APMA News - June 2012 - (Page 28)

Federal Advocacy Forum By Seth A. Rubenstein, DPM Understanding Medicare’s SGR It’s a perennial refrain that frustrates, confuses, and sometimes threatens our medical practices: Medicare’s flawed physician payment formula. You’ve heard it time and again from APMA and in the news: Congress is looking to pass another short-term Medicare “doc fix” to keep Medicare physicians from facing a steep reduction in reimbursements. What is this “doc fix,” and how did we get into this predicament? It’s an interesting story that merits understanding if we are to be informed physicians. The story began on July 30, 1997, a day of bipartisan celebration in Washington, DC. By huge margins, Congress passed the Balanced Budget Act of 1997—legislation to cut taxes; to extend health insurance to five million uninsured children; and, in its key cost-control measure, to cut future Medicare spending by nearly $400 billion over 10 years. Most of the $400 billion in projected savings was to have come not from doctors, but from limits on payments to hospitals and skilled nursing facilities, as well as from higher premiums charged to Medicare enrollees. To help reach the Medicare spending reductions, almost as an afterthought Congress designed the sustainable growth rate formula (SGR) to produce a few billion dollars more in Medicare savings by curbing spending on doctors’ services. It wasn’t considered a big deal at the time. The idea was that Medicare payments to doctors would be kept in line with the growth rate of the overall economy, or growth in the Gross Domestic Product (GDP). If Medicare spending on doctors’ services exceeded the SGR target, a pay cut would automatically take effect the following year. Congress seemed to expect that payments to physicians would stay roughly in line with GDP growth or slightly above it and envisioned a system in which there would be updated targets each year that would automatically control spending. The Congressional Budget Office forecast in 1997 was that only $12 billion over 10 years would need to be trimmed from payments to doctors under the SGR formula. The problem was that spending started racing ahead much more rapidly than the targets. That growth in spending in turn led to the prospect of very large fee cuts for Medicare doctors. Under the SGR system, the Medicare program establishes both annual and cumulative targets for Medicare’s combined spending for physicians’ services and those services furnished in connection with a physician visit (e.g., diagnostic laboratory services or physician-administered drugs). Targets are updated annually, taking into account the core rate of inflation and economic growth. The formula also reflects costs related to increasing numbers of enrollees in traditional Medicare fee-for-service and any projected changes in Medicare outlays stemming from new laws or regulations. 28 APMA News June 2012 If spending exceeds the target (measured on both an annual and a cumulative basis), as it currently does, the SGR mechanism is designed to reduce payment rates to physicians each year so that cumulative spending and the cumulative target eventually converge. (The reverse would happen if spending was below the target.) In the first few years of the SGR system, actual expenditures did not exceed the targets, and the updates to the physician fee schedule were considered reasonable. Beginning in 2002, the actual expenditure exceeded allowed targets, and the discrepancy has grown each year. With the exception of 2002, when a 4.8-percent decrease was applied, Congress has decided the cuts were too painful and postponed them, partly out of concern that cutting doctors’ pay would lead some physicians to stop treating Medicare patients. Each year since 2003, as the moment of decision approached for SGR cuts, Congress has called off the cuts, simply adding them—in theory—to the reductions that would need to be made the following year. Thus, in 2004, physicians faced a 4.4-percent payment reduction under the SGR. When Congress averted this reduction, the hole became larger in terms of the future percentage of the cut and the budgetary resources needed to fix it. In 2007, the SGR called for a 5-percent provider cut, but Congress stopped it again; in 2008, the cut was scheduled for 10 percent, and by 2010 it was 21 percent. Had Congress acted as recently as 2005 to overhaul the SGR, the 10-year cost of preventing future cuts would have been $48 billion. Today, that cost is more than $300 billion. The reason Congress has opted time and again for shortterm patches is that there is no consensus on where to get the money necessary for long-term reform, or exactly what the overhauled system should look like. In its latest action earlier this year, Congress froze physician Medicare pay at 2011 levels through December 31, 2012. Doctors’ pay was set to decline 27 percent on March 1, 2012. Through the SGR’s long and tortuous history, APMA has continued its strong advocacy to pursue a long-term Medicare payment solution for the benefit of all Medicare providers and the patients they serve. Every day we are working with policymakers and other stakeholders to put in place a sustainable, equitable Medicare physician payment system, one that aligns reimbursement with quality and efficiency, and strengthens the doctor–patient relationship by allowing physicians to provide the type of care best suited for Medicare beneficiaries. The challenges are great, but the sooner we take action on SGR reform, the more manageable the solutions will be. n APMA Trustee Seth A. Rubenstein, DPM, can be reached at sarubenstein@apma.org.

Table of Contents for the Digital Edition of APMA News - June 2012

APMA News - June 2012
President’s Message
Contents
APMA Introduces REdRC
Legislative Scrapbook
APMA By the Decade
Profiles in Progress
2011 Podiatric Practice Survey
Reimbursement
Federal Advocacy Forum
List of Cosponsors to the Equity and Access for Podiatric Physicians Under Medicaid Act
APMAPAC Chair Report
IT Consultant
Website Wisdom
Technofile
Small Business 101
CPME Update
Pediatric Medical Assistans' Education Program
Annual Scientific Meeting Preliminary Program
Annual Scientific Meeting Sponsors
Annual Scientific Meeting Registration Form
APMA All Stars
In Short
Worthy of Note
Affiliates Corner
List of Affiliated Organizations
Insurance Advisor
New Members
Death Notices
APMAPAC Update
Development Update
Call for Third-party Comments
Classified Advertising
Dates to Remember
Advertising Index
Your APMA

APMA News - June 2012