The Death of SGR Reform

Late last week, House Republican leaders declared their intention to bring H.R. 4015, the bipartisan, bicameral SGR repeal measure, to the floor for a vote.

Good news, you’d think, for doctors and the broader healthcare system, that we might finally be rid of the SGR’s broken machinations and perverse cycle of congressional intervention.

But House leaders added a footnote: the measure would be paid for by delaying the individual mandate, which CBO opined last week would save money through reduced enrollment in Exchanges and Medicaid. To cover the approximate $150 billion cost of the SGR measure, the mandate would probably need to be delayed by at least 10 years.

While sparing us a rehash of the individual mandate debate here, suffice it to say that the Obama Administration, the authors of the Affordable Care Act, and most healthcare insurers and providers consider it to be a linchpin of the health reform regime.

Without it, most agree, the consumer protections established by the ACA would precipitate spiraling premiums that would quickly destroy the market.

In other words, the House measure is DOA in the Democrat-controlled Senate and White House, which House leaders know all too well. In a move whose political deftness is hard to quibble with, they are coupling two very popular measures into a single package that they know the vast majority of Democrats can’t support.

Good politics? Probably. Good for enactment of SGR repeal? More like the opposite.

But don’t blame House leaders for the demise of SGR repeal. This move is a symptom, not a cause, of its end. As previously reported, the well-intentioned negotiators were having difficulty finding common ground on the so-called extenders package that would be included, and were miles apart on the offsets that would be used to fund it.

This train had already come off the tracks.

Not to be outdone, early buzz this weekend is that Senate Democrat leaders may pair SGR repeal with an extension of unemployment insurance. As they mirror the House strategy of pairing two popular measures that their opponents can’t support, we now seem to be entering a sort of arms race, with each side trying to build the perfect legislative weapon to fire at the other.

Unfortunately, SGR repeal is sitting at the tip of their warheads.

This is just a bit of fun melodrama on a Sunday afternoon, because it’s really just another round of politics as usual in Washington (queue the violins for a looong collective sigh…). The midterm elections might seem a ways away to you and me, but in Congress, they might as well be tomorrow.

And the glimmer of hope that permanent SGR repeal would come this spring is one of the first victims of the election cycle.

Billy Wynne is the Founder and CEO of Healthcare Lighthouse, a one-stop shop for comprehensive policy information for healthcare organizations and businesses. He is also a Partner at the Washington policy and lobbying firm Thorn Run Partners. Previously, he served as Health Policy Counsel to the Senate Finance Committee.

18 replies »

  1. Thanks for the clear explication, BIlly. Washington is still REALLY dysfunctional. Serious governing obviously ceased at the Budget deal. Hard to believe the Dems would put up the SGR package without a pay for. Give the deep arcane wonkery surrounding it, it’s hard to believe that they put it in the same category of public urgency as the unemployment extension. What are they smoking? There are about 200 people that really care about the SGR. The rest of the world thinks it’s sort of a global warning type issue.

    On ICD-10, true enough that all the other OECD compare health systems use ICD-10, but they also pay on fee for service, event driven payment schemes. The difference with us: they fit TOTAL fee payments within hard global spending caps and so they’ve made their peace with fee for service. That was what the SGR tried to do and failed. What other countries do is still inflationary, and there are still the predictable “run up the tabs” behaviors on the part of some docs, but it’s inside the petri dish and does no fiscal harm.

    The reason it’s stupid policy here is that we have a policy consensus that we’re no longer going to pay on a fee for service, event driven system, but move toward some population health, risk based model.
    THere is emerging agreement that we need to begin managing health risks BEFORE the episode commences, so what we really needs is a coding scheme that accurately characterizes the state of the major risks driving the patient’s condition. It’s a completely different paradigm.

    ICD-10 microscopically characterizes the presenting event (bitten by Orca really is one of the codes. . .). ICD-10 works if the system we want is “Why are you in my office/ER/floor of the ambulance”. That’s not an affordable health system if 70% plus of the costs are NOT event driven, but driven by one or more chronic diseases we really need to be managing better (diabetes, I’m talking about you. . .) or we will have a serious fiscal problem.

