On SGR and Physician Distrust of Government

If the super committee fails to address the SGR, it will land back in the MedPac court. For the moment, though, another short-term fix, rather than repeal of the SGR, seems the most likely outcome, leading to further erosion in physicians’ confidence in government as a business partner.

John K. Iglehart, “Medicare Payment Reform – Proposals for Paying for an SGR Repeal, “ New England Journal of Medicine, November 17, 2011

November 16, 2011- Ask any physician, and they will tell you government makes a lousy business partner. Government waffles,hassle, baffles, and then downgrades physician pay in an arbitrary and capricious wways,

Take the SGR (Sustainable Growth Rate) – cumulative formula tying the growth of physician fees to the growth of the gross national product, practice costs, and Medicare’s covered population. The principle is that doctor pay should not exceed what Medicare costs. The formula invariably calls for a reduction of physician fees, for example, 27.4% in January 2012.

If Congress passes another short term fix, as it has done 12 times since 2001, the cost of permanent reform would escalate by $600 billion by 2016. If Congress does not fix SGR, it faces a mass exodus of physicians from Medicare, which is unthinkable since the jobs of Congress members depend on the senior vote.

Consequently, seeking an alternative, on October 6, the Medicare Payment Advisory Commission (MedPac) voted 15-2 to recommend replacing the SGR with a “predictable 10-year path of legislated fee-schedule updates.
Under the plan, specialists’ fees would be reduced by 5.9% for each of 3 years and frozen for the next 7 years Fees for primary care services would be frozen for all 10 years. This would save Medicare $100 billion over 10 years, but even then physician fees would double form $64 billion to $121 billion because of the expansion of th Medicare population and the intensity of services.

Over the 10 years drug companies would be cut $75 billion, clinical labs $10 billion, post-acute-care facilities $45 billion, hospitals $25 billion, durable equipment makes $13 billion, and health plans $13 billion. This would not leave many happy campers, including Medicare recipient who would be asked to pony up increased co-pays and a Medigap excise tax, amounting to $33 billion.

Tweet: Congress finds itself on the horns of a dilemma - how to cut the deficit by paying doctors less without driving them out of practice