The SGR Lives, For Now

The future of physician reimbursement is now officially tied to the outcome of healthcare reform efforts. Yesterday, the Senate failed to garner enough votes to overcome the filibuster of S.1776, known as the Medicare Physician Fairness Act, which would have eliminated the 21% Medicare physician reimbursement cut set to take effect in 2010.

Unless additional legislation is introduced, the only remaining hope for eliminating the cuts mandated by the Sustainable Growth Rate formula is in HR 3200, the House healthcare reform bill.

We've been through this song and dance routine many times before, and for several years Congress has intervened at the last minute to prevent Medicare cuts that would have slashed physician pay and led many providers to stop accepting Medicare patients. Only this time the cut is much larger and the Congressional intervention is happening in the middle of a heated ideological debate about broader healthcare reform.

Which is probably why Senator Bob Corker (R-TN) called the legislation "a ponzi scheme" and asked his Senate colleagues to revolt "against this most sinister act."

Corker and other Republicans argue that Democrats are trying to handle the physician payment fix separate from healthcare reform legislation in order to deceptively keep reform budget-neutral. There's a point to that. Eliminating doctor pay cuts adds nearly $247 billion to the deficit over 10 years, and Democrats don't want that to count against them.

But in many ways it is a separate issue. Even if Congress wasn't debating reform, even if the current reform bills were withdrawn from consideration tomorrow, physicians would still be facing a 21% reimbursement cut and Congress would still be forced to debate the consequences of letting the cut take effect.

The physician fee schedule is like that frequent flyer patient that keeps showing up on the operating table; let's call him Steve. Steve smokes. He's obese. He doesn't exercise or utilize preventive care, and each year the poor health catches up with him when he's rushed to the hospital after a heart attack for a major, life-saving intervention.

Thanks to last-minute action, Steve hasn't died yet, but he hasn't gotten noticeably healthier, either. Each year he's back again, only a little worse for wear. Those Medicare cuts are growing exponentially—last year's would have been 10.6%, and the ones before that were only single digits. By 2016, they're scheduled to add up to 40%.

The Medicare Physician Fairness Act would have gone much further than previous efforts. Instead of a one-time intervention—a Band-Aid, as it has often been called—it would have essentially reset the payment updates at zero and repealed the SGR formula altogether. The AMA, AARP, and other groups understandably campaigned intensely to make this happen.

In our analogy, this bill would have given Steve a coronary stent, blood pressure medication, and set up an appointment with a primary care doctor to ensure that he doesn't end up in the emergency room for a long while.

But S. 1776 didn't offer a replacement for the SGR methodology, so it would have prevented annual emergencies but stopped short of a sustainable fix. In Steve's case, any treatment is limited in its effectiveness if he continues his current lifestyle. If he doesn't lose weight and stop smoking, he's not getting at the underlying drivers of his health problems.

Similarly, S.1776 was good as far as interventions go, but Congress is still missing the underlying "poor health" of the current physician reimbursement system. It's the fee-for-service payment model, which rewards quantity over quality, that is driving a good chunk of healthcare costs, and that system remains intact.

To their credit, reform advocates in Washington have talked about the importance of changing the fundamentals of physician reimbursement to better reward quality. They've also talked about the importance of rewarding patient behavior changes to get at core health problems like obesity. But they haven't included major solutions to either in the bills.

Reform legislation in the House can still prevent the 21% cut and kill the SGR formula for good, but it also stops short of offering a compelling replacement.

"We'll take this up again when we finish healthcare, and we'll have a multiple-year fix for this," Senate Majority Leader Harry Reid (D-NV) said yesterday after S. 1776 failed. "Right now, we'll only have a one-year fix."

Meanwhile, Steve is lying on the operating table, waiting for January 1.