MedPAC Votes to Kill SGR

MedPAC is charged with advising Congress on Medicare payment policy issues, including reimbursements to physicians, hospitals, labs and imaging centers. SGR was put in place as part of the Balanced Budget Act of 1997 to help control Medicare spending. It soon became apparent that significant cuts in physician reimbursements would be required to help reduce spending.

Typically Congress has ignored MedPAC's payment reduction recommendations. It's been 10 years, for instance, since Congress has actually enacted any cuts to physician reimbursements.

Now the proverbial chickens are coming home to roost. Unless some action is taken before  Jan. 1, 2012, Medicare payment rates for physicians will drop by 29.4%. In the current political climate, however, Congress and President Obama are unlikely to intercede and delay the cuts as they have in the past.

Details

MedPAC has proffered a plan that calls for $335 billion in reimbursement reductions over 10 years. The so-called "doc fix" will account for $100 billion. Specialist would see their reimbursement rates reduced by 5.9% each year for three years and then frozen for seven years. PCP reimbursements would remain unchanged for the next 10 years.

• Cuts to Medicare Part D drug plans (32%)
• Post–acute care facilities (21%)
• Medicare beneficiaries (14%)
• Hospitals (11%), labs (9%)
• Durable medical equipment (6%)
• Medicare Advantage plans (5%)
• Other providers (2%)

MedPac first unveiled the proposal in September and it was greeted with a resounding thud.

Industry Reaction

MedPAC's proposal brought howls of protests from the American Medical Association.

"The recommendation voted on today by MedPAC flies in the face of their previous recommendations to stop harmful physician cuts that threaten access to care for patients," AMA President Peter W. Carmel, MD, said in prepared remarks. 

"There is already a 20% gap between Medicare payment updates and the cost of providing healthcare to seniors. Many physicians may also face upcoming payment penalties related to electronic prescribing, health information technology and quality reporting programs. Adding additional physician payment cuts to this mix will leave many physicians unable to care for Medicare patients or make the investments needed to participate in new models of care that can increase coordination and reduce costs."

The American Hospital Association this week told MedPAC that it should stop punishing hospitals – which are already facings cuts of $155 billion in reimbursement cuts over 10 years under the Affordable Care Act.

Instead, AHA gave MedPAC a list of 40 recommendations that the hospital lobby said could generate savings, including medical malpractice reform, and budget reduction proposals from both the Obama Administration and from House Republicans.

AHA said it would even support raising the Medicare eligibility age and eliminating first-dollar coverage on MediGap plans if that would help the nation's hospitals avoid additional reimbursement cuts over the next decade. 

In a letter this week to MedPAC Chairman Glenn M. Hackbarth, AHA President/CEO Richard Umbdenstock said he supports eliminating the SGR, but not at the expense of hospitals. 

"Offsetting the cost of the repeal with Medicare cuts to hospitals and other providers is merely 'robbing Peter to pay Paul' and is the wrong approach," Umbdenstock said in the letter. "Making cuts to providers, such as hospitals, that, according to MedPAC itself, are already seeing negative Medicare margins, could endanger beneficiary access to those providers."

Instead of passing the costs onto other providers, Umbdenstock said MedPAC could pass the costs onto seniors by considering "offset suggestions, such as eliminating first-dollar coverage for MediGap plans or raising the Medicare eligibility age."

Umbdenstock says MedPAC and the federal government should consider tort reform, which he said adds between $50 billion and $100 billion each year to the nation's healthcare bill.

"Across the nation, access to healthcare is being negatively impacted as physicians move away from states with high insurance costs or stop providing services that may expose them to a greater risk of litigation," he said.

"The increased costs that result from the current flawed medical liability system not only hinder access to affordable health care, they also threaten the stability of the hospital field, which employed 5.3 million people in 2009, and continues to be one of the largest sources of private-sector jobs."

See Also:
MedPAC Releases SGR Repeal Proposal
Lawmakers Seek SGR Alternatives, But Who Will Pay?
MedPAC Calls for Pay Raise for Doctors, Hospitals