Medicare Brain Trust Floats SGR Solutions

What could be called a Medicare brain trust made an appearance last week on Capitol Hill in the first in a series of roundtable discussions on Medicare physician payments and hosted by the Senate Committee on Finance.

In attendance were Gail R. Wilensky,PhD; Bruce C. Vladeck, PhD; Thomas Scully; and Mark McClellan, MD and PhD. Each has headed the Centers for Medicare & Medicaid Services or its predecessor, the Health Care Financing Administration.

In his opening statement Sen. Max Baucus (D-MT), who chairs the committee, said the idea was to "focus on where things stand now and how we got here." He was referring, of course, to that scourge of politicians and providers: the sustainable growth rate formula.

Panic Mode
Congress and physicians are in a bit of panic right now because of the 27% cuts to physician payments that is slated to take effect in January 2013. In the old, pre-debt reduction days, Congress simply looked the other way as it voted to ignore the SGR for 10 years.

Now though it's becoming increasingly difficult for Congress to kick the SGR can down the road. Plus this is an election year, which puts Congress on the hotseat.  It must resolve the longstanding issue without appearing to stick it to physician voters.

That brings us to the Medicare brain trust.

Proposed SGR Fixes
There was general acceptance among the group that the SGR had never worked quite the way it was expected to. Among the shortcomings and suggested fixes:

SGR objectives are inconsistent with the incentives it produces. In her statement, Wilensky noted that individual physicians and groups are "implicitly encouraged to increase spending, because nothing they can do as individuals will affect overall spending, but their fees will be affected by what other physicians do collectively, irrespective of their own behavior."

Suggested fix. Set the SGR at the level of a physician's practice. Wilensky says that would link physician updates to physician behavior. She sees it working for larger group practices but it would be a problem for individual and small group practices because of the adjustments that would be needed for to correct for atypical patients.

SGR is fundamentally irrational. Vladeck said he was shocked that in 2011 the difference between the targets the SGR produces and the actual Medicare outlays since SGR was enacted was less than $13 billion, or about 1.2% of the total outlays. "There is something fundamentally irrational about a formula that requires a reduction of 27% from physicians to recoup a difference of just over 1%. A similar logic applied to an ordinary commercial obligation would violate every anti-usury law I've ever seen."

Suggested fix. Vladeck said Congress needs to acknowledge the SGR mistake, repeal it, and replace it with an update factor similar to what is applied to other Medicare providers such as hospitals, ambulatory surgical centers or home health agencies.

The AMA is embedded in the Medicare payment process. Thomas Scully said the AMA's Resource Value Update Committee (RUC) did a good job for their members by taking over the process, but the RUC became too powerful, very political and "very responsive to stronger specialty groups" and limits the ability of the SGR to work.

Suggested fix. Scully suggested removing the RUC from the AMA and letting it operate as an independent body "through a contractor reporting to the CMS directly." He says it appears the current CMS team is asserting itself more to "make the RUC truly advisory. CMS and objectivity should be driving valuations, not physician politics."

The relative value unit system is really a relative estimated average cost system. McClellan said the RVU system assigns the same value to a service regardless of whether it's of lifesaving value to a patient or no value at all, that it's tough to keep the system up to date with medical technology, and that new services such a e-mail consultations, and nurse- or pharmacist-led care management teams may not be covered at all.

Suggested fix. McClellan, who is a physician himself, said the first step is leadership from the physician community. "Who knows better the best opportunities to improve care and avoid unnecessary costs for Medicare patients that are not well supported by Medicare's currents payment systems?" The second step is to translate clinical opportunities for improving care into Medicare payments reforms that better support patient-centered care. He said that means identifying current payment rules in the fee-for-service system that don't do as much as they could to promote efficient high-quality care.

At the end of the roundtable Sen. Baucus asked the group to create specific short-term and long-term SGR fixes. He gave them 30 days to accomplish the task but cautioned that he wasn't committing to introduce any of their ideas as legislation. I won't be counting the days, but I did make a note on my calendar to check back with the committee.

I don't doubt the Medicare brain trusts' ability to develop some good ideas, but I do doubt Congress's ability to substantially deal with the issue. The SGR problem will be an unwelcome gift to the new Congress that assumes office in January 2013.

'After all,' I can imagine our representatives declare sanctimoniously, 'it would be unfair for a lame duck Congress to deny newly minted representatives a say in this very important matter.'