reduction.
Late last month, the American Medical Association and 10 specialty societies (including AAFP) sent a video to Congress on the need for full repeal of Medicare’s flawed Sustainable Growth Rate formula. At just over two minutes long, a combination of text and eerie techno-classical music sets the scene: “By acting now, Congress can preserve access to care for people on Medicare and reduce Medicare spending by hundreds of billions of dollars. Or it can put off a solution…again.” Weaving through charts and graphs, they make the golden deficit-reduction argument, ending with the final statement: “Stop digging the hole. Pay the bill. Repeal the SGR.”
The AMA proposes a three-pronged approach: repeal the SGR; provide five years of stable payments with positive annual updates; and transition to a broad array of payment and delivery innovations.
AAFP outlined similar asks in a letter sent to supercommittee members last week. First, stabilize Medicare payments to physicians by repealing the SGR, and specify a payment rate for the next 3 to 5 years with a 3-percent higher rate for primary care physicians delivering primary care services. Second, avoid making reductions in Graduate Medical Education, especially GME payments for primary care education and training, to protect the physician workforce.