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Another Band-Aid on Medicare's Physician Payment Problems

Elyas Bakhtiari, for HealthLeaders Media, May 14, 2009

When I finished last year's column about Congressional intervention to stop the proposed 10% cut in physician reimbursements, I hoped that I would never again have to write one of those Medicare-payments-are-about-to-be-cut-and-time-is-running-out articles. It looks like I got my wish, for now.

For seven years, the sustainable growth rate formula that attempts to control Medicare spending growth has called for exponentially larger cuts to physician reimbursements. And for seven years, an intense lobbying effort, complete with warnings about physicians dropping Medicare patients, has led Congress to intervene (usually at the last minute) to prevent the cuts from actually going through.

Because several delays have compounded the problem, physicians were looking at a 21% cut in reimbursements for 2010, based on the SGR formula. The Obama administration made it clear early on that this wasn't an option, and Congress inserted provisions into the budget resolution to make sure physician payments don't decrease.

That's the good news.

The problem is that the current approach is almost identical to previous solutions. It provides $38 billion to cover the cost of freezing payments at current levels through 2012, but doesn't address the underlying issues with the SGR formula that cause this recurring problem.

Once again, it is a Band-Aid on a gaping wound that is growing larger every year. The only difference so far is that Congress didn't wait until the 11th hour this time.

There is hope, however, for a more permanent fix. Health and Human Services Secretary Kathleen Sebelius has acknowledge the importance of an SGR fix and suggested that it may happen outside of the budget process. "I don't think there's any question that the physician [payment] fix has to be done," she said at a press briefing.

Although the budget is filled with several healthcare-related changes, it is just one piece of what looks like a three-part approach to healthcare reform. The first was the American Recovery and Reinvestment Act, and the final piece looks like it will be healthcare reform legislation that Congressional Democrats are promising to vote on by the end of the year, and possibly introduce as early as next month.

There's a reason SGR changes are being saved for last. Coming up with an alternative won't be easy.

The SGR formula was introduced to keep Medicare costs under control by setting an overall target amount for spending and adjusting the fee schedule based on that goal. That's still a high priority given recent estimates that Medicare Part A will become insolvent by 2017.

Any solution will have to keep costs in check, which means we probably won't see drastic physician payment increases. If we do, additional funding will have to come from somewhere. The more likely scenario is that reimbursement increases for one specialty will be offset by decreases for another specialty, or savings in another area of Medicare.

That's not a big enough change for many physicians. But considering the potential 21% payment reduction in 2010, followed by 5.5% cuts in 2011, 2012, 2013, and 2014, it is better than the alternative.

And like I said, I'd rather write about something other than pending Medicare cuts for the next five years.


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Elyas Bakhtiari is a freelance editor for HealthLeaders Media.

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