    Forget about the inappropriateness of an event-driven payment paradigm for a minute and look at the costs. It’s going to cost MANY tens of billions of dollars to do this, and that’s just the implementation cost. The cost estimates were fake, incidentally- SWAG numbers- as were the claimed societal benefits.

    The main societal benefits will be: ever more invasive utilization controls by Medicare and commercial payers (“We don’t cover bites by Orcas), a brand new raft of invasive post-event payer audits (RAC, etc) and astonishingly detailed epidemiological information we can send in to the World Health Organization where we FINALLY join the rest of the world public health community so they can see how bad a job we’ve been doing relative to them
    (and a ton of dissertation material for grad students in public health).

    The real costs will be MANY MORE tens of billions in wasted clinician time, not only in learning this new scheme, but then struggling to push it into the patient’s record, which will be even less comprehensible than it is now. It will come on top of the onslaught of stuff the SGR bill intended to codify, which I really meant was a sentence: tens of millions of hours checking boxes and dictating.

    Maybe we should declare the last week of the month “coding week” where no patient care takes place at all and docs and nurses can catch up on their coding. . . .

    Sorry about the ramble, but I’ve actually been working on a blot posting on this precise topic, and now you’ve blown my cover.

  2. Jeff – true a lot of those organizations have comparable influence to the AMA; collectively they undoubtedly have more so. But I wouldn’t characterize all of their support as exactly zealous. There was plenty of quibbling in most corners, and the doc caucus in the House actually announced its opposition to the bipartisan package before softening their stance a bit.

    Republicans took their tack because they knew they could not support an unpaid for bill, and they knew their offset demands – such as premium and coinsurance increases for beneficiaries – were only going to hurt them in the 2014 elections. So they had no tenable path forward.

    Not that Dems are blameless either, or that there was a clear shot at a viable offset package on their end. Forget about the beneficiary cuts, the provider cuts that Dems were toying with enacting would’ve raised a firestorm as well. That’s why leadership took the position it should not be paid for at all, which they knew would never get Republican support.

    In fact, tonight Senate Democratic leaders have just put the bipartisan SGR package on the floor, without pay-fors, as – ahem – my post predicted (there’s no unemployment insurance provision, though, at least not yet). This’ll get filibustered and they’ll lay blame at the R’s feet. Just as the Rs will do to them on the House side.

    I would love to do a post on ICD-10, btw. CMS has been trying to do this since the mid-2000’s (when George Bush was President). ICD-10 is the norm in virtually every other developed country (it was finalized in 1992!!). I agree it’s going to be a fiasco if they keep it moving but the inability of our system (a euphemism by generalization…) to get on the stick with this is the appalling part.

  3. “BTW, ICD-10 is going to be the next healthcare.gov implementation fiasco.
    It’s actually going to be worse than healthcare.gov”

    I am with you on this all the way. “ICD-10: W6142XA, Struck by turkey, initial encounter”


  4. AMA is an aged, toothless critter that, if you strip out the medical students, etc, represents maybe 90 thousand dues paying docs. This ain’t 1965. The real power in medicine for at least twenty years has been the specialty societies like radiology, cardiology, internal medicine, family practice, etc. and the big state medical societies like Texas and California. THEY were ALL behind this SGR fix, as was the arch conservative doctors’ caucus in Congress, all but two (?) of whom are Republicans.

    It is a serious puzzle why the Republican leadership, in effect, cut all these folks loose.

    Why, Billy?

    BTW, ICD-10 is going to be the next healthcare.gov implementation fiasco.
    It’s actually going to be worse than healthcare.gov, because the way I read it, physician and hospital incomes basically stop dead if they haven’t converted.
    And perhaps 15% of providers actually have this covered. It won’t be eager uninsured folk can’t get a website to work- it will the healthcare equivalent of an ischemic stroke. . .

    I’d be diving for cover now, if I were CMS and the White House. This is a seriously stupid idea.

  5. Getting rid of the SGR formula (the doc fix) is the 1st, 2nd, and 3rd priority for the AMA. The argument over the issue in Congress is an illustration of the tyranny of the CBO budget score which tries to quantify the financial cost over a ten year budget window of fixing the problem.

    Five years ago, the CBO scored the cost of a doc fix at north of $300 billion and now it’s down to $138 billion. In the meantime, Medicare costs have come in below the original budget projection for four consecutive years. According to the CBO’s Monthly Budget Review released today, Medicare spending for the first five months of fiscal 2014 adjusted for differences between the two years in the timing of payments and net of beneficiary premiums rose all of 0.1%. With baby boomers now aging into Medicare, enrollment is probably up 3% year-to-year which means per capita Medicare spending is down by a comparable amount.

    If the politicians in Congress were smart, they would just ignore the CBO score on this issue and eliminate the SGR formula without “paying” for it because it probably won’t need to be paid for. Besides, the ACA is throwing a lot at doctors including forcing a move to electronic records and the coming implementation of ICD-10 on October 1, 2014. Give the docs a break here and then the AMA can turn its attention to lobbying for tort reform at the individual state level.

  6. Take a look at Ron Wyden’s new Medicare payment reform bill: http://www.wyden.senate.gov/news/press-releases/wyden-outlines-new-medicare-reforms which has, gulp, bipartisan sponsorship.

    It focuses on the sickest Medicare population, and challenges the medical community to assume primary care level risk for their care. We will know relatively shortly how much savings it is likely to generate, but a high CBO score might mean that it is the “solution” to the SGR problem.

    In general, relationship based payment and focusing on the sickest 10% of patients that generate half the cost are two basic principles of a sustainable solution.

  7. I fear any payment solution the government comes up with will involve a boatload of regulations, etc, etc. I believe some docs would even be OK without huge pay increases, just to cut out some of the onerous mandates required to document when seeing Medicare or Medicaid patients. I agree with Bobby, a 25% cut is very unlikely, but really, a 0.5% increase?

  8. OK, fair enough. And, I suppose given even THAT new volume, political pressure to remediate the situation would mount rather quickly.

  9. “A tired, hollow threat.”

    A 25% cut in payments has never gone through. If it does, the threat will be neither tired nor hollow: it will be very real.

  10. For what it’s worth, the physician community’s ambivalence about the bipartisan SGR replacement is partially to fault for its failure. While I definitely sympathize with Mr. (Dr.?) Goldsmith’s frustration, doctors are never going to get a blank check to replace the SGR. Like every other element of the healthcare system, the next iteration of the Medicare doc payment system will include a boatload of new regulation, scrutiny, carrot and stick incentives, etc. If a substantial number of doctors prefer the status quo to that, then the status quo is likely what we’ll have for the foreseeable future.

  11. “and a significant bloc of the surviving practitioners closing their practice to Medicare patients”

    A tired, hollow threat. You mean, in essence, closing their practices entirely. Not nearly enough well-heeled concierge patients to keep many doors open.

  12. In the meantime, the fix for the pharmaceutical companies and device companies continues. Congress knows better than to threaten the people who own them with cuts.

  13. Not a tragedy.

    The SGR fix was a terrible deal for practicing docs. It was like a really bad plea bargain: ten years probation and ten million hours of community service checking boxes and dictating into their EMR’s. It would also have condemned primary care physicians to a sub-inflationary update regime for a decade.

    Plus, there is NO WAY Congress is ever going to cut Medicare physician fees by 25%. It would have triggered a mass retirement of older docs, and a significant bloc of the surviving practitioners closing their practice to Medicare patients. It would have been a public health and public relations debacle.

    The SGR was like a bad mortgage on the federal balance sheet: it needs to be written off and we need to move forward with progressive physician payment reforms that reduce the record keeping burden, promote responsible economic behavior and strengthen relationships with patients.

    So what if the proposed SGR fix was bipartisan if it was bad policy.

  14. Did anybody think it would end any differently!?! The legend of the Mythical “Doc Fix” continues ..

  15. Billy,
    Sadly, I think your analysis is right on point. As Bluto Blutarski might have said, “7 months of bicameral, bipartisan legislating down the drain”